Billings sits in the middle of vast energy potential that will prompt economic recovery, speakers said Tuesday during an economic outlook conference.
Paul Polzin, director emeritus of the Montana Bureau of Business and Economic Research, told a crowd of about 300 at the Crowne Plaza that since Yellowstone County’s economy bottomed out in late 2009, “support activities for the oil and gas industry have grown enormously” – some 47 percent.
Bureau Chief Patrick Barkey estimated that energy alone already accounts for about 14 percent of Montana’s economic activity.
Jeremy Van Atta of the Big Sky Economic Development Authority said that it’s not just the oil and gas boom that’s making Billings businesses coffers run over, but coal reserves and wind energy as well that will benefit the trade hub.
Mr. Van Atta said many of the county’s nearly 6,000 small businesses already are adding employees while other big oil-patch players are moving in.
One Canadian company is gearing up to hire as many as 250 welders and fabricators, he said, another needs 50 employees to build storage tanks, and another company will service trucks that jam the roads of northeastern Montana and western North Dakota’s Bakken play.
Dr. Polzin said that only about 6 percent of Montana’s 25.3 million barrels of crude are refined in-state and others said the Williston Basin oil is unlikely to be refined in Montana.
Yellowstone County is poised for phenomenal growth with completion of new coal-loading ports in Washington and Oregon that would haul Powder River Basin coal through Billings and the potential of the Keystone XL Pipeline from Canada’s tar sands to Gulf of Mexico refineries.
Mr. Van Atta said such growth is “going to come with challenges and going to come with controversy” over environmental concerns of coal shipping, chemicals used in extracting petroleum in fracturing or obtaining coal-bed methane.
The Obama administration rejected TransCanada’s pipeline proposal because of environmental concerns raised by Nebraska.
Tom Kaiserski of the Governor’s Office of Economic Development said he believes the company will re-adjust its plans and re-apply. Mr. Kaiserski said a key element of the Keystone proposal would be adding an on-loading facility near Baker that could handle 10 million barrels of crude daily and another $500 million pipeline is under construction to bring Eastern Montana’s natural gas to Colorado refiners.
Constriction of movement of coal, petroleum and electric transmission are holding back the Bakken boom, said Tom Richmond of the Montana Oil and Gas Conservation Commission.
Horizontal drilling, new technologies such as fracturing shale formations and other factors are contributing to what Dr. Polzin described as an “energy renaissance” that will aid the economies of 42 of Montana’s 56 counties.
Mr. Richmond said transportation is shaving anywhere from $7 to $25 per barrel off the price producers receive for Williston Basin crude. Some ends up being shipped by rail to refiners.
“The new pipeline is going to increase the value of the product,” Mr. Richmond said.
“I think it’s just too good a project not to happen,” Mr. Kaiserski said of the Keystone proposal, which would add 13,000 jobs nationwide.
The pipeline also would raise $60 million annually in state taxes, he said.
The bureau says transmission lines from Colstrip to the Northwest already generate some $8.4 million in property taxes – nearly $1.5 million of that in Yellowstone County.
Ironically, Dr. Polzin’s presentation cited an unpredictable economic upswing last year came in the form of “a one-time surge in activities associated with the cleanup of the Yellowstone River from the Exxon-Mobil pipeline rupture,” which spewed 1,500 barrels of crude near Laurel during summer floods.
The clean-up “gave a one-time boost to area contractors, equipment-rental companies, and the accommodations industry,” he said.
“Billings is uniquely situated, both geographically and economically, to benefit from the more than four-fold increase in oil drilling activity that has occurred on the North Dakota side of the Bakken formation … . Even with Montana drilling dormant … the repair, engineering and other services in Yellowstone County have captured a significant amount of Bakken-related business.”
Dr. Polzin said, “Yellowstone County’s growth prospects look bright relative to other parts of the state in light of the oil boom unfolding just across the North Dakota border .... . Speculation that drilling activity will move west has heated up commercial real estate activity in Billings, particularly for warehousing and industrial space.”
Al Koelzer of NAI Properties in Billings said “the phone was not ringing in commercial real-estate” during the first half of 2011 but now has reached a point where oil-patch support firms “are very much forced to … buy land and build.”
“Right now it’s all about the Bakken, and if you and your company aren’t doing something about the Bakken – you are stupid.”
Mr. Van Atta said a challenge is providing a skilled work force for energy industries. Yellowstone County has a 4.7 percent unemployment rate, and he wondered if the area’s high schools and colleges can turn out enough qualified workers to fill those good-paying jobs.
Although Billings’ geography has much to do with its success as a support for the energy-industry, Dr. Polzin said Yellowstone County’s diverse economy helped it weather the recession better than most other parts of the state and nation.
Around 28 percent of the county’s economy comes from its role as a regional wholesale, retail and medical trade center. Manufacturing (including petroleum refining and electrical generation) makes up 16 percent of the county economy.
The federal government accounts for 13 percent of the economy, trade-center services 12 percent and mining 11 percent. Transportation accounts for 8 percent of the economy, state government and higher education 7 percent, non-resident travel 4 percent and agriculture 1 percent.
Yellowstone County’s economy grew by a mere 1.2 percent in 2011. That was second only to Bozeman’s Gallatin County, which grew by 1.3 percent.
That’s much better than other populous counties such as Helena’s Lewis and Clark (0.9 percent growth), Butte-Silver Bow and Great Falls’ Cascade (both 0.2 percent), Missoula (minus 0.3 percent) and Ravalli and Flathead (minus 0.5 percent). Dr. Polzin projected a Yellowstone County growth rate of 2.2 percent to 2.4 percent over the next four years.
The statewide growth rate is expected to range from 2 percent to 2.4 percent during that period.