Montana’s economic recovery moved forward hesitantly in 2011, but it could get a boost this year from new energy development.
North Dakota’s oil boom is an example of economic resurgence amid a lingering national recession. Analysts believe a similar boost could be coming for Montana, which has its own strong prospects in what is being called a “new energy frontier.”
The belief that increased energy development will be a driving force for the state’s economy in 2012 is the central theme of this year’s traveling Economic Outlook Seminar presented by the Bureau of Business and Economic Research at the University of Montana.
Roughly a year after forecasting meaningful growth for the state’s economy in the near future, Patrick Barkey, director of UM’s Bureau of Business and Economic Research, acknowledged he was surprised when the turnaround stalled last year.
“We really thought that 2011 would be the year that the Montana economy found a higher gear,” he told a room full of attendees at this year’s gathering at Kalispell’s Hilton Garden Inn on Feb. 10. “We said there would be stronger growth ahead to really chip away at these problems.”
Barkey said the state was bogged down by high inflation rates and a number of key sectors underperforming, combined with the tight grip of the national recession. Instead of the state’s economy increasing 2.6 percent in real nonfarm earnings, the rate slumped to 0.7 percent growth, lower than 2010’s 1.5 percent growth rate.
“This is a hesitant recovery,” Barkey said.
However, energy development, particularly in eastern Montana, could spur the state to a true recovery, according to Barkey.
Spanning roughly 200,000 square miles across North Dakota, Montana and Saskatchewan, the Bakken oil fields have become the largest known reserve of light sweet crude in North America and one of the largest energy plays in American history. An estimated $1.5 billion is being spent each month on drilling there.
The extraction efforts have helped counties in eastern Montana avoid much of the recession. Labor and wage rates have surged, with residents from across the state, including the Flathead Valley, traveling east for employment.
Tom Richmond, administrator of the Montana Board of Oil and Gas, estimates that extraction efforts will continue to increase in Montana and the economic benefits will follow.
Coal and wind energy have potential for significant development, too. Montana has an estimated 119 billion tons of coal reserves.
Using the state’s new energy frontier as a source of hope, Barkey is optimistic about the economic prospects in 2012. Although the recession is lingering, he believes this is the year slow growth could pick up speed.