Oil and An Economic Renaissance: Just Connect the Dots

LEANING RIGHT - The royal baby, George Zimmerman, pitiful Detroit – all compete for our daily attention and energy along with hundreds of other events.

The royal baby is easily compartmentalized and put away given the realization that the celebration and the miracle of birth is a natural occurrence of our daily lives. Furthermore, continued pursuit of the George Zimmerman issue in civil courts will merely shed light on the shaky past of Trayvon Martin including his school suspensions, photos and items of his burglary and drug paraphernalia, and the fact that his parents had not been together since he was 3 years old. An ugly and unfortunate event will get even uglier. Therefore we should compartmentalize and put it away as well. 

Detroit? Detroit is no real surprise either. Detroit was once the pride of the nation. It was once the city with the highest per capita income in the states and was a real jewel. It was the epitome of capitalism and was birth of an unparalleled innovation in human history – the assembly line. Innovation, imagination, pushing technology to its limits, efficiency, prosperity for its workers and managers, and extreme pride were its trade marks. It was capitalism at its very best.

 

It would be just as easy to compartmentalize Detroit and also put it away except for that little something that keeps nagging. The nagging causes us to keep glancing at our city – Los Angeles. We saw the downfall of Detroit coming for 60 years. It is a little unsettling when we look at many other US cities and see many similarities. We can begin by asking ourselves how bad and widespread are the nation’s and specifically California cities’ fiscal problems. “Virtually ubiquitous and massive” says Rod Kiewiet, professor of political science at California Institute of Technology.

 

Despite signs of economic recovery, many parts of the nation's most populous state are feeling a hangover from the collapse of housing prices, prolonged high unemployment and resulting declines in revenue. They are confronting soaring demands for spending on public workers' pensions and retiree health care while slashing services, rolling back pay and laying off cops, firefighters and other workers.

 

"There's a huge amount of California that's in extreme distress,'' says Joel Kotkin, a professor of urban development at Chapman University in Orange, Calif., a frequent critic of California fiscal policies.

 

Los Angeles has seen TV ads warning of bankruptcy by groups trying to sway the future. City voters rejected a sales-tax increase, and officials are looking for ways to close a $200 million shortfall next year, even after concessions from public workers unions. Local governments in California are constrained in efforts to raise revenue through taxes by the Proposition 13 property tax limitation of 1978 and later ballot measures.Stung by an $8 billion pension fund loss last year, Los Angeles County supervisors will be asked today to spend an additional $200 million to shore up its wilting retirement system.

 

If the additional funding is approved, the taxpayer tab for county employees' pensions would soar in the fiscal year beginning Thursday from $787 million to $987 million. And officials warned that additional increases would be needed in future years - with the price tag for taxpayers reaching $2 billion by 2015 - to cover investment losses in addition to enhanced pensions for the legions of county-employed baby boomers reaching retirement age.

 

"It is expected the employer costs will rise sharply in the coming years depending on the severity and longevity of the economic downturn," Gregg Rademacher, CEO of the Los Angeles County Employees Retirement Association, wrote in a letter requesting the funding hike. "It is foreseeable the employer's contribution rate could rise from the recommended 14.22 percent to approximately 23 percent of active member payroll when the sustained losses are fully reflected in the employer's contribution rate."

 

Pension costs have been soaring even as county departments have slashed services in response

The situation just continues spiraling down hill. Who said Detroit? Instead maybe we should look at the Dakotas.

 

The nation’s unemployment rate has been hovering at nearly nine percent since 2009. But not every state is suffering an employment crisis. In the remote, windswept state of North Dakota, job fairs often bustle with more recruiters than potential workers. The North Dakota unemployment rate hasn’t risen above five percent since 1987.  In the state's oil country, unemployment hovers at around two percent and pretty much everyone who wants a job—as long as they are old enough and not incarcerated—is employed.  North Dakota has either tied for or had the lowest unemployment in the country since 2008.   

 

The job base of the state (population 672,500) has grown five percent in the past two years. Even more astonishing, there are over 16,000 unfilled jobs, and projections indicate that 45,000 more workers will be needed in the next two years.  Of those jobs, one out of three will be in oil and gas.

If you are willing to endure the blazing hot summers and bitterly cold winters, come to western North Dakota, young (or not) man (or woman) and you can get a job. Michael Ziesch has worked with Job Service of North Dakota for the past 15 years and is currently a manager in the Labor Market Information Center. “The average wage in oil and gas is $80,000 plus overtime, and there will likely be plenty of that,” said Ziesch.  Development of the massive Bakken oil field in the western part of the state has tapped out the local workforce.

 

If you are not interested in an energy job, consider retail. Employers are paying $15 an hour for convenience store employees and fast food workers. Drive through any community in the area and you will be hard pressed to find a store front devoid of a sign shouting “Help Wanted, Now!” It seems that everything in the state these days ends with an exclamation mark, and for a state filled with unassuming, hardworking, family-centered kind of folks, it’s a little disconcerting.

 

Job seekers from outside the state are flocking to Williston, the unofficial capital of the oil boom, located in the remote northwestern corner of North Dakota. The population here has grown from 12,500 to an estimated 22,000 in the past five years.

 

Williston is home to 350 oil service companies. Willistonlife.com, an employment and informational website built with the objective of attracting workers to the area, boasts that at any given time, over 1,200 job openings are available in the Williston area alone. On its home page, the website beckons to the nation’s unemployed in large white letters brightly juxtaposed against a black background, “Make Your Move!”

 

The wildcat oil culture that the newly arrived encounter, though, is distinctly different than the risk-averse culture of the state. One “New North Dakotan” noted that although long-time residents of the state are pleasant (we smile a lot), helpful (there’s no better place to have a flat tire), kind (we’ll bring you a hot dish if you are sick), and polite (we almost always hold the door open for the person behind us), we are not quite “friendly.” We are a little guarded with folks we didn’t grow up with. Ethnic to us means Norwegian or German. We’re not used to accents other than our own. (And, no, we don’t talk like the actors in the movie Fargo.) One more thing — and this is important — we talk about the weather a lot.

 

What should you know before you throw your last $100 in your gas tank and head up to Williston to make cold calls for jobs? Don’t come without a housing plan, or you may find yourself among the hundreds of parking lot denizens, living out of your car.

 

New North Dakotans need places to live, creating an enormous construction boom. Williston formerly saw about five new homes a year. So far this year, 2,000 new homes have sprouted up. In 2012, the expectation is for 4,000 more along with apartments, hotels and, outside of town, dormitory-style housing facilities known as 'man camps'. According to the Williston Herald, since the boom began, the market price of rental housing in Williston has jumped from $300 to $2,000 per month for a modest apartment. Hotels are full and booked for months, charging $170 to $200 a night.  

 

Service is hard to come by. Waits of 45 minutes or more are not uncommon at fast-food restaurants. The Dairy Queen closes at 5:00 pm because they can’t retain enough staff to stay open any later, and many small businesses have simply closed their doors for lack of employees. The town’s Wal-Mart doesn’t have enough employees to stock the shelves, so boxes are simply laid open in the middle of the aisles for customers to grab what they need. Locals have discovered a “secret route” into the store to avoid the worst of the incoming traffic, and even the local Luddites have managed to learn how to use the self-checkout lanes as a matter of self-preservation. A professor at Williston State College complained recently that she had to text her husband with a request to pick up clothes hangers while he was out of town visiting relatives because local stores were completely sold out. It’s not only hangers; long lines and low inventory have made running everyday errands a vexing challenge. “It sounds crazy,” this same professor says, “but I order laundry detergent online and have it delivered by UPS to my front door.” 

 

At Williston State College, the faculty often take out their own garbage to help out the strapped maintenance staff.  The school is seeing lower enrollments as students are drawn away from post-secondary education by the lure of instant cash.

 

The law of supply and demand has kicked in across all sectors of the community. A severe shortage of contractors, plumbers and electricians means that homeowners wait weeks or even months for simple home projects. The local community college is putting out a second bid for a parking lot because, the first time, they didn’t get any bids at all.

 

Even more disturbing in Williston are rumors of impending electricity shortages. Worried about brownouts and blackouts during the long North Dakota winter, many townspeople have picked up generators in Fargo, where they sell for $700, compared to the “sale” price of $1300 in Williston.

Officials are quick to point out that the state’s larger cities, Bismarck and Fargo, are also thriving. In the Governor’s most recent State of the State address, he posited his explanation of 'The North Dakota Miracle': “It is about an educated workforce, low taxation, a friendly regulatory climate.” And if your state happens to be sitting atop 400 billion barrels of oil … hey, it can’t hurt.

 

John Hofmeister, former CEO of Shell Oil has blasted the Obama Administration for prohibiting such nationwide oil and gas production in the United States. “The failure of the United States of America, the world’s largest consumer, to adopt government policies to enable domestic production to increase and meet these conditions has been nil, nada, nothing, and that is unfortunate for American consumers, We know where the oil is but the government has to allow the companies to get the oil,” he said, charging the administration with being “anti-drilling.”

 

When you fill up your gas tank this week and every week you can thank Barack Obama and democrats for the record amount you are spending at the pump.

 

Why does this lurking crisis exist for Los Angeles and other US cities? Let us examine some of those who have influenced the White House and had a hand in shaping these current policies.

 

There was Reverend Jeremy Wright who spent 20 years shouting “G D America” from the pulpit.

 

There was William Avery who was convicted of crimes against the United States and whose living room was used by Obama to announce his intent to run for the presidency.

 

There was Frank Marshall Davis, a card-carrying member of the Communist Party, who mentored Barack Obama when he lived in Hawaii.

 

This list goes on and on but this is sufficient to let you connect the dots.

 

Now we should look at the extent of a lurking remedy. The Government Accounting Office has pointed out the recoverable oil in Colorado, Utah, and Wyoming alone is equal to the entire world’s proven oil reserves.

 

The Green River Formation, a largely vacant area of mostly federal land that covers the territory where Colorado, Utah and Wyoming come together, contains about as much recoverable oil as all the rest the world’s proven reserves combined, an auditor from the Government Accountability Office told Congress on Thursday.

 

The GAO said that the federal government was in “a unique position to influence the development of oil shale” because the Green River deposits were mostly beneath federal land.

 

It also noted that developing the oil would have an environmental impact and pose “socioeconomic challenges,” that included bringing “a sizable influx of workers who along with their families put additional stress on local infrastructure” and “making planning for growth difficult for local governments.”

 

“The Green River Formation--an assemblage of over 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah, and Wyoming--contains the world's largest deposits of oil shale,”Anu K. Mittal, the GAO’s director of natural resources and environment said in written testimony submitted to the House Science Subcommittee on Energy and Environment.

 

“USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions,” Mittal testified.

 

“The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the oil shale in the Green River Formation can be recovered,” Mittal told the subcommittee. “At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world's proven oil reserves.”

 

In her oral statement before the subcommittee, Mittal said that developing the shale oil would create wealth and jobs for the country, but also challenges for government.

 

“Being able to tap this vast amount of oil locked within this formation will go a long way to help to meet our future demands for oil. The U.S. Geological Survey, as you noted, estimates that the formation contains about 3 trillion barrels of oil of which half may be recoverable,” she said.

 

“As you can imagine having the technology to develop this vast energy resource will lead to a number of important socioeconomic benefits including the creation of jobs, increases in wealth and increases in tax and royalty payments for federal and state governments,” she said.

 

“While large-scale oil-shale development offers socioeconomic opportunities it also poses certain socioeconomic challenges that also should not be overlooked,” she testified. “Oil shale development like other extractive industries can bring a sizable influx of workers who along with their families put additional stressed on local infrastructure. Development from expansion of extractive industries has historically followed a boom-and-bust cycle making planning for growth difficult for local governments.”

 

In her written testimony, Mittal noted that three-fourths of the Green River shale oil is under federal land.

 

“The federal government is in a unique position to influence the development of oil shale because nearly three-quarters of the oil shale within the Green River Formation lies beneath federal lands managed by the Department of the Interior’s (Interior) Bureau of Land Management (BLM),” she testified.

 

The GAO also cited potential environmental impacts from producing oil from the Green River shale that included the need to draw large amounts of water, possible harm to water qualify, and temporary degradation of air quality and the clearing of large amounts of vegetation.

 

"Developing oil shale and providing power for oil shale operations and other activities will require large amounts of water and could have significant impacts on the quality and quantity of surface and groundwater resources," Mittal said in her written testimony. "In addition, construction and mining activities during development can temporarily degrade air quality in local areas. There can also be long-term regional increases in air pollutants from oil shale processing and the generation of additional electricity to power oil shale development operations. Oil shale operations will also require the clearing of large surface areas of topsoil and vegetation which can affect wildlife habitat, and the withdrawal of large quantities of surface water which could also negatively impact aquatic life."

 

The above does not even begin to factor in the trillions of barrels of oil that exist throughout the rest of the United States, the off-shore oil, the Keystone oil, or the gulf oil.

 

Development and production of this oil will give us the Whole Package of:

 

- Millions of jobs

- Energy independence

- No reliance on foreign energy

- Less wars since our dependence on the rest of the world decreases

- Huge increase of local and national tax base

- Control of our destiny

- Wipe out of the deficit

 

Activity in the Dakotas is just a microcosm of what the activity across the states will resemble. An unimaginable economic renaissance will be created.

When you ask yourself why development and production of this United States oil  hasn’t happened yet the answer is apparent.

 

All you have to do is sit down and connect the dots.

 

(Kay Martin is an author and a CityWatch contributor. His new book, Along for the Ride, is now  available.)

-cw

  

 

 

CityWatch

Vol 11 Issue 60

Pub: July 26, 2013