SHALE PROJECTION WEBINAR SERIES

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1 Stark County, North Dakota WESTERN NORTH DAKOTA ENERGY PROJECT SHALE PROJECTION WEBINAR SERIES An Initiative of the Strom Center for Entrepreneurship & Innovation at Dickinson State University

2 ACKNOWLEDGMENTS Our Analysts: 1. Lynn Helms, ND Dept of Mineral Resources 2. Dean Bangsund & Dr. Nancy Hodur, NDSU Our Funders: Bush Foundation Vision West ND US Dept. of HUD Regional Sustainability Planning Grant Our Moderators: Dr. Dick Gardner Don Macke Senior Fellow and Co-Director, RUPRI Center for Rural Entrepreneurship Our Local Host & Coordinator: Deb Nelson, DLN Consulting

3 ROLE OF KEY PLAYERS 1. ND Dept of Mineral Resources Describe scale, duration & pacing of Bakken development consistent with geologic resource Identify dynamic variables, i.e. deal changers 2. NDSU Dept of Agribusiness & Applied Economics Create socio-economic models that build on Helms Distribute regional impacts among counties 3. Center for Rural Entrepreneurship Concerned with community implications & policy, e.g. maximizing benefits, crowding out effects Decision aids for local leaders

North Dakota Department of Mineral Resources http://www.oilgas.nd.gov http://www.state.

4 North Dakota Department of Mineral Resources East Boulevard Ave. - Dept 45 Bismarck, ND (71) (71) 328-8

9 NORTH DAKOTA COUNTY OIL PRODUCTION, 1952-29 29 8 7 6 5 4 3 (millions of barrels) 2 1 1952 1957 1962

6 9 NORTH DAKOTA COUNTY OIL PRODUCTION, (millions of barrels) All Others Bottineau Williams McKenzie Stark Bowman Billings

7 WESTERN NORTH DAKOTA WELL PROJECTIONS 1,8 to 3, wells/year = 2, expected rigs = 12, 3, jobs Another 1,-15, jobs building infrastructure 2 rigs can drill the wells needed to secure leases in 1 year 2 rigs can drill the wells needed to develop spacing units in 18 years 35,-4, more new wells

8 Helms Bakken Development Scenarios Possible Probable Proven

Wild Cards Draft BLM Hydraulic Fracturing rule could double

$Draft EPA guidance on diesel fuel in hydraulic fracturing could$ Current administration budget contains tax changes that could

sustained Bakken/Three Forks development World and U.S.

9 Wild Cards Draft BLM Hydraulic Fracturing rule could double federal drilling permit approval time or worse. Draft EPA guidance on diesel fuel in hydraulic fracturing could triple drilling permit approval time or worse. Current administration budget contains tax changes that could reduce drilling capital 35-5% The future looks promising for sustained Bakken/Three Forks development World and U.S. economies continue to struggle. If China joins the downward spiral oil price could fall enough to make some areas uneconomic

10 1,5, 1,35, 1,2, 1,5, 9, 75, 6, 45, 3, 15, MONTHLY OIL PRODUCTION FOR STARK COUNTY STARK wells

11 Stark County Rigs and Wells Year Rigs Wells

12 Tyler Formation Rigs and Wells Year Rigs Wells

13 12. jobs per drilling rig 3. wells per gathering contruction job 1. jobs per frac spread 4. wells per frac spread per year 1. total jobs to support one producing well 12. wells per rig per year.85 ratio of phase 2 rigs to phase 1 rigs.8 ratio of phase 2 well construction jobs to phase secondary jobs per industry job INDUSTRY ESTIMATES OF EMPLOYEES PER WELL Recent industry estimates of 6 by year end 213 Crowding out effect Housing Day care Variable currently.7 Direct Indirect Indirect Production 2. Company Rep. 1.4 Construction.8 Mud Engineers.9 pumper 2. Tool Pusher.3 Surveyors.8 Bit Sales.6 company professionals 4. Wellsite Geologist.4 Crane services 3.4 Water haulers.4 workover crews 8. Directional Drillers 2. Rig hauling 1.2 Fuel Haulers.2 roustabouts 4. Drillers 4.1 Other trucking 1.6 Mud Haulers.28 water disposal 4. Derick Hands.3 Well logging 3.3 Casing Crew.35 oil transportation 12. Floor Hands.1 DST services.8 Cementing.1 supply sales 8. Mud & cuttings 3.9 Completion Rig.8 regulatory.11 gas processing 1.1 Perforating.2 Biology & Botany.1 regulatory 6.6 Frac tank hauling.2 Archeology.9 Reclamation 8.3 Equip Mfg 1.8 Flowback testing 4.6 Roustabouts Total Well Construction Jobs per rig 1. Total Producing Jobs per well Note: 25% of jobs are trucking water Total trucking jobs = 36.6% New Bakken wells currently 3.5 EOR 1.5

14 1, Stark County Oil Industry Jobs Jobs 9, 8, 7, 6, 5, 4, 3, 2, 1, Year Prod jobs Gathering jobs Fracing jobs Drilling jobs

15 Tyler Formation Oil Industry Jobs 1, 9, 8, 7, 6, Jobs 5, 4, 3, 2, 1, Year Prod jobs Gathering jobs Fracing jobs Drilling jobs

16 STARK COUNTY PROJECTED EMPLOYMENT Year Drilling Gathering Fracing Prod Rigs Wells jobs jobs jobs jobs Year Drilling Gathering Fracing Prod Rigs Wells jobs jobs jobs jobs

TYLER FORMATION PROJECTED EMPLOYMENT Year Drilling jobs Gathering jobs Fracing jobs Prod jobs Rigs Wells 25 2 5 5 26 2 5 5 27 2 5 5 28 2 5 5 29 2 5 5 21 2 5 5 211 2 25 5 5 212 12 5 25 15 1 15 213 12

17 TYLER FORMATION PROJECTED EMPLOYMENT Year Drilling jobs Gathering jobs Fracing jobs Prod jobs Rigs Wells Year Drilling jobs Gathering jobs Fracing jobs Prod jobs Rigs Wells

18 HELMS LIST OF DYNAMIC VARIABLES 3 Expected Ultimate Recovery of oil scenarios 3 Scenarios of secondary employment Additional Factors Not Modeled: Technology Change (Wells/pad; wells/rig/year; fracs/crew/year) Oil collection & water distribution pipelines Increased use & share of natural gas Oil price dynamics Shift towards permanent residents Crowding out of other economic sectors Hundreds of possible scenarios

19 NDSU EMPLOYMENT, HOUSING & POPULATION PROJECTIONS Department of Agribusiness and Applied Economics North Dakota State University Dean Bangsund Research Scientist Dr. Nancy Hodur Research Assistant Professor Ph: Ph:

20 NORTH DAKOTA STATE UNIVERSITY MODEL Consistent with and builds upon Helms model Rapidly changing technology & other variables led NDSU away from trad I/O models and into uncharted territory Projects to 236 instead of Helms 25 Consensus, pessimistic, & optimistic scenarios Splits jobs into permanent vs transient Is more accurate at regional level Communities can affect the local distribution of opportunities, impacts, risks, and growth.

21 DYNAMIC ELEMENTS ANNUAL CHANGES OVER Drilling efficiency in ND - 1/wells/rig/yr to 12 by 232 Employment /drilling rig - 12 FTE/rig to 1 by 216 Oil field service 2% job reduction, trucks to pipelines Temp vs Permanent employee ratio Secondary employment from permanent employees more than doubles from.5 jobs per employee Base Employment constrained in Williston & Dickinson regions to show some crowding out effect Housing Mix change in type over time, more apts County Housing Share changes in some counties with trends

22 , 5, 4, 3, 2, 1, North Dakota Total Direct Employment Petroleum Sector Consensus Scenario Temporary Direct Permanent Direct

23 6, 5, 4, 3, 2, 1, ND Petroleum Sector Employment Consensus Scenario Drilling & Fracing Oil Field Service Gathering Total

24 GOLDEN VALLEY BOWMAN DIVIDE State Planning Region 1 MCKENZIE SLOPE BILLINGS WILLIAMS State Planning Region 8 DUNN ADAMS BURKE MOUNTRAIL STARK HETTINGER WARD State State Williston Region Minot Region RENVILLE BOTTINEAU Planning Region Region 2 2 MCHENRY PIERCE Dickinson Region Major trade centers

25 .6 Petroleum Employment as % of Total Employment Dickinson Region Williston Region Minot Region.2.1

26 , 35, 3, 25, 2, 15, 1, 5, Dickinson Region Composition of Employment Consensus Scenario Secondary Added Total Direct Petroleum Other Employment

27 45, Dickinson Region Permanent Housing Units 4, 35, 3, 25, 2, Pessimstic Consensus Optimistic 15, 1, 5,

28 , 35, 3, 25, 2, 15, 1, 5, Dickinson Region Consensus Scenario Demand: Housing Units Total (service) Housing Units Permanent (census) Housing Units

29 8, Dickinson Region Permanent (Census) Population 7, 6, 5, 4, 3, Pessimstic Consensus Optimistic 2, 1,

30 3, Stark County Permanent Housing 25, 2, 15, 1, Pessimstic Consensus Optimistic 5, , Stark County Consensus Scenario 2, 15, 1, Service Permanent 5,

31 5, 45, 4, 35, 3, 25, 2, 15, 1, 5, Stark County Permanent Population 45, 4, 35, 3, 25, 2, 15, 1, 5, Pessimstic Consensus Optimistic Stark County Consensus Scenario Service Population Permanent Population

32 STARK COUNTY PROJECTIONS (CONSENSUS) Permanent Housing % Ave Annual Growth Permanent Population % Ave Annual Growth 11,23 16,283 21, % 1.6% 23,253 31,549 4, % 1.6%

33 CONCLUSIONS Not last word; instead first comprehensive projection of employment, housing, and pop Best available data & best local experts Scenario of likely future; not precise prediction Our job to give you input This boom is much longer-lived than 8s boom You have the ability to affect the amount of growth that comes to your community. You decide about your community s vision for itself, and make decisions on that basis.

34 WHAT IF YOU ARE WRONG? If you are too cautious: Your community will under-invest in public infrastructure and private development, You will fall short of maximizing the number of workers, new residents, and economic activity. A cautious region will have short-term crowding out of secondary spending Long-term w/o enough temp housing, oil workers may crowd out others and other sectors will lose If you are too aggressive : Over-investment in public infrastructure and private investments >> bankruptcy and higher taxes for residents left holding the bag

35 HOW CAN A COMMUNITY GET ITS SHARE? Agree on community vision & goals Conduct infrastructure planning & implement Use land use planning to encourage, condition, and site housing & community development Plan/require amenities that improve quality of life, e.g. parks, trails, rec facilities, comm. ctr. Regardless of vision, plan for increased traffic flows, truck by-passes, etc.

THOUGHTS? WHAT ELSE? We ve outlined a likely scenario, and flanked it with optimistic and pessimistic alternatives to offer you a plausible range of outcomes in an uncertain & dynamic world.

36 THOUGHTS? WHAT ELSE? We ve outlined a likely scenario, and flanked it with optimistic and pessimistic alternatives to offer you a plausible range of outcomes in an uncertain & dynamic world. 1. What other questions need to be answered? 2. Are there scenarios you d like to see? 3. Are there other subjects or community impacts for a webinar of lessons learned in other boomtowns?

Economic Contribution of the North Dakota University System in 2015

Agribusiness and Applied Economics Report No. 729 May 2017 Economic Contribution of the North Dakota University System in 2015 Randal C. Coon Dean A. Bangsund Nancy M. Hodur Department of Agribusiness