Drought adaption: Agriculture economy shifts to petroleum
By: Brian Brus – Journal Record
The typical economic impact of long-term drought is easy enough to predict, said economist Dave Shideler, as the ripple effects from agriculture shut down and move to greener pastures.
Typically, tractors would stop running, trucks and trains would stop hauling livestock and grains, small downtown businesses would close and the rural community tax base would collapse, dragging school districts with it.
“A lot of people started converting the ag infrastructure to support another industry instead: oil extraction,” he said. “Some grain silos started being used as sand storage for hydro-fracturing, for example.
“A lot of ag communities are looking better than before the drought,” Shideler said. “If drought had unfolded in absence of the mining, none of that would be going on. Oklahoma is very adaptable.”
Oklahomans have been forced to adapt quickly as drought has plagued the region for more than three years. According to the latest data from the Oklahoma Mesonet, January ended with a statewide average of less than a third of an inch of precipitation, 1.16 inches below normal and ranking as one of the top 10 driest Januarys since 1895.
Nearly half of the state was covered by at least moderate drought by the end of January, according to the U.S. Drought Monitor, most intensely felt across the southwest and Panhandle.
Cattle producers have responded by selling off their herds instead of watching the livestock go without water or feed. The National Agricultural Statistics Service reported that the U.S. inventory of all cattle and calves totaled 87.7 million head at the beginning of January, down by about 1.6 million cattle compared with the same time a year earlier. The agency reported that it was the lowest January cattle inventory since 1951.
Economist Jonathan Willner at Oklahoma City University agreed with Shideler that the trickle-down or ripple effects – ironic descriptors, given the nature of the impact – of drought are normally felt right away in industries that support agriculture such as fertilizer producers, tractor manufacturers and trucking lines, as well as all the rural towns that provide fuel stops, restaurants and clothes along the way. From that, it’s easy to extrapolate bigger problems such as home mortgage failures.
Willner said drought has also put more pressure on municipalities to provide utilities for residents – he cited the rural logging town of Willits in Northern California as a worst-case example, as that community is less than 100 days from shutting down for lack of water. He said extended drought upstream in Oklahoma could even shut down the shipping lines passing through the Port of Catoosa or other waterways used for fishing and tourism.
Rogers County Port Authority spokesman Jeff Yowell said that if operations at the Port of Catoosa near Tulsa were discontinued for any reason – lock malfunctions or low water levels, for example – the state would suffer a $2 million-per-day economic impact.
A representative from Webco Industries in Sand Springs told Yowell recently the company couldn’t operate except for the port – “It saves them up to 50 percent on their shipping costs,” he said.
Yowell said a lot of agricultural commodities, the mainstay of the port, pass through from other parts of Oklahoma. A total of 1,494 barges passed through in 2013, hauling about 2.7 million tons of cargo.
Yowell said although he has seen ag materials through the port drop only slightly, petroleum shipping has increased much more dramatically in recent years, so it doesn’t appear to be a simple translation from one industry to another. The Port of Catoosa had a record year in 2012 due to crude oil, he said.
Elk City Chamber of Commerce Economic Development Director Jim Mason said his community has blossomed as it’s moved from agriculture to petroleum. He also cited the growing wind farm industry as another example of adaptation.
“The local grain elevator has closed down and our cotton gin is now gone. A lot of our agriculturally related businesses do seem off,” he said. “Drought has had a big impact, but it hasn’t devastated us.
“Oil and gas has kind of picked up the slack, so it’s possible we might not have noticed the impact as severely,” he said. “A lot of farmers have benefited from mineral rights or wind farm development.”
Elk City’s hotel and housing market has boomed and the schools are struggling to keep up with growing class sizes, he said. Tourism has also increased with petroleum-related meetings and more social events overall drawing visitors from around the region, he said.
Shideler said the next big question that needs to be studied is what happens when an agriculture-to-petroleum transitioned community also hits its water consumption limits. After all, cattle and wheat need water, but drillers and their families need water, too.
El City was identified last year as one of the country’s fastest-growing boom towns with 3.5-percent population growth to about 23,000 people. Mason said his town’s leadership has been planning ahead to protect the local water supplies from the aquifer south of Sayer. Elk City has a capacity of 12 million gallon per day and is using only 4 million to 5 million per day from its 80 wells. The town has another 9 million gallons of storage and has recently completed a new treatment plant.
“At this time, it’s being used almost entirely for people,” he said when asked about consumption for fracking processes. “We are also entertaining some of that with the belief that these companies should reclaim some of the water they use for reuse. There’s a lot of creative developments for recycling that will help the community.”