January 28, 2016

North Dakotans Reel From Low Oil And Ag Prices

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You don't see this anymore -- a sign at the gas station in Killdeer, North Dakota, in February 2015, back when the boom was still going strong and oil prices were in the $50/barrel range.

Emily Guerin

You don't see this anymore -- a sign at the gas station in Killdeer, North Dakota, in February 2015, back when the boom was still going strong and oil prices were in the $50/barrel range.

On the surface, North Dakota doesn’t seem like a state full of risk-takers. It’s conservative, faith and family-oriented. Yet many people here are constantly making big bets on how much money they’re going to make next year, or whether they’re going to have a job in a  few months.

That’s because the state economy is dominated by commodities – raw goods like crude oil, cattle or wheat. In the past year, those have fallen 34 percent, 30 percent and 16 percent respectively. The entire state is feeling the effect, but Dean Bangsund, an economist at North Dakota State University, says residents of small towns like Killdeer are on the front lines.

“They talk to the people that are directly affected,” he said. “They see it in those individuals spending less money. [They’re] much closer to the core effect.”

For the past five years, Killdeer, population 975, was bustling. Semi-trucks hauling crude oil crowded the parking lot at the one gas station in town, which was constantly hiring. Developers built new apartment buildings and charged over $2,000 a month for the apartments – pretty steep for a place where the closest real grocery store was 35 miles away.

But just drive the grid of dirt roads outside of town and it’s clear that before and after oil, the economy of this area is based on agriculture. Nearly every farmhouse has a small collection of silos full of spring wheat and other grains. Hay bales are stacked high in fields, and cattle range across buttes and prairie.

Since the Bakken oil boom began, farmers, ranchers and oil workers have learned to coexist in Killdeer, sometimes uneasily. Because the town is so small and so remote, they have to shop at the same stores, like the Western Choice Cooperative. Manager Jesse Sipe says she tries to cater to everyone. She stocks cattle vaccines, special oil for ancient tractors, fire resistant clothing for oil workers and socks, because “everybody buys socks.”

But recently, sales have dropped at the co-op. It’s not surprising – all of her customers work in a commodity industry.

The Western Choice Co-op is like a microcosm of the state of North Dakota. Today, more than 60 percent of the state’s economy is based on agriculture and energy, up from 40 percent a decade ago. That worries North Dakota State’s Bangsund.

“You never want to see all of your industries go through these types of periods at the same time,” he said.

Farm income is down by a third since 2013, and the state recently created a loan program to assist distressed farmers. Since December, the fund has meted out $15 million.

Oil and gas tax collections are down by nearly two thirds since 2014, and the state is likely to tap into a budget reserve fund for the first time in over a decade.

Killdeer farmer Lorin Dvirnak is personally feeling the commodity price drop. He grows wheat and this year, the price is so low – less than $5 a bushel – it won’t even cover his costs. So he’s holding on to it.

“A lot of the grain’s still sitting in the bins,” he said.

Dvirnak is gambling that he can keep the wheat from spoiling in the grain bins on his farm until the price comes up. But he does have another source of income – a monthly royalty check from an oil company. That’s a lot smaller than it used to be, though.

“Production is slowing on the older wells and the price is cut,” he said, “so everyone’s checks are decreasing.”

Dvirnak lived through the 1980s oil boom, and he suspected this one wouldn’t last. So he never depended on the oil money for his basic expenses. It’s his grandchildren who may be affected – they’ll inherit the oil money one day from four wells on the property. Three of the wells are named after them: There’s the Nadia, the Ben, and the MicahLucas.

They named the first well after their granddaughter Nadia because, as Lorin’s wife Karen said, “we only have one.” As for the MicahLucas, the Dvirnaks weren’t sure they would get another oil well, so they decided to make the two boys share. “Micah and Lucas are a little upset,” Dvirnak said, laughing.

North Dakota practicality  – it’s what has gotten this commodity dependent state through booms and busts before. Living with the economic uncertainty that comes from working in commodities seems difficult, but co-op manager Jesse Sipe says that’s the way people like it.

“The feeling you get from creating something that other people really want is priceless.”

Take a beef calf, she said. “You know it’s going to go on to the supermarket and somebody is going to go on to enjoy a beef dinner someday and you helped create that. And the oil is the same way. The roughnecks are out there, and I don’t know if they get so philosophical about it, but at some level they understand that they are energizing America. I’m not positive that other people in the world who are just floating through their cubicle jobs have that feeling.”

People who don’t like living with uncertainty have already left rural North Dakota. For the most part, the ones who stayed accept the risks that come with making a living off the land. Boom times, and busts.

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