Yellowstone County economy primed for more energy growth

2013-12-22T00:15:00Z 2013-12-22T09:49:09Z Yellowstone County economy primed for more energy growthBy TOM LUTEY The Billings Gazette

The Bakken oil boom and skyrocketing farm commodity prices kept the Billings economy chugging through the recession, and still economic developers believe its train has yet to come in.

That optimism stems from the belief that more oil and gas development is on tap for Montana both in the Bakken oil shale along the North Dakota border, and closer to Billings in the Beartooth Mountains and in the Big Horn Basin of Montana and Wyoming.

Two major announcements in October suggest energy could give the local economy a boost in 2014. Burlington Northern Sante Fe Railroad announced that it expected Bakken oil development to intensify on the Montana side of the border. Accordingly, the railroad opened an economic development office in Billings to meet demand for new or expanding rail facilities, specifically rail industrial parks 80 to 200 acres in size.

Days after BNSF economists opened shop, Denver-based Energy Corp. of America opened its Billings office to develop oil and gas leases near Roscoe, Red Lodge and the Big Horn Basin. ECA plans to develop 50 wells using horizontal drilling and hydraulic fracturing. Drilling cost of each well is expected to be $5 million, with most of the development taking place in the next two years.

The Big Sky Economic Development Agency then sweetened BNSF’s development announcement by disclosing its interest in building a rail-based industrial park, mostly to meet existing demand.

“In the last 18 months, even the last two years, we were getting a lot of phone calls asking, ‘Do you have 20 acres where I can build a distribution facility and does it have infrastructure in place?’ ” said Steve Arveschoug, Big Sky Economic Development director.

Big Sky EDC has since hired an engineering firm to look into potential sites for a rail park, though there already seems to be interest in a park in Lockwood were Pacific Steel installed a rail-sided car shredder big enough to serve four states. Pacific plans to eventually ship 80 railcars of shredded metal to the steel mills every month. The 23-acre park cost $30 million.

The rail activity is welcome news to a Billings economy that was just beginning to see a slowdown in manufacturing.

“Yellowstone manufacturing actually declined a little bit, but let me tell you a fuller story,” said Patrick Barkey, chief economist at the Montana Bureau of Business and Economic research at the University of Montana. “Montana has recovered manufacturing, manufacturing wages are recovering, but Montana was coming out of a hole. Yellowstone County was not. Energy basically allowed Yellowstone manufacturing to have a different experience during the recession.”

In fact, manufacturing grew slowly as the oil development demanded steel and fiberglass tanks, as well as custom machinery. Texas-based Bay Ltd. moved in and hired 250 people to manufacture steel structures for the oil companies in the Canadian tar sands.

In 2010, with the recession showing its first signs of easing, manufacturing jobs in Yellowstone County numbered 3,022. The number of jobs peaked at the end of 2012 with 3,347.

“It appears that Yellowstone County maintained their manufacturing sector better than the state for awhile during the recession,” said Barbara Wagner, chief economist for the Research and Analysis Bureau of the state Department of Labor. “The better performance of Yellowstone manufacturing is likely because of the decline of the wood products industry due to the national housing problems. Plus, Yellowstone manufacturing is concentrated in food products and petroleum, both industries that performed well during the recession.”

However, during the first half of 2013, manufacturing jobs tumbled to 3,179, according to the Research and Analysis Bureau of the state Department of Labor. Nearly all of the job loss was in food manufacturing, mostly likely related to the closing of Sweetheart Bakery. Sweetheart closed at the end of 2012, leaving about 250 Montanans unemployed. The company had 100 workers in Billings, many of whom were rehired when Franz Bakery reopened the Billings facility in May.

Other than food manufacturing declines, other sectors of the regional economy showed steady growth.

Construction growth had its second strong year in a row, with the value of new construction within Billings city limits through November at $302.3 million, compared to $171.9 million a year earlier through November.

Denise Smith with the Billings Homebuilders Association said there would be more industry growth, but banking regulations have slowed lending.

“Because of the financial stuff that’s happening at the federal level, there are so many more hoops that the banks have to jump through to finance a spec home,” Smith said. “The big banks that have banks in Kalispell, the Bitterroot and Missoula are still dealing with foreclosures and that plays into what they can do in Billings.”

The biggest difference was commercial and multifamily housing values. Stockman Bank and Billings Clinic had the most expensive construction.

Billings Clinic has been in perpetual expansion for the past few years. The hospital began construction on a 20,000-square-foot cardiac center in the spring, and also an ambulatory telemetry unit. Together, the projects cost an estimated $10.9 million.

Last July, Billings Clinic began work on a new $11.5 million intensive care unit. The clinic also opened a $1.2 million center for breast health.

Those medical projects were rolled out at the same time the federal government began a 44,000-square-foot expansion of the Veterans Affairs Clinic. The $67.3 million expansion comes just four years after the original clinic was built. Roughly 20 to 50 new jobs will be created by the VA expansion.

Billings Clinic employment has also increased steadily, from 3,400 employees in 2008 to 3,766 workers on payroll currently.

St. Vincent Healthcare has also been growing steadily. In the past five years, the medical provider’s footprint has increased more than 100,000 square feet to 1.14 million. St. Vincent employs 2,100 people in Yellowstone County.

After a disconnect of several years between the retail economy and other Yellowstone county industries, earnings for retail employees increased 3.5 percent in 2013. The sector was most affected by the recession and the last to recover.

The single largest retail expansion in Yellowstone County is the 220,000-square-foot Scheels sporting goods store at Shiloh Crossing. The store is set to open Sept. 6, 2014.

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