Oil Booms Slowed Down By Weakening Roads

Without being too political... The simple answer is the two states cited have such low taxes and non-existent corporate taxes that the oil industry can operate at a complete positive on public goods. The oil industries effectively pay nothing to destroy the roads on which they operate and because the current regimes in both states are misinterpreting (or willfully ignoring) the realities of the system they put in place they're now reaping the rewards of it. They're watching most of that oil truck out of the state and next to no increase in practical taxes (payroll or otherwise) because few of the workers are residents. It's just a matter of being gifted this oil by a government willing to tax the locals while ignoring the main culprits of the destruction.

@Xeranar In North Dakota, the oil companies are now pushing to get the extraction tax LOWERED. Guess they want everyone else to pay for the roads they destroy. Unbelievable.

@HotPotato If you are referring to recovery.gov it was a joke. Even the mainstream press lampooned it. Bottom line, we got about 50 billion worth of infrastructure for over 800 billion. (Though much of the total cost was actually tax cuts that likely did some good). And, that's if you get liberal on defining infrastructure. The building of infrastructure has now become, due to it being seen as pork, an inefficient process designed to buy votes and fill campaign chests and bank accounts of friends. Keynes denied being a Keynesian having seen what his work has wrought.

@Xeranar Or, you could actually leave your hatred of the oil companies and capitalism out of it because it's simpler than that. It's almost apolitical. The roads were not designed for the weight. Your logging roads are designed for sustained use by logging trucks. The roads in question were designed for only occasional over weight vehicles. There is a lot of common sense reasons for the lack of upgrades on the roads. The damage wasn't planned for. Fixing the road now means it will be destroyed again next year. Investing in a major upgrade may not be wise because when the fracking stops, the revenue from it stops. Local politicians are, of course, suspicious of oil company forecasts of how long the activity will continue. Some suspicion is justified because the companies are motivated to get infrastructure built and might exaggerate. Then there has been an oil hatred campaign fueled by idiocy and billions of dollars. Oil companies are no worse than any other industry and far more trustworthy than governments on average.

@HotPotato As for taxes, it guess you don't want your taxes lowered? What percentage of the extraction tax goes to road repair? You do realize that roads are supposed to be funded by fuel taxes? Are you implying the oil service vendors are not paying their fuel taxes?

@Xeranar - good point. In BC most industrial roads are the responsibility of the company who has the forest harvesting licence. If they do a good job of managing their harvesting licences then the government pays back a large portion of the "main haul road" maintenance and construction since it ultimately benefits the public for having that road on public land. It should be user pay. If companies expect the state to build and maintain roads then they should contribute to those costs.

@Landcrusher Silly post. All one has to do is go to recovery.gov and see where the money went (including tax cuts/rebates/incentives, contracts and entitlements) to realize that the $840 billion in deficit spending was a injection in the economy, stimulate the economy and prevent another depression, just as Keynesian economics predicted it would. Keynes never denied being a "Keynesian" but another noted economist, and one of Keyne's early disciples, Milton Friedman did.

@Landcrusher LC - Stop being so desperate, nobody is hating capitalism (atleast not in this particular position). The fact that you're out there citing the engineering capacity of roads is irrelevant, the article is pointing out that the roads are breaking down and the state is picking up the tab under some very suspect reasonings. Whatever you feel about capitalism (and lets be honest, you're about in love with it as you can be) you should recognize that the capital leaving my pocket is going into the oil companies because they're not being expected to repay their transaction cost. Never mind the fact that states like ND & Texas are both dipping into federal funds as often as state for these repairs so my tax dollars are going to line Exxon's pockets because they're not being asked to pitch in for infrastructure repairs they're causing. It's basic capitalism 101, avoid paying whenever possible and the state governments are being complicit in this act. By the way, stop living in a fantasy land where an oil company I don't own and have no say in how they're run is more trustworthy than a democracy. You realize how stupid you sound, right? There has to come a point where reality steps in on these far-right fantastical dreams you have of being in a complete oligarchy. You're not going to be the leader of it, so I suggest you stop assuming so.

@Landcrusher Dartman, You have some nerve bringing fact into the equation!

@Lou_BC Lou/Xeranar- In Texas, the state is collecting 4.5% for oil and 7.5% for gas as a "severance" tax. for an oil well producing 450,000 barrels of oil equivalent (BOE) at $100/bbl that equals $2 million. In addition every one of the 1200 to 2800 trucks servicing that well are paying .4440 cents per gallon of which the state is collecting .20 cents. Texas has a corporate franchise tax and a sales tax, ad-valorem tax and numerous other taxes that the producer has to pay. All those trucks and rig workers, engineers, accountants, sales people etc.etc are paid very well and contribute to the local and state economies. Don't you think the producer is already paying their fair share for the roads when you look at the big picture for the economic output they generate in jobs,salaries and taxes for local, state and federal?

@Xeranar Xer, What transaction costs are they not repaying, and how on earth is your measly tax bill involved? Are federal taxes not charged on every gallon in order to pay for roads and their repair? Has the government been lying to us about that? (Hint: they really, really have spent the money elsewhere and everyone of any import knows it). And by the way, you really trust the government so much? Really? Democracy being all so wonderful as people always vote so altruistically. Surely none of our laws need overturning then? There need be no checks on government power? Nonsense. Wake up and grow up. This is a democratic republic and without constant vigilance which has not been kept up by the voters, the government will eventually cause even you to grab a gun and revolt. I am no fan of Exxon either because they are too damn big for their own good. I would, however, trust them more than an oil company owned by you. Not that it's personal, but I prefer to live in a world where oil companies are not controlled by people who don't like oil companies. Just say'n.

@Lou_BC Lou, The US government promised it would use fuel taxes to pay for the roads. Many people voted for representatives who then used their power to redirect those funds. Most of those characters were re-elected. You can choose to blame the pols or the voters. I don't care. Either way, the companies paid their taxes as set by the legislature. Why then blame companies?

@Landcrusher Facts. No. Go to the site and start drilling down into the smaller projects that don't actually sound like a shovel is involved. You will find the term "not reported" fills many of the lines in the database. I'm sure the academics felt rewarded for their continued shilling for the statist left. So much so that the likely have a continued consensus on who should run Congress. I'd like to see an accurate report on how much of an economics chair holder's income is sourced through government funding. Let's face it, the modern education establishment would downsize by half without the oversized support of the Feds. They all know where their bread is buttered and can only utter a "tut, tut" for any fool among them who bothers with objectivity and truth.

@dartman We discussed Texas' near non-existent corporate tax and again I already blew apart the 'well they're adding payroll' because these producers are only producing in the state with their office staff elsewhere and often located in another state for corporate tax roll purposes. Never mind that the severance tax is rarely based on barrel head but on the much lower prices set by the state regulators. So even if they are getting a tax benefit of 2 million the roads are still not being repaired at the rate of destruction.

@Xeranar LC - I love it, I attack your argument where your right-wing beliefs lie and you freak out. Aren't you the one obsessing over taxes and now I point out that my tax dollars going to Texas to cover oil production destruction of infrastructure. Your response is to call my tax dollars measly, well welcome to the world, individuals pay 2/3rds of all taxes for the federal government up from 1/3rd when you were a child. Those taxes that Exxon used to pay would have went towards the infrastructure they use up. It's simple math, oil company uses roads and the 'severance tax' isn't covering that. They're continuing to make record profits and Texas gets worse roads for the trouble. Thus I am stuck paying for their profit, this is how profit works, finding a way to exploit something without paying for it. Going back to the 'gubmint ain't trustworthy' talk, you mind as well keep obsessing because frankly your argument folds in on itself. You're upset the government has people who vote for their self-interest while a corporation has only self-interest and will exploit using their vast resources. Jane and Bob have meager savings, I doubt they're the ones beating down congress' door. I mean the irony here is that you're more upset at the poor than the exploiters and you want to keep rewarding them because well, that's what the right does, they have an obsession with the idea of wealth = moral good but can't quite square it with the bitter reality of what is really going on.

@Xeranar ...@xeranar My comments are related to Texas only, where almost every driller/producer such as EOG, Marathon(MRO) is either Texas based or has substantial operations in the state. Most jobs are filled by native Texans or immigrants from other states to looking to improve themselves. High school graduates in South Texas have a plethora of good-no great-job opportunities and even entry level low paying jobs in fast food and customer service or paying near double the minimum wage. If you are CDL driver with and clean record and not making $75k a year in Texas, you're probably lazy. Last but not least, many, many new millionaires or being minted because most land in South Texas is privately owned. You cannot discount the economic effects.

@dartman …@xeranar My comments are related to Texas only, where almost every driller/producer such as EOG, Marathon(MRO) is either Texas based or has substantial operations in the state. Most jobs are filled by native Texans or immigrants from other states looking to improve themselves. High school graduates in South Texas have a plethora of good-no great-job opportunities and even entry level low paying jobs in fast food and customer service are paying near double the minimum wage. If you are CDL driver with a clean record and not making at least $75k a year in Texas, you’re probably lazy. Last but not least, many, many new millionaires or being minted because most land in South Texas is privately owned. You cannot discount the economic effects. In one county alone more than 3,000 wells have been permitted/drilled in the last 5 years. To my knowledge there have been no "dry holes" in the Eagle Ford in S. Texas. Do the math: 3000 x 2m = $6 Billion. This does include royalty income, fuel taxes, license fees, franchise taxes, ad-valorem taxes, just severance taxes. Do you seriously still think in Texas that the State haven't or won't receive enough money to maintain and repair the existing roads in one county?

@dartman Xer, You are by nature anti oil company, and I'm quite sure you get regular propaganda from bias sources because that's what you choose to believe. The situation in Texas is that there are funds piling up from fees and taxes being paid by oil companies specifically for road and other infrastructure because all money is fungible. The big cities have the power and they let earmarked funds pile up so they can borrow for other things and still say the budget is balanced. I suppose you might say that puts the lie to our balanced budget laws, but I would point out that it would be obviously worse. Dividing up money other people earned is always going to lead to moral problems. This is why your buddy Keynes was wrong in so many ways.

@Xeranar Xer, If you loved it, you would answer my questions. Instead, you have to try to characterize me as desperate and freaking out? I am doing neither. I am just confronting your hate based ideology with some reality. Your taxes are measly because, unless you have some serious secondary income your job description tells me you aren't really paying much versus what you draw out. Your taxes do not go to Exxon in any reasonable examination of reality. OTOH, your salary is totally subsidized by the hardworking folks at Exxon with six figure salaries because let's face it, colleges in this country are on the dole. The whole meme on subsidizing oil companies is a childish ruse. Those guys earn their money fair and square these days. You, not so much. When I was a kid. The budget was about one sixth transfer payments and I suspect colleges were reasonably supported. Now, the budget is what's, two thirds transfers? The top 20 percent pay 80 percent of the taxes? Are you in that group? I've explained elsewhere what's going on with Texas roads. I suspect most states would love our situation. I'm sorry you have so much hate for business. I know you have spent your life looking at the worst of it and have a warped perspective. Still if you think that all profit comes from exploitation, there is just something wrong with you. And puhlease, don't try to tell use you didn't mean for people to infer anything from your use of exploit. Everyone knows better. Lastly, I never claimed wealth is the moral good. I don't pretend to speak for the right. I believe that there are a lot of haters and exploiters running around implying that the rich are all cheating and we should tax their wealth away and redistribute it based on how they think it should be divided. I think a bunch of fools and idiots believe giving those evil turds power might get them something for free and hurt people who have been more successful than them. What a great pile of crap. I'm glad you understand how corporations work in their self interest. Now if you can only figure out how people in government work mostly the same way, you might get somewhere.

@Landcrusher - the companies are as much to blame as the government. This kind of truck traffic dictates road upgrades. Companies and government should work together. There are rural routes in the backcountry of BC that aren't used for logging or mining access but if those roads start to get used as haul roads, they get upgraded fairly quickly. It costs companies money in downtime if their trucks are getting damaged and productivity drops. Part of the problem is advanced planning - companies have to get approval from government to drill for oil. This isn't last minute out of the blue stuff. Companies are negligent and so is the government........... the argument is who needs to pay for it? The argument is also....... are current taxes enough? I'd say no coupled with poor planning and no one willing to take responsibility.

There has been a lot of progress to reduce flaring. There are all sorts of new techs being used to capture gases and use them for on site power or even transport them.

@Landcrusher This is true. Most compressors and gen-sets, run off of the available natural gas, where possible. Oil at +/- $100 barrel is where the real money's at, not NG at $4-$5mcf. If it means flaring off excess gas to get the oil and NGL's so be it.

Yeah, quickly puts the lie to how much of a better stock government workers are. Being only human, most people will dop a 40k blade truck job for 100k fluid truck job. Just don't tell that to all the statists whose world view depends on the superior altruism and selflessness of those in government. The funny thing is that there is likely someone around you with a reasonably good solution that no one in the local government is willing to listen to.

@Landcrusher I;m not sure how much anybody was saying government workers were inherently better than private sector workers, atleast not in a practical dollar for dollar sense. This has long been an issue with government jobs is that they pay less and even with pensions usually end up being lower paying than their private sector counterparts. This though has no bearing on the quality of workers but rather the pay scales. Normally government workers are doing it because they care for their fellow citizens. You're extra frothy today, are you having a bigger cognitive dissonance problem than usual, LC?

Appreciate your on the scene reporting Andy.

@Xeranar How can government be more trustworthy than corporations if the people are the same? How are the same if one set of them cares more? You are aware of recent studies showing government workers actually making more than private sector after total comp I is compared? How about a quote that sounds "frothy"? Why do you always have to throw labels at me? It does aggravate me. Is that why you do it?

@Landcrusher FWIW, LC, your comments influence at least one person. I always learn from them. Your knowledge of the subject and clarity of expression are appreciated.

@Landcrusher Thanks, thelaine

@Andy - We do that in BC. We have what is called "spring breakup". IIRC it used to mean the time when the rivers unthawed and logs were boomed or "floated" to the saw mills. Roads "breakup" in spring when frost comes out of the roads. Weight restrictions or complete road bans get implemented to protect the roads. Environmental regulations have made things tougher because if the roads get pounded too much and rain puts too much silt into the ditches logging can get shut down as well. We are seeing more and more emphasis on logging and hauling in the winter. One can get away with a "lower grade" of road when it is frozen like cement. The secret in that case is to be extremely diligent and groom the roads at the point of freeze-up. The roads then will hold up really well unless an unusual thaw occurs. North Dakota probably gets cold enough to force companies to operate primarily in the winter to protect the roads. Does Texas see freezing weather? Hiring more graders is an answer but like any job it is getting tougher and tougher to find skilled operators. Even with skilled operators there needs to be enough machinery to do the job and enough skilled supervisors to keep an eye on the roads. My brother is a Forester that currently specializes in road construction and maintenance. He had told me once that to build a high volume mainline haul road (carved out of the forest) costs around $100,000 a kilometer. Secondary lower volume haul roads were around $60K per Km and low volume limited lifespan roads like cut block access roads were usually under $20K per Km.