1. NANCY HODUR DEAN BANGSUND RANDY COON North Dakota’s Oil & Gas Industry: Economic Observations & Workforce Characteristics Presented to: Vision West Consortium December 17, 2015 Minot, North Dakota

2. Introduction Select economic indicators  Gross State Product  North Dakota Economic Base  Economic Contribution Studies Economic influence of the oil and gas Industry Current conditions Sneak peak at workforce study

3. Economic Indicators Consistent and widely used measure of economic output Measure of value added Calculated by the Bureau of Economic Analysis Gross State Product Measure of dollars returning to the state from export of goods and services to markets outside of North Dakota Tracks well with gross state product Comprehensive for key industries Economic Base (NDSU data set) Measure the amount of economic activity by an industry in a year Measure of gross expenditures associated with an industry…measures “all” dollars not “new” dollars Does not measure the net change of substitute industries or activities Economic Contribution/Impact Studies

4. Gross State Product 1990 – 2014 Source: U.S. Bureau of Economic Analysis.

5. Personal Income 1990 - 2014 Source: U.S. Bureau of Economic Analysis.

6. All Employment (Public and Private) Source: Job Service North Dakota, Quarterly Census for Employment and Workforce.

7. Source: The Economic Base of North Dakota. Agribusiness and Applied Economics Staff Paper 15001 (forthcoming Fall 2015).

9. ND Economic Base by Industry, 2000

10. ND Economic Base by Industry, 2010

11. ND Economic Base by Industry, 2013

12. Economic Base & GSP

13. Change in Industry Spending, In-state Capture, North Dakota, 2005-2013 Infrastructure spending (additional) 2011 - $1.1 billion and 2013 - $1.4 billion

14. Share of Growth, Employment 2005 - 2014 20052014 Change and Percent Share Employment (QCEW) North Dakota328,121444,658116,537 Oil and Gas5,05262,94257,890 49.6% Sources: Job Service North Dakota; Bangsund and Hodur (2015).

15. What caused the surge in economic output? ND’s growth was steady and consistent from 1990- 2008/9 Rebound from the national recession Petroleum industry ramps up Strong growth in other sectors including technology Favorable agriculture commodity prices

16. What’s Next?

17. ND Average Rig Count

18. Bakken Production Profitability Map The areas in red, yellow and orange have the highest potential for economic gains (2014 prices) Blue zones have a lower potential for sound economic returns. Source: Oil and Gas Impacts Study, KLJ, (2014).

19. Number of Drilling Rigs, ND

20. Production is Stable (Through October 2015)

21. In 2009 each rig drilled 8 – 10 wells per year In 2015/2016 each rig can drill 20-24 wells per year (in-field drilling with walking rigs) Initial production & estimated ultimate recovery up 20% Well drilling cost down 11% Operating costs down 15% Firms focusing on reducing cost and improving efficiencies Drilling and Operating Efficiencies Source: Department of Mineral Resources, North Dakota Industrial Commission (2015).

22. Efficiency and Cost Control

23. Slowdown Impact on Job Openings

24. Not as many jobs as a year ago, but still more jobs than active resumes! North Dakota Core Counties Balance Counties Non Oil Producing Counties Unemployment Rate2.01.82.51.9 Job Openings15,9011,2642,45012,187 Active Resumes8,2161,0942,5044,618 Active Resumes per Job Opening0.50.91.00.4 Source: Job Service of North Dakota, November 2, 2015

25. Takeaway Points Growth has been very rapid Oil and gas industry is the largest single driver of change in the state, but growth in other base sector industries (agriculture, manufacturing, technology) are strong Economic diversification as important now as ever Still adding jobs, still more jobs than applicants Are workforce issues becoming an constraint statewide? Slow down has extended timeline to develop shale formations. Drivers of change are different going forward than those of the last 5-8 years Slow down allows state to catch up to demand for service Goal is to return to steady sustainable growth

26. Goal is to Return to Pre-boom Sustainable Grow Source: U.S. Bureau of Economic Analysis.

27. Much Expanded Workforce in the Oil and Gas Industry We know very little about the current or future workforce Super commuters and housing demand Barriers to workforce becoming permanent residents of ND Important to understand workforce intentions and motivations

28. Study Objectives: Gain insights on the perceptions and intentions of the oil and gas workforce. Project began summer 2014 Oil and gas industry slow down complicated study efforts Personal interviews with community leaders and business and industry representatives Focus group meetings with new residents Survey of oil and gas industry workforce

29. Personal Interviews: Key Workforce Issues-2014 Housing, housing, housing! Staffing Issues  Need more people for everything  Turnover  Poaching  Bonus hopping Concerns regarding quality of life issues Resistance of families to move a key consideration Building and development hampered by lack of infrastructure….can’t build infrastructure fast enough Community made up of two worlds…locals and newcomers

30. Change in Market Conditions Revisit personal interviews in 2015 Needed to go back and see what changed and what stayed the same Has proven to be a valuable exercise Without revisiting, feared that all findings from 2014 would be summarily dismissed as yesterday’s news Also conducted new resident focus groups

31. Personal Interviews Revisited: 2015--Takeaway Housing still an issue  Cost, price risk, credit  Most public entities provide housing subsidies Some sectors turnover is still an issue, but workforce more stable Improved applicant pool, but still challenges with some skilled positions Substantial layoffs in some segments of the industry At least some workers left voluntarily  Reduced hours/overtime  Many went home Housing allowance ongoing, but in some cases firms changed incentives, reduced or eliminated some allowances  Purchase incentives  Eliminate travel expenses  Dining services Many new residents indicated they did not feel welcome

32. Employee Survey Sample ~1,668 Observations 15 firms representing ~8,100 employees

33. What best describes your job?

34. What best describes the activities or services related to your job?

35. Primary Residence Survey Respondents (n = 1,647)

36. Type of Housing

37. Type of Owned Housing by Residency

38. Owned Housing 1 Average Score based on 5 point scale where 1 is very unsatisfied and 5 is very satisfied.

39. Type of Housing Rented, by Residency North Dakota: n = 341 Elsewhere: n = 153

40. Rented Housing 1 Average Score based on 5 point scale where 1 is very unsatisfied and 5 is very satisfied.

41. Type of Housing Provided by Employer, by Residency

42. Employer Provided Housing 1 Average Score based on 5 point scale where 1 is very unsatisfied and 5 is very satisfied.

43. Non-Resident Intention to Move to ND

46. More information forthcoming—Preliminary Thoughts on Workforce Findings  Many issues that were present in 2014 were still present in 2015…housing costs, especially SFH  The divide felt by new comers at focus groups was striking  Super commuters….a portion of this workforce has NO INTENTION of every moving to ND  Recognize the difference between housing need and housing demand  Need adequate number of housing units  Some may demand different types of housing, e.g., RV crew camp, or other “temporary” housing Full report should be available by the end of the month.

47. Questions? Contact Information: Nancy Hodur: nancy.hodur@ndsu.edunancy.hodur@ndsu.edu or 701-231-7357 Dean Bangsund: d.bangsund@ndsu.edud.bangsund@ndsu.edu or 701-231-7471