Tuesday, July 08, 2008

We Want Jobs!

One of the biggest challenges that I see on the horizon for many rural areas is the rapidly escalating price of gasoline and diesel fuel, especially when there aren’t local jobs and a big percentage of the community has to commute to work everyday. Union County, SD (population 13,952) is such a county. Almost half (44%) of the residents drive out of the county each day for work, most 20 miles to Sioux City, IA or 65 miles to Sioux Falls, SD. Jobs in the county have declined from 10,290 to 8,416 in the past ten years so commuting is often the only option.

Last month the voters in Union County were given an opportunity to reverse that trend, when they were given the choice of zoning 3,300 acres between Elk Point (population 1,714) and Spink (population not listed) for a new oil refinery. This $10 billion refinery, which would be the first built in the USA in over 30 years, which is another story, would take 4,500 workers five years to build and once completed would hire over 1,800 employees. The refinery would process about 400,000 barrels of thick Canadian crude per day. The economic impact was estimated at $14 billion per year.

Emotions ran high on both sides of the issue. On one side were people like Dennis Hultgren, who’s lived on the same farm for 78 years about 8 miles from the proposed site. He commented, “I’ve got ten adult grandchildren and not one of them has stayed in South Dakota. I think that this is a great opportunity that will impact the entire area. Not just jobs but an immense growth in other related industries.”

Ed Cable, who led the opposition to the proposed plant is a project manager by trade. His main concern was, “There’s going to be an immediate need to upgrade state, county and township roads. Who would pay for those costs? Who would pay for the increased maintenance costs? Who would pay for the temporary issues of housing and socioeconomic needs of construction workers?”

After being debated for months, two-thirds of the voters went to the polls and supported the new project by a 57% to 42% margin. Construction is projected to begin in 2010.

An article on the vote in the Sioux City Journal generated 450+ comments with them running about 90% in favor of the project and 10% against. Here was my researcher Lisa Huston’s favorite comment from Lawrence, “For those who oppose this oil refinery, why don’t you stop buying gasoline for your cars? Stop buying anything that is trucked or shipped. Stop taking postal mail. It all takes fuel, there is no viable substitute, yet or soon. Get real!”

It will be an interesting project to follow.


Richard Jennings said...

despite all the stats there are still many high paying jobs on employment sites. Here's a few from About.com's top 10 employment sites:


Some of those jobs are $200K and $300K jobs!

Shannon McMaster said...

It seems Ed Cable's question of who will pay for the immediate infrastructure costs is a fair one. Did your research people come across an answer? It's true that infrastructure improvements are a necessary precondition for economic development, but there should be some reasonable plan for how the costs will be paid. (By the way, a single development which will offset, almost exactly, the number of jobs lost in a decade sounds almost too good to be true, though confirming that an oil refinery of a certain size needs a certain number of employees is probably pretty easy.)

BoomtownUSA said...

Shannon: Your question is a good one and I didn’t delve into the economics of the cost of infrastructure. Based upon what I’ve seen of other towns that have big refineries (Ponca City, OK; Robinson, IL, etc.) the property tax that comes in from such a project is enormous. A very rough calc that I did, based upon a $10 billion estimated cost, is that this project would generate hundreds of millions of dollars in added property tax to the communities, schools and county. There is obviously quite a bit of infrastructure that could be accomplished with a cash flow stream like this.

One of the studies that I’ve found most interesting is one that was done by the American Farmland Trust on the cost of providing services to commercial/industrial entities compared to the services provided. Their research, done in over 100 rural communities, was that these entities received about $0.27 in services for every $1.00 paid in property taxes.

With what I know I can’t imagine that this project wouldn’t be a big win for the area from both a high paying jobs standpoint and also as a tax generator.