Posted 7/03/13 (Wed)
By Neal A. Shipman
With the city of Watford City looking at needing over $195 million in infrastructure improvements to meet the needs of a rapidly growing city, Brent Sanford, Watford City mayor is less than pleased to see that his city is only going to be receiving $10 million in North Dakota Oil Impact Grant funds to address a litany of city issues.
“Statewide press will likely view this as a great event for Watford City,” states Sanford. “But, in fact, it is a bitter disappointment for the community leaders who have been involved with planning for the energy population on our doorstep and pleading our case in Bismarck over the last few years.”
The 2013 North Dakota Legislature, according to Sanford, approved $240 million for energy impact grants this biennium. Of that amount, $80 million was earmarked for non-hub cities, such as Watford City, in the oil and gas producing counties.
“The first round of non-hub city infrastructure grant requests totalled $422 million, which was 10 times the $40 million that was available,” states Sanford.
Of that amount, according to Sanford, Watford City, which is in the epicenter of oil development, requested $195 million for the continued build-out of its core city infrastructure to facilitate the population growth that the city is experiencing.
“The Watford City grant request represented 46 percent of the total requested,” stated Sanford. “That number is indicative of the fact that McKenzie County has 40 percent of the state’s drilling rigs, 40 percent of this year’s drilling permits, 30 percent of the state’s traffic fatalities for 2013, and 30 percent of the oil production. And, the list goes on and on.”
While Sanford says the growth from oil development in Minot and Dickinson is leveling off, the growth in McKenzie County is barely getting started.
“We are in the epicenter of oil development,” states Sanford. “No one seems to deny that.”
According to Sanford, when the awards were handed out, the advisory committee suggested the Land Board award $71 million for this grant round, due to the overwhelming needs and not wanting to further cut worthy projects.
However, even with the increased amount available this round, Watford City came away with only 15 percent of the awarded grant funding, or $10 million.
“Our needs represented 46 percent of the total requested funding and 56 percent of the funding requested by those cities who actually received an award,” stated Sanford. “Yet we received 15 percent. Our award represents five percent of what we needed.”
If Watford City had been funded at the 30 or 40 percent level of what the city needed, Sanford says that there would not have been any money left for other severely oil-impacted communities, like Tioga, Stanley, New Town, Killdeer, Parshall, Ray, Alexander and Belfield.
“Basically the pot provided by the Legislature was not enough to handle the needs of oil country cities, and woefully inadequate to handle the needs for the highest impact areas,” says Sanford. “The excuse is that we non-hub city oil producing communities were given a large increase in the Gross Production Tax allocation from this legislative session.”
According to Sanford, this biennium, of the $5 billion in revenues generated from the oil producing counties, the state will send $590 million, or 11.8 percent, in direct payments back to local government.
“Our state’s own coal counties and neighboring state’s energy counties receive closer to 35 percent,” says Sanford. “So an 11.8 percent distribution is not fair or adequate funding.”
While Sanford says that the city hopes to receive $18 million in Gross Production Tax this biennium, those funds won’t go very far in paying for the $185 million of unfunded needs either.
The lack of funds, according to Sanford, is forcing the city to choose to fund only the top priority projects, such as the sewage treatment facility and two water towers, that have to be done to avoid a shutdown of the construction encircling the community. And the city will be asking for developer participation on the water towers.
“The rest of the cost for the $170 million-plus needed for the collector roads, collector water and sewer lines will need to be picked up by someone else,” states Sanford. “And those costs are going to fall mainly on the developers, and ultimately the residents occupying the housing. Otherwise, the housing will not be built for another two years as we wait for a new oil impact plan out of the next legislative session.”
And under-funding these permanent housing infrastructure needs, according to Sanford, is not good for the oil industry or the small cities, which are in the center of the oil play, who are trying to keep up with the permanent population demands.
“Permanent production oilfield employees need to live close to their jobs,” says Sanford. “Whiting and Oneok have built large permanent facilities in our community, Hess and Petro Hunt are adding to their holdings and adding employees, and XTO, QEP and Continental have large holdings in the county.”
And those workers, says Sanford, want to live and work in Watford City or McKenzie County.
“Not many people would choose to commute 1½ to 2 hours each direction from Williston, Dickinson or Minot to their Keene or Watford City office every day if there were housing options within a 10 to 20-minute drive,” says Sanford. “Drilling employees can fly in from Houston or Denver for a week and fly back home for a week. But production oilfield employees are our friends and neighbors who live where they work.”
And, according to Sanford, the success that the oil companies have in recruiting and retaining production oilfield employees is going to depend to a large extent on how successful communities like Watford City, Tioga, Stanley, Ray, Parshall, Killdeer, New Town, Alexander, Arnegard and other epicenter towns are at being able to house the production oilfield workers of the future.
“A fairer, more adequate distribution of the severance taxes and sales tax generated in this oil and gas play needs to be put in place and soon,” states Sanford. “At this point it is a scary thought to think we have two years to wait and see what happens again.”