Park County may have started the upswing.
After losing more than 20 percent in assessed valuation over the last three years, Park County Assessor Pat Meyer is predicting a 12 percent rebound in that revenue stream in 2018.
Though oil and gas production are both slightly down from 2017, higher first quarter prices for the volatile commodities are driving a rosier assessment of the county’s finances, Meyer said.
“Price is the biggie,” he said, adding, “I like to see that price at the gas pump go up because that means we’re doing better.”
Assessed value is a large piece of the county’s operating budget, providing approximately $8.177 million, or 36 percent, of the county’s total annual budget of roughly $23 million in 2017.
If it bears out, a 12 percent increase in the county’s assessed valuation would represent a 4.3 percent revenue increase overall.
Smaller piece of the pie
The price spike in oil is good news for the county coffers, but not as good as it may have been in decades past.
That’s partially because Park County is no longer as harnessed to oil and gas production as it once was.
Based on first quarter severance taxes, oil and gas production are expected to provide 36 percent of 2018’s total assessed value.
By contrast, in the first 15 years of the new millennium, oil and gas production were responsible for between 45 and 66 percent of the county’s assessed value. With the exception of 2000, 2002 and 2003, the number was always above 50 percent during that period, according to figures from the assessor’s office.
But as the fracking revolution drove prices through the floorboards in 2016 that number fell to 36 percent and then to 31 percent in 2017.
“Last year was the worst year,” Meyer said.
Between 2015 and 2016, the barrel price of oil plummeted by more than 50 percent, dragging the county’s finances down with it.
But the assessor said those budgetary wounds were less gaping than they would have been in decades past.
In 1982, he pointed out, oil and gas were responsible for 90 percent of the county’s assessed value, dwarfing other sources of income.
With the figure hovering in the 30s now, the county is less exposed to the huge swings that define mineral industries.
Part of that reflects conscious decisions by politicians at every level to try and diversify the economy, University of Wyoming economics professor Jason Shogren said, pointing to Governor Mat Mead’s ENDOW program as an example of those efforts.
And part of the trend is simply the mathematics of extraction.
“Production in those oil fields gradually declines,” Meyer said.
Indeed, at its 43-year high in 1976, Park County was producing about 27,358,000 barrels of oil a year.
Today, production stands at 6,035,000 barrels, roughly 22 percent of that figure.
“[County oil fields] are still going to be around for another 30 years – you just aren’t going to get as much oil out of them,” Meyer predicted.
Gas fields have experienced similar drop-offs, producing 16,512,000 thousand cubic feet, or Mcf, in 1978, compared to a projected 7,056,000 Mcf in 2018, a 57 percent decline in productivity.
Rebound in prices
Price-point, rather than total production, often takes the lead in determining whether the county is counting pennies or flush.
Shogren said recent action by the Organization of Petroleum Exporting Countries is a force behind recent surges in the barrel-price.
“OPEC’s constraining some of their supply, pushing up fuel prices,” he said.
Bloomberg reports the consortium began cutting production in 2017 to combat weak prices worldwide.
Instability in OPEC member Venezuela and diminishing production in Angola are further driving prices up, and as President Donald Trump mulls ending the Iran nuclear deal that has allowed Iranian crude to circulate more widely, supply could be further squeezed.
“It’s a local land market but a global energy market,” Shogren said of how the county’s fiscal fate is tied to the vagaries of international oil and gas trends.
“In a resource-based economy,” he said, “you’re riding the bull.”
Back in 2009, Park County seemed destined to take a buckle, with $75 a barrel oil pushing the county’s valuation over $1 billion for the only time since the 1970’s.
“I told the commissioners at the time, don’t get used to this, it’s a freak thing. It won’t stay like that,” Meyer said.
Shogren said weathering bad years like 2016-17, by contrast, “requires some creative financing” from elected officials.
“You still need to keep things rolling when things get tight,” he said. One way counties do so is by “hedging their income stream through a bond or state and federal funding,” he added. Holding substantial cash reserves is another tactic, he said.
In Park County, Payment in Lieu of Taxes and Secure Rural Schools funding from the federal government helps dampen the impact of bear markets.
At $1.839 million in 2017, PILT dollars were the third largest source of county income (behind sales/use tax and assessed valuation). SRS, meanwhile, chipped in about $633,000.
And Meyer said the reserve funds were robust, sitting at $17 million. Even in the bad years of 2016-17, Meyer noted the county did not dip into that pot, however.
With Meyer predicting the assessed value will move from its 12-year nadir of $604,982,000 in 2017 to $681,416,000 next year, the assessor said the darkest times may be over for the time being.
Merit Energy has brought in a rig this year, he noted, saying, “They’re doing some drilling, and that’s a good sign.” He believes the county’s assessed valuation will crest $700 million in 2019.
Meyer declined to give a five-year assessment, though, saying “nobody can predict that stuff.”
And Shogren likewise demurred to give even an 18-month prognostication of energy markets, saying “That’s anyone’s guess.”
One forecast Meyer would make?
“What you can predict is about every 10 years we go through this stuff,” he said.