Industry leaders in North Dakota discuss impact, share outlook

By Sam Easter

The tricky thing about rising gas prices, Lance Monson says, is that they don’t hit you just at the pump – they hit your supply chain there, too.

Lance Monson is a preconstruction manager at Grand Forksbased Construction Engineers – a role that has him crunching numbers and closely watching prices as projects launch. Despite its fleet of gas-hungry construction equipment, gas prices aren’t nearly as big a part of the budget as labor and building materials.

But for the latter especially, months of high gas prices have buoyed costs that get passed down the line – from the pump to the supplier to him.

“Although we’re paying more for metal panels, it’s hard for us to parse out how much of that is because of fuel price, and how much of that is because of the panel material itself,” Monson said. Russia still hadn’t invaded Ukraine; a steady drumbeat of infla- tion hadn’t spurred a hawkish Federal Reserve to big hikes in interest rates.

Monson shared the story of a client who wanted to pay for a foundation and wait six months to pay for the building still to be built on top of it.

“We just told them that, great, here’s the number today, you can ask us six months from now what the number is on it then. Otherwise, we’re going to have to put 20% on it to guarantee it to you,” he said.

It’s hard to pinpoint exactly why oil prices have skyrocketed. Dean Bangsund, an applied economist at NDSU, points out that oil is a global commodity that has been affected by the war in Ukraine, sanctions against Russia oil and exports and a post-pandemic bounce in the travel demand.

“As is usually the case with many of these big issues, there’s not a particular one factor that you can really put your finger on that is a driving mechanism,” Bangsund said. “There’s usually a contribution of a number of things.”

It’s not all bad news. Joe Morrissette, the top staffer in North Dakota’s state budget office, notes that the state could see record revenues from its oil taxes during this two-year fiscal cycle – with the price of North Dakota’s oil far outstripping the conservative estimates the state made.

The projection that the state relied on, Morrissette says, is roughly equivalent to the West Texas Intermediate price – a widely used standard – somewhere in the mid-$50s.

“We’re not quite double that right now, with the price in the low to mid-$90s. But we were double that for a considerable period of time,” Morrissette said. “...Through the end of July, the forecast adopted by the Legislature that our budget’s based on assumed we would have collected a little over $1.9 billion in tax revenue. And so far, we’ve collected $2.8 billion.”

But Morrissette points out that it’s no guarantee those big revenues will continue. When the state set oil tax revenue records in the 2013-2015 biennium – at about $6 billion – it was followed by lean times in the next cycle. And despite the big spending boon coming toward appropriators, inflation is pushing upwards on costs around state government.

“There’s some agencies in state government, like the DOT (Department of Transportation) and Water Commission that do a lot of construction,” Morrissette said. “Well, they deal with supply chain issues, and they deal with inflationary pressures and cost escalation on those things.”

Sara Otte Coleman is North Dakota’s tourism director. She said that high oil prices seemed to have an effect on travel earlier this year, especially with hotel occupancies dipping in parts of the state more impacted by road trips.

But Coleman said there are signs the travel mood is improving. The state has access to cellular location data that can help track tourism. Those numbers, she said, show that for a week in late August, North Dakota led the country in year-over-year increase for road trips.

“People have decided ‘I still want to take my family on vacation, I still want to get away before fall,’” she said. “And so we’re seeing stronger numbers later this summer.”

Monson previously spoke with Prairie Business in early 2022, when many business observers had hoped pandemic-era price uncertainty was about to fade. That hasn’t come to pass – but he’s still as adamant now, just as he was then, that it’s important to plan for tough times no matter how rosy the outlook.

“Eight months ago we said we were seeing a (price) plateau and hoping for a decrease. I don’t want to try and make any predictions, but we’re hoping for the same thing now,” Monson said. “But we’re not planning for it. And, we never really did stop planning for increases.”

Rewards of working in the construction industry

Christenson said a career in construction lends itself to a variety of experiences, including working outside. At the end of the day – or at the end of a project – there also is something to show for his hard work and planning.

“It’s different every day,” he said. “There’s very little monotony in what we do – and it’s tangible. When we finish a project, I can go and look at a job, I can drive my kids past a building and say, ‘Hey, I worked on that for two years. That was just a parking lot before we started.’”

Also, the pay is decent and there are a variety of options. “Just within our company,” he said, “if you want to work for a few years in Texas and then want to move out to Colorado or wherever, there’s a million different opportunities.”

Hilde and Finneman echoed similar sentiments. “For me it’s the uniqueness; each project is exciting and unique,” Hilde said. “You’re working with a unique team, and every building has different challenges. You’re never bored.”

Monson said, “It’s fun to have something that’s mentally challenging. There’s also a decent amount of variety.” And there’s the ability to work one’s way up the career ladder, from carpenter to superintendent, “maybe running crews and running projects.

“It’s a good opportunity for anybody, whether you’re just getting out of high school or if you’re 40 years old, there’s a spot for you to jump in and grow your career.”