“2,000 New Wells in Four to Five Years”
By Darryl L. Flowers
The meeting was put together by Montana Overthrust Management (MOM), a Choteau company that has been involved in the development of oil and gas along the eastern slope of the Rockies.
Dan Lindseth, one of MOM’s partners, opened the meeting by thanking Rep. Christy Clark, R-Choteau and Rep. Bob Mehlhoff, D-Great Falls, for bringing staff from the state legislature’s Fiscal Division to Choteau. The rules require that a bipartisan request be made for the fiscal division to engage in such a presentation.
The first to wade into the details of Montana’s complicated tax policy was Terry W. Johnson, Principal Fiscal Analyst. Johnson began by showing how oil production had changed since 2003. Using a graph he explained that production from both horizontal and vertical wells had peaked in 2005. Since then, horizontal wells have been in steady decline while vertical wells have shown an incease, starting the the third quarter of 2010.
The trend in oil production in the state was not reflected in the numbers showing production statistics, though. According to Johnson, in the period form 2003 through 2011, production (gross value, in dollars) peaked at over $900 million in 2008. That peak reflected the price of oil at the time, which was about $120. The value plummeted to about $250 million in the first quarter of 2009 and ended 2011 at half a billion dollars.
Johnson noted that, since 2006, oil and gas production in Montana were in a steady decline until the last three quarters” We expect that trend to change, to increase, possibly as soon as the next quarter.”
As he wrapped up his portion of the presentation, Johnson revealed that on a recent visit to communities in eastern Montana, he had heard from a couple of oil exploration companies about what they expect to see in that region of the state in the next four to five years. One company expects 1,000 new wells in eastern Montana while another put the estimate at 2,000 new wells. “And that does not include the development in this region.”
Next, Jim Standaert detailed the flow of revenue to the schools. The Senior Fiscal Analyst began by telling the crowd that Rosebud County had the lowest “mills” of any of the state’s counties due to the tax receipts from the Colstrip generating facility. One of those in attendance asked about the Otter Creek Coal proceeds.
According to Standaert, when the Otter Creek money, over $80,000,000, came into the state, the schools had already been funded for the year. The money was put into the “ending balance” and returned to the general fund as the new fiscal year began.
Standaert next detailed some of the problems in addressing school funding needs, explain that schools count the students in October and again in February. “In the other months, you may have students come into the school for a brief period before moving on. The schools never get reimbursed for those additional students.”
During a question and answer session after Standaert’s presentation, the question came up as to why counties were seeing oil and gas money while cities and towns were not reaping the benefits.
According to Rep. Lew Jones, R-Conrad, during the “Big Bill” of 2003, most of the cities chose to take money from gaming while the counties hedged their bets on oil and gas. “We did not become Las Vegas, we became and oil and gas producer” remarked Jones.
As the meeting came to a close, Cathy Duncan described a visit the group had made to Watford City, North Dakota. She explained how, despite the bad news coming out of the oil patch painted a distressing picture of what was happening to our east, Watford City was not seeing the bad effects of the oil and gas exploration.
According to Duncan, the city had engaged in planning in advance of the boom, and had targeted the 20% of oil workers who become permanent residents. As a result, Duncan said, the community had seen a 30% increase in students in local schools, “according to Bloomberg, Watford City was recently rated as the best place to raise your kids in the U.S.”