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As oil prices drop, North Dakota’s booming industry braces for a winter cooldown

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  • JUDY WOODRUFF:

    And the push for more oil and gas, as we know, comes in the wake of a record boom in domestic production, and after an unexpectedly steep plunge in the price of crude oil in recent months.

    One of the states where the boom has been most pronounced, of course, is North Dakota. But, as oil's price keeps dropping, things are starting to change there for many oil field businesses bracing for the slowdown.

    We have a report from Emily Guerin of Inside Energy. That's a public media collaboration on energy issues, working with the NewsHour.

  • EMILY GUERIN, Inside Energy:

    Drive around Western North Dakota and you will see a lot of these, drilling rigs.

    There's over 150 of them in the state, all drilling new oil wells into North Dakota's Bakken shale. Six months ago, there were a lot more. Oil prices have dropped since then, so companies are cutting back on expenses. That means drilling fewer wells.

    North Dakota is already an expensive place to drill for oil. Transportation costs are higher here than in places closer to Gulf Coast refineries, $10 per barrel or more. So the drop in prices makes things even harder for companies drilling in the Bakken.

    With oil prices in freefall, companies like Emerald Oil are suddenly cautious. It's a small company based in Denver with just 50 wells, not much by oil field standards.

    CEO McAndrew Rudisill says he's drilling fewer wells next year.

  • MCANDREW RUDISILL, CEO, Emerald Oil:

    No one wants to lose money drilling an oil well. So, everyone is going to pull back because of where oil price is right now.

  • EMILY GUERIN:

    Niles Hushka is the CEO of a large engineering firm based in Bismarck, North Dakota. He says companies of all sizes are starting to feel the slowdown.

  • NILES HUSHKA, CEO, KLJ:

    Almost on a weekly basis, there's some new announcement of companies cutting back on the number of rigs that they have or possibly redeploying those rigs into more highly productive zones.

  • EMILY GUERIN:

    Hushka has seen plenty of booms and busts before in his 30-plus years as an engineer. But he says this one is harder to predict.

  • NILES HUSHKA:

    The interesting thing about this particular cost cycle is, is that it's not supply or demand driven, and that the entire price of oil today is being politically influenced. And, therefore, you can't look at a traditional economic model and say supply equals demand and, therefore, prices should go up or down.

  • EMILY GUERIN:

    What he means is, North American oil producers are pumping so much oil out of the ground, there's a glut. And OPEC, the Organization of Petroleum Exporting Countries, isn't cutting back on their production. So prices are plummeting.

    Here in North Dakota, oil touches everything. So people are nervous. Falling oil prices could have a huge impact. The slowdown isn't just affecting oil companies. It's hitting their contractors and suppliers too. Small oil field businesses like industrial equipment sales and service in Williston, North Dakota, are bracing for that impact. They make and fix parts for oil field equipment.

    Rory Anderson is one of the company's owners. They have got about 50 employees and they're trying to avoid laying anyone off. So they cut back hours and let their cleaning crew go. They also give advice to younger employees, who haven't been through a boom and bust before.

    RORY ANDERSON, Industrial Equipment Sales and Service: We tell them, you need to save as much money as you can. Put it away. Don't buy new things. And just be prepared, because it's going to tighten up a long way.

  • EMILY GUERIN:

    One way companies prepare for a slowdown is by diversifying, not relying just on the oil field for all their business.

    That's what Bob Ayala is trying to do. He's the owner of Shale Oil Field Services. He leases a few trucks mounted with powerful hoses and vacuums. His company gets called to clean up oil and wastewater spills and blast holes into the ground for new pipelines. But that's not all they can do.

  • ROBERT AYALA, Owner, Shale Oil Field Services:

    For the specific services that we offer, it is tied to the oil boom, because everything is here. But we do a lot of utility work. We do — we expose fiber-optics. We do other work besides just drilling rigs and those type of oil boom services.

  • EMILY GUERIN:

    Ayala says demand for his business is pretty constant, because even if drilling slows down, there will always be spills.

  • ROBERT AYALA:

    Going forward, even when the oil boom slows, there are still so many wells in North Dakota that have to be maintained. There are still ongoing fluid that's being moved. And there still has to be support services, and we're one of them.

  • EMILY GUERIN:

    And for some other businesses, demand is still high. Take this indoor R.V. park. Inside the oversized storage units, it's warm and quiet. You don't have to worry about your sewer and water pipes freezing.

    Owner Louis Bonneville says it's an obvious choice for the harsh North Dakota climate.

  • LOUIS BONNEVILLE, North Dakota Indoor RV Park:

    Owner, We do have a waiting list for our indoor units, and we have a few openings outside right now. Every day, we get three or four calls for somebody to go inside. And most of the time, it's because they're froze up from another R.V. park, and so they'd like to move in.

  • EMILY GUERIN:

    A few people have moved out recently, but Bonneville says that always happens this time of year.

  • LOUIS BONNEVILLE:

    I believe people are leaving because of the weather, not because of the price of oil. If it was the price of oil, we'd have a mass exit. We'd have companies that are here that have 10 people here. All of a sudden one day, we'd have 10 people leave and go home. And we haven't seen that yet. So, I don't think it's the oil prices dictating our move-out right now.

  • EMILY GUERIN:

    Williston, the town at the heart of the boom, usually feels slower this time of year. Cold weather puts a lot of the new construction and pipeline projects on hold, so there's far fewer heavy trucks rumbling through town than in the summer.

    But it's really hard to tell what's seasonal and what's due to low oil prices. Some say this is actually a pretty good time of year for prices to drop.

  • NILES HUSHKA:

    We'd rather not be drilling now anyways. We'd rather be slowing things down. We'd rather be waiting for better weather to come along. So, it's — if there was such a thing as a best time, it would be right now, in the middle of the coldest part of winter.

  • EMILY GUERIN:

    The full effect of low prices probably won't be felt until spring, when the prairie thaws, temperatures rise and activity would normally start back up. Until then, a lot of people up here are in a kind of hibernation, waiting to see what happens.

    For the PBS NewsHour, I'm Emily Guerin in Williston, North Dakota.

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