October 7, 2014

Costly road closures

By Neal A. Shipman
Farmer Editor

The roads around McKenzie County were eerily quiet last Tuesday and Wednesday. And there was no traffic jam at the busy junction of U.S. Highway 85 and N.D. Highway 23 in Watford City, where normally upwards of 12,000 vehicles a day pass.
While there was steady traffic on the highways, one element of the traffic was clearly absent. And that was the heavy trucks that carry Bakken crude from well locations, as well as trucks hauling either fresh or salt water.
The culprit  behind the absence of the normal oilfield traffic was the inch of rain that had fallen, which forced the McKenzie County Commissioners to close all non-paved county roads to truck traffic.
“We closed the non-paved roads in McKenzie County to truck traffic at 8 a.m. on Tuesday, Sept. 30 and weren’t able to reopen them until 6 p.m. on Wednesday,” stated Ron Anderson, McKenzie County Board of County Commissioners chairman. “These slow rains that last for several days really have a negative impact on our county road system.”
When McKenzie County is forced to close its county roads in order to protect them from damage by oilfield traffic, the impacts are immediately felt by oil companies and the trucking companies that service the 2,000-plus wells in the county.
“It’s safe to estimate that over 1,000 trucks were idled in McKenzie County because of the weather-related road closures,” states Jason Homiston, executive vice president of Development and Water Logistics for MBI. “The road closures turn the entire oilfield upside down.”
And according to Ron Ness, president of the North Dakota Petroleum Council, the cost to the entire oil industry when the roads are shut down is astronomical.
“We estimate that the entire oil industry has over $50 million a day in input costs,” states Ness. “So when something like these road closures occur, the impact is felt immediately by everyone working in the oil patch.”
According to Ness, when roads close, like they did last week in McKenzie County, there is a rippling effect across the oil industry.
“The wells are not designed to be turned on and off like a light switch,” states Ness. “When the roads are shut down, it backs everything up everywhere.”
According to Homiston, trucking companies like MBI and Nuverra, both of which have locations in Watford City, were forced to not only idle all of their trucks during those two days, but had to pay their staff for the down time.
“Even when our drivers aren’t on the road when the county shuts down the road, it costs us,” stated Homiston. “Our employees count on working those hours and we just can’t send them home.”
And Homiston agrees with Ness, that road closures completely disrupt the oil industry.
“Everything that happens out in the oilfield is synchronized. From the trucks hauling oil, fresh water and salt water to the fracing of the wells, it is all scheduled in advance,” states Homiston. “When the roads are closed, it literally turns the oilfield upside down and we’re forced to play catchup when they reopen.”
Which is why, according to Anderson, the McKenzie County Commissioners don’t take the decision to close the non-paved roads lightly. They know the impact it is going to have on the oil industry, but they also know how quickly these county roads can be damaged if the decision isn’t made to close them when weather conditions warrant.
“We know what the impact will be to the oil companies when we close our 1,000 miles of county roads,” states Anderson. “But we also know that we will be looking at millions of dollars in road repair costs if we don’t.”
Which is why McKenzie County has made arrangements with some oil companies to continue to use certain county roads even though the commissioners have issued a county-wide closure.
“We have made arrangements with some companies that they can continue to use certain roads if they repair them to the condition they were in before the rains hit,” states Anderson.
But for both Anderson and Ness,  the long-term solution that needs to occur is that more of McKenzie County’s gravel roads need to be paved.
“We need to get our major haul roads in the county paved,” states Anderson. “We don’t want to keep closing our roads. But until we get the funds needed to pave these critical roads, we don’t have a choice.”
Which is why McKenzie County and the North Dakota Petroleum Council are supporting a bill that will change the formula by which Gross Production Taxes (GPT) are shared between the state of North Dakota and the counties in which the oil wells are located.
Currently, the state of North Dakota takes 75 percent of the GPT from the producing wells, while the counties receive 25 percent of the revenue. Under the proposed change, which will be decided by the North Dakota Legislature this winter, counties would receive 60 percent of the GPT, while the state would receive 40 percent.
“That change in formula would go a long way in helping McKenzie County improve the roads that we need,” states Anderson.