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Economic impacts of proposed changes in management of the Little Missouri National Grasslands in North Dakota. (Symposium).

Abstract

More than 1.1 million acres of National Grasslands, administered by the U.S. Forest Service, are located in North Dakota. Recently proposed changes in the management of these lands would reduce livestock grazing, restrict petroleum exploration and extraction, and constrain recreational access. This paper describes the methods and approaches used to estimate the direct and secondary economic impacts associated with changes in grazing, petroleum exploration and extraction, and recreation-tourism activities on the Little Missouri National Grasslands in North Dakota.

Introduction

The National Grasslands are located primarily in the Great Plains region and comprise several million acres, of which 1.1 million acres are located in North Dakota. These lands are administered by the U.S. Forest Service and historically have been used primarily for livestock grazing, while outdoor recreation (principally hunting) and petroleum production have long been important secondary uses. In 1999, the U.S. Forest Service proposed substantial changes in the management of the National Grasslands in North Dakota. Some specific effects of the proposed management plan would be to a) reduce livestock grazing (by 35 to 50 percent), b) restrict petroleum exploration and extraction, and c) restrict recreational access by declaring some areas off-limits to all motorized access and limiting motorized travel in the remaining areas to a limited number of designated travel routes (1). (Throughout this paper, the Draft Environmental Impact Statement (DEIS) by the U.S. Forest Service of 1999 is referenced. DEIS is used in this report to refer to the Draft Environmental Impact Statement with corresponding reference to page(s) cited.) These proposed changes have been a source of considerable concern for livestock producers and petroleum firms that depend heavily on the Grasslands, for hunters and other recreational users, and for local businesses and governments in the affected areas. At the same time, the proposed changes are supported by some national environmental groups, including the Sierra Club. Because the economic consequences of the proposed management changes area major concern to individuals, industries, and governments which rely on the National Grasslands in North Dakota, the authors were engaged to assess the economic impacts of the proposed changes.

The purpose of this paper is to describe the methods and approaches used to estimate the direct and secondary economic impacts associated with changes in grazing, petroleum exploration and extraction, and recreation-tourism activities on the Little Missouri National Grasslands in North Dakota. The subsequent use of this information in the evolving debate over the future of the National Grasslands will also be described.

Affected Area

The Little Missouri Grasslands area is a semi-arid, sparsely populated region remote from major population centers (Figure 1). The primary industries are agriculture (largely cattle grazing and dryland wheat production) and petroleum exploration and production. Continuing trends of mechanization in agriculture have led to fewer and larger farms and to decreases in the area's population. The four counties that encompass the Little Missouri National Grasslands all lost population from 1980 to 1990 and again from 1990 to 1998 (Table 1). Employment trends in the area have been similar to those for population.

[FIGURE 1 OMITTED]

Estimates of the economic base (i. e., revenue received from outside the area) of the Little Missouri Grasslands area counties highlight the importance of agriculture and petroleum production to the region. The energy sector (gross receipts from sales of oil and gas) was the area's largest economic base sector in 1997, with revenues of $245 million representing 55 percent of the total economic base (Table 2). Agriculture was the second largest sector (and the largest in two individual counties) with total revenues from livestock and crop sales of $115 million, representing 26 percent of the area's economic base. Tourism is the fourth largest economic base sector, accounting for about 9 percent of the area's economic base in 1997. This sector has grown in recent years, with much of the increase associated with the growth of tourist-oriented businesses in Medora, a restored frontier town located adjacent to the Theodore Roosevelt National Memorial Park. The park is the area's major tourist attraction and offers visitors the opportunity to view Badlands scenery and native wildlife (e.g., buffalo, prairie dogs).

The changes in management of the Little Missouri National Grasslands proposed in the Revised Management Plan were a source of major concern to area leaders. The proposed reductions in grazing and oil development posed direct threats to the two largest components of the region's economic base. These reductions might have major revenue implications for local governments as the area's counties and school districts rely heavily on oil-related revenues (local share of federal royalties and lease revenues and state energy taxes). Also, leaders were concerned that reduced grazing and energy activities would exacerbate recent trends of declining employment and population in the region.

Impact Assessment Methods

Evaluation of the economic effects of the proposed Revised Management Plan for the National Grasslands required several steps. First, direct economic impacts were determined by estimating the change in basic sector revenues associated with a change in National Grassland outputs. Subsequently, secondary economic impacts were estimated using input-output analysis. Finally, effects on local and state tax revenue and regional employment resulting from changes in outputs from the Little Missouri National Grasslands were estimated. While the Forest Service has described five alternatives (each with a different emphasis) in its planning documents (1), the analysis presented here focuses on Alternative 3, which has been identified as the U.S. Forest Service's preferred alternative. Changes in the use of the National Grasslands will result in changes in revenues to various sectors of the North Dakota economy. An important element in determining the change in basic-sector revenues was estimating changes in the physical quantities of outputs derived from the National Grasslands. Changes in physical outputs were estimated by comparing levels of use under current National Grassland management to the estimated level of use under the proposed Revised Management Plan. Basic-sector revenues associated with the change in outputs from the National Grasslands were then estimated. To evaluate the economy-wide effects of changes in basic sector revenues, input-output analysis was used. The input-output model used in this study has 17 sectors and is based on primary (survey) data collected from firms and households (2, 3). The model is closed with respect to households (i.e., households are included in the model) and the gross business volume (gross receipts) of the trade sectors is used (for both expenditures and receipts) rather than value added by those sectors.

Regional Economic Effects

The Little Missouri National Grassland, located in southwestern North Dakota, encompasses about 1,043,000 acres of Federal rangeland. Three industries are directly linked to the Little Missouri National Grasslands: Agriculture, through livestock grazing; Energy, through exploration and extraction of oil and natural gas; and Tourism, through both consumptive and nonconsumptive wildlife and nonwildlife-related recreational activities. The effects of the proposed Revised Management Plan were evaluated on ah industry basis.

Effects of Alternative 3 on Grazing Activities

Grazing within the National Grasslands is predominately organized through the various grazing associations. Grazing associations are collective organizations through which ranchers negotiate with public agencies to secure/retain permission (permits) to graze cattle on public lands (4). The Medora, Little Missouri, Horse Creek, and McKenzie County Grazing Associations control livestock grazing on the Little Missouri National Grasslands (LMNG) in Slope, Golden Valley, Billings, and McKenzie Counties. The four grazing associations in the LMNG control about 1.8 million acres and 675,000 animal unit months (AUMs) of grazing (Table 3). An animal unit month is ah average figure of the amount of forage needed to feed one animal unit (AU) for one month. An AU is typically considered a mature cow weighing approximately 1,000 pounds or ah equivalent grazing animal(s) based on an average feed consumption of 26 pounds of dry matter per day (5). The grazing associations in the LMNG control about 70 percent of the grazing land and AUMs in Billings, Slope, Golden Valley, and McKenzie Counties. Public lands collectively produce about 44 percent of the estimated grazing output in Billings, Slope, Golden Valley, and McKenzie Counties. Changes in Federal grazing in the Little Missouri National Grasslands under Alternative 3 were estimated to range from a 36.5 to 48 percent decrease from permitted levels, based on permitted grazing levels reported by the Medora, Horse Creek, Little Missouri, and McKenzie County Grazing Associations (Table 4). A change in Federal grazing capacity (stocking rates) affects much of the land under grazing association control. Due to the complexities of the rules governing the use of Federal, state, and private lands within each grazing association, the various grazing associations provided the acreage and AUMs of private and state grazing lands that would be affected by a change in the Federal stocking rate for the National Grasslands. Data provided on lands affected by Federal stocking rates was based entirely on the rules and by-laws governing the associations.

Changes in Federal stocking rates would affect more than one million acres of Federal rangeland in the Little Missouri National Grasslands. According to the grazing associations, 281,000 acres or 43 percent of private land controlled by the associations also would be affected. In addition, about 46,000 acres or 47 percent of state land controlled by the associations would be affected. Total acreage affected would equal 1.4 million acres or 77 percent of all lands controlled by the grazing associations. The amount of land affected (in total and in percentage) by Federal grazing rates in the various associations would not be equal, as about 86, 52, and 84 percent of all lands under the Medora, Little Missouri and Horse Creek (combined), and McKenzie County Grazing Associations would be affected, respectively.

Collective grazing capacity on Federal, state, and private lands would be reduced by 187,300 AUMs to 246,600 AUMs, high and low estimate in Alternative 3, respectively (Table 5). The levels of grazing reduction in Alternative 3 result in a 28 to 37 percent decrease in total grazing capacity within the grazing associations.

Changes in grazing capacity were assumed to have corresponding changes in herd size. Decreases of 187,308 AUMs (137,221 Federal and 50,087 state and private) under the high level in Alternative 3 in the Little Missouri National Grasslands would translate to a reduction of 17,575 cow-calf equivalent units (Table 5). Decreases of 246,639 AUMs (180,675 Federal and 65,964 state and private) under the low level in Alternative 3 would translate to a reduction of 23,143 cow-calf equivalent units (Table 5).

Direct and Secondary Economic Effects of Grazing Changes

The economic impact of the proposed Revised Management Plan for the Little Missouri National Grasslands was measured by first estimating the direct effects on sales/ receipts in affected sectors (i. e., through changes in cow-calf production which translate to reductions in livestock sales) and then applying these direct effects to the interdependence coefficients of the input-output model. The resulting estimates indicate the total (direct plus secondary) changes in gross business volume (gross receipts) for each economic sector that are expected to result. Estimates of a change in secondary employment that may result are obtained by applying ratios of gross business volume to employment (derived from historical relationships) for each sector to the changes in gross business volume.

Direct effects of a reduction in Federal grazing were based on a reduction in basic sector revenues (i.e., sales to final demand) associated with a reduction in cow-calf herds. Production coefficients for cow-calf operations in western North Dakota were used with a 10-year average (1989 through 1998) of livestock prices received by producers in North Dakota to estimate basic sector revenues (sales to final demand) lost with a reduction in cattle numbers (North Dakota Farm and Ranch Business Management various years, N.D. Agricultural Statistics Service various years).

Grazing reductions in the Little Missouri National Grasslands translated into basic sector revenue decreases of $6.5 million to $8.6 million annually for the high and low level grazing scenarios, respectively (Table 6). Reductions in livestock sales, which represent direct economic impacts, were allocated to the Agricultural-livestock sector of the North Dakota Input-Output Model. A decrease in livestock sales of $6.5 million and $8.6 million in the Little Missouri National Grasslands would generate $22.8 million and $30 million in secondary economic impacts in the region, respectively (Table 6).

The annual loss in gross business volume (direct and secondary effects) in the region resulting from a reduction in grazing activities under Alternative 3 in the Little Missouri National Grasslands ranged from $29.3 million to $38.5 million (Table 6). The economic sectors of the regional economy that had the greatest overall economic impact included: Agriculture-livestock ($7.9 million to $10.4 million), Households (which represents economy-wide personal income) ($6.8 million to $9 million), Retail Trade ($4.6 million to $6.1 million), Agriculture-crops ($2.6 million to $3.4 million), and Finance, Insurance, and Real Estate ($1 million to $ 1.3 million). Losses in secondary employment within the region were estimated to range from 282 to 364 full-time equivalent jobs (Table 6).

A portion of the grazing fees levied on Federal lands is returned to the counties. The amount of lost local government revenues from the intergovernmental transfer of grazing fees was estimated to range from $46,400 to $61,000 annually for the counties within the Little Missouri National Grasslands. Lost local government revenues from reduced collections of grazing fees on Federal lands were included in Table 9.

The effect on state tax collections resulting from reduced grazing activity in the Little Missouri National Grasslands under Alternative 3 of the proposed Revised Management Plan was estimated. Input-output analysis was used to estimate personal income, retail trade, and other business activity, which was used with tax collection coefficients to estimate tax revenue. Annual decreases in estimated tax revenues to the state from grazing reductions in the Little Missouri National Grasslands ranged from $213,000 to $281,000 in sales and use taxes, $89,000 to $ 117,000 in personal income taxes, and $35,000 to $46,000 in corporate income taxes (Table 6). Total reduction in annual state collections from sales and use, personal income, and corporate income taxes ranged from $337,000 for the high level of grazing in Alternative 3 to $444,000 for the low level of grazing in Alternative 3.

Effects of Alternative 3 on Energy Activities

Energy activities in the Little Missouri National Grasslands include oil and natural gas exploration and extraction. A number of provisions in the proposed Revised Management Plan indicate that substantial restrictions on energy activities are likely under Alternative 3. Alternative 3 will place surface occupancy and timing restrictions on substantial acreages within the Little Missouri National Grasslands. Additional restrictions on energy activities will result from special use areas, such as back country recreation, roadless areas, and bighorn sheep habitat. Other factors potentially affecting energy activities included no net gain in roads and no new utility corridors (preventing electricity and pipelines needed for energy extraction activities).

The Oil and Gas Division of the N.D. Industrial Commission and the North Dakota Geological Survey have studied the provisions of Alternative 3 with regards to its effect on oil and gas activities in the Little Missouri National Grasslands. Information from Oil and Gas Division (6) and North Dakota Geological Survey (7) provided the basis for this study's assessment of the economic effects of Alternative 3 on energy activities in the Little Missouri National Grasslands. Changes in physical outputs were determined by comparing estimated future energy production under current National Grassland management to the estimated future level of production under Alternative 3 of the proposed Revised Management Plan.

The reports cited above (6, 7) estimated that the provisions in Alternative 3 would eliminate the drilling of 103 wells in the Little Missouri National Grasslands over the 10 years that the proposed Plan would be enforced. Of the 103 wells eliminated, 77 percent was assumed to be successful in producing oil and natural gas. A declining production schedule, typical of oil and natural gas output for wells in the area, was used to estimate 10-year total oil production per well. Each producing well was expected to generate 190,193 barrels of oil over 10 years and produce one MCF (one thousand cubic feet) of natural gas for each barrel of oil produced. About 68 percent of a producing well's 10-year output would occur in the first three years of production (6).

The exact number of wells eliminated in any particular year was impossible to determine, since drilling activity in any given year is related to a number of factors outside the scope of the Oil and Gas Division study (6). Thus, the Oil and Gas Division averaged the number of wells eliminated over 10 years. Averaging the number of wells over 10 years yielded 10.3 drilled wells or about 7.9 producing wells eliminated annually within the boundaries of the Little Missouri National Grasslands. However, since wells were assumed to produce oil and gas annually for 10 years, some lost production from producing wells would occur for nine years after the 10-year period of the proposed management plan. For example, a well that would start producing in year 8 of the 10-year management plan would continue to produce oil for 7 years after the end of the 10-year plan. As a result, oil and natural gas production was scheduled for nine years beyond the end of the 10-year plan to capture full production from producing wells that started in years 2 through 10 of the management plan. The loss of oil and natural gas production was estimated annually for 19 years, based on a 10-year declining production schedule per well. Total lost oil production under Alternative 3 within the boundaries of the Little Missouri National Grasslands was estimated at 15,087,207 barrels of oil and 15,087,207 MCF of natural gas over 19 years (Table 7).

The amount of lost energy production was estimated for Billings, McKenzie, Slope, and Golden Valley Counties (6). Of the lost energy production in the Little Missouri National Grasslands, about 37, 33, 23, and 7 percent would occur in Billings, McKenzie, Slope, and Golden Valley Counties, respectively.

The distribution of lost energy activities was estimated by land ownership (6). About 67 percent of the reduction in energy activities was estimated to occur on Federal lands in each of the four counties (Table 7). Lost energy production from state lands was estimated at 5.7 percent in each county (6). The remaining 27.3 percent of lost production was assumed to occur on private land.

Economic Impacts of Changes in Energy Extraction

The economic impacts of a reduction in energy activities under Alternative 3 were divided into regional effects and effects on revenues received by county, state, and Federal treasuries. Annual losses in oil and natural gas revenues (i.e., sales to final demand) were based on the volume of production eliminated and the expected value of oil and natural gas outputs. A price of $20 per barrel for oil and $2 per MCF of natural gas was used for all years (6). The per unit values used in this study represented 7-year averages of the current expected future prices for oil and natural gas (6).

Due to the declining production schedule per well and the even distribution of lost wells over the 10-year length of the proposed management plan, the majority (80 percent) of energy production eliminated occurs in the first 10 years (Figure 2). The remaining 20 percent occurs in the nine years following the end of the proposed management plan. The reduction in energy sector sales/receipts under Alternative 3 in the Little Missouri National Grasslands was averaged over two periods. The first period (Period I) represented the 10 years of the management plan (Figure 2). This period represented the time flame when well drilling and producing wells were eliminated. The second period (Period II) represented the time frame required (9 years) to capture lost production from wells that would have started producing during the 10-year management plan (Period I).

[FIGURE 2 OMITTED]

Reductions in energy sector sales, which represent direct economic impacts, were allocated to the Oil Exploration and Extraction sector of the North Dakota Input-Output Model. A decrease in energy sector sales of $26.5 million annually for Period I and $7.4 million annually for Period II would generate $24.5 million and $6.8 million in annual secondary economic impacts in the region, respectively (Table 8). Energy activities eliminated in the Little Missouri National Grasslands under Alternative 3 decreased total basic sector revenues by $331.9 million over 19 years. Direct employment losses in the Little Missouri National Grasslands were estimated at 0.75 FTE job per producing well and 3.5 FTE per well drilled (6). Total direct jobs lost from producing wells would range from 5.9 FTE in year one to 59 FTE in year 10 of Period I. Average annual employment lost from producing wells would be 32.7 in Period I. Total direct jobs lost due to the elimination of drilling activities was estimated at 36.1 FTE per year in Period I. Total annual reductions in employment would be about 68.8 FTE during the Period I.

The annual loss in gross business volume (direct and secondary effects) in the region resulting from a reduction in energy activities under Alternative 3 in the Little Missouri National Grasslands ranged from $51 million during Period I to $14.2 million in Period II (Table 8). The following economic sectors of the regional economy had the greatest overall annual economic impact: Petroleum Exploration and Extraction ($29 million--Period I to $8.1 million--Period II), Households (which represents economy-wide personal income) ($8.5 million-Period I to $2.4 million--Period II), Retail Trade ($4.9 million--Period I to $1.4 million--Period II), Construction ($3 million--Period I to $0.8 million-Period II), and Communication and Public Utilities ($1.4 million--Period I to $0.4 million--Period II). Losses in secondary employment within the region were estimated to range from 388 full-time equivalent jobs per year in each of the first 10 years to 93 jobs per year in each of following 9 years (Table 7).

Input-output analysis was used to estimate personal income, retail trade, and other business activity, which was used with tax collection coefficients to estimate tax revenue from state general taxes. Annual decreases in estimated tax revenues to the state from reductions in energy activities in the Little Missouri National Grasslands ranged from $226,000 (Period I) to $63,000 (Period II) in sales and use taxes, $111,000 (Period I) to $31,000 (Period II) in personal income taxes, and $128,000 (Period I) to $36,000 (Period II) in corporate income taxes (Table 8). Total reduction in annual state collections from sales and use, personal income, and corporate income taxes ranged from $464,000 for Period I to $130,000 for Period II.

A number of revenue streams arise out of energy production in North Dakota. These revenue streams include state energy taxes (oil and gas gross production tax and oil extraction tax), royalties on production from state-owned lands, royalties retained by county governments on some Federal lands, portions of Federal royalties returned to the state and counties from oil and gas production on Federal lands, and revenues from Federal mineral leases and bonuses.

As a result of energy production eliminated by Alternative 3 in the Little Missouri National Grasslands, North Dakota would not collect, over 19 years, $14.2 million in oil and gas gross production taxes and $5.5 million in oil extraction taxes. Combined energy tax collections lost would equal $19.7 million. Other revenues lost, over the 19 years, to the North Dakota treasury would include a loss of $3.2 million in state royalties on oil and gas production on state-owned lands, $5.3 million from North Dakota's share of Federal royalties from energy production on Federal Public Domain lands, and $2.1 million from North Dakota's share of Federal mineral leases and bonuses on Federal Public Domain lands. However, not all revenues accruing to the state treasury are retained by the state. The state redistributes a portion of its share of royalties, leases, and bonuses from Federal Public Domain lands back to the producing counties. Also, portions of the gross production tax are returned to counties, cities, and school districts within the producing counties. Thus, net revenues retained (after redistributing revenues back to local governments) from all sources were estimated at $24.9 million over 19 years (Table 9).

Similar to revenues accruing to North Dakota, the Federal treasury also collects revenues from energy production on Federal Acquired and Public Domain lands in the form of royalties, leases, and bonuses. In addition to lost revenues from oil activities, the Federal treasury collects grazing fees from the Little Missouri National Grasslands. The net revenues retained (i.e., after redistributing those revenues to North Dakota and counties in the Little Missouri National Grasslands) by the Federal treasury that would be lost under Alternative 3 were estimated at $26.4 million over 19 years (includes only I 0 years of lost grazing fees) (Table 9).

Billings, Golden Valley, McKenzie and Slope Counties each receive revenues to their treasuries from oil production within their respective county and from energy production on Federal Acquired lands in all counties in the Little Missouri National Grasslands. Revenues to county governments can accrue from county royalties retained on some Federal Acquired lands (i. e., Billings and McKenzie Counties), redistribution of the county's share of Federal royalties from energy production on Federal Acquired lands, redistribution of the county's share of the state share of Federal royalties on Federal Public Domain lands, redistribution of state oil and gas gross production taxes, redistribution of Federal mineral leases and bonuses from Federal Acquired lands, redistribution of the county's share of the state share of Federal mineral leases and bonuses from Federal Public Domain lands, and redistribution of grazing fees collected on Federal grazing lands. In addition to county government revenues, cities and school districts within oil producing counties receive some revenues from the state oil and gas gross production tax. Total government revenues accruing to Billings, Golden Valley, McKenzie, and Slope Counties, over 19 years (includes only 10 years of grazing fee collections), were estimated at $3.4 million, $0.8 million, $5 million, and $2.4 million, respectively (Table 9).

Effects of Alternative 3 on Tourism

The tourism sector was the fourth largest sector of the area's economic base in 1997 and has been a growing sector during the past decade (Coon and Leistritz, unpublished data). Unfortunately, little quantitative information is available concerning tourism activities in the region (e.g., origins of visitors, length of stay, types of activities engaged in). Information regarding the role of the Little Missouri National Grasslands in visitors' activities is particularly lacking. Local informants and state tourism officials, however, agree that most tourism activity in the Little Missouri Grasslands area is directly or indirectly associated with events and attractions in and around Medora, with visitation at Theodore Roosevelt National Park, with outdoor activities (e.g., hunting, camping, backpacking, trail rides, canoeing), and general sightseeing. The four-county area encompasses the heart of the North Dakota Badlands region, which is generally viewed as a weekend destination for state residents and a stopover attraction for persons from outside the region (who may be traveling to or from other attractions such as Yellowstone or Glacier National Parks). Two major U.S. highways (I-94 and U.S. 85) pass through the four-county area.

The role of the Little Missouri National Grasslands in these tourist activities is not clear, as little information is available concerning recreational use of the Grasslands. The U.S. Forest Service (1) reports that the two activities most often reported by Grasslands visitors are hunting and motorized sightseeing, but little other information is available.

The U.S. Forest Service's DEIS (I) indicates that recreational use of the Little Missouri National Grassland should be enhanced by the actions proposed under Alternative 3. Major effects are indicated to be (a) enhanced wildlife habitat and populations and (b) greater variety of recreational opportunities (e.g., primitive camping, picnicking, wildlife viewing, wildflower viewing, hiking, backpacking, mountain biking, and horseback riding). However, many local leaders question how more diverse vegetation and landscapes would translate into greater levels of participation in those activities, particularly because the Little Missouri National Grasslands is located in a very sparsely populated area remote from major population centers. Questions also may be raised concerning the local economic impact of these types of recreational activities. Keith and Fawson (8) surveyed wilderness users in Utah and found that their expenditures were not sufficiently large to influence county economies.

On the other hand, the proposed restrictions on motorized access to the Grasslands may curtail some traditional uses (particularly hunting). In a number of areas, totaling more than 170,000 acres, no motorized use (except administrative use) would be allowed, and motorized travel would be subject to seasonal restrictions on an additional 118,000 acres. On the remainder of the Grasslands, motorized travel would be restricted to designated routes (i.e., hunters could not leave the designated roads, even to retrieve game). Another consideration is that the population base in North Dakota and the Upper Great Plains is aging, yet many of the outdoor activities suggested by the U.S. Forest Service as potentially increasing on the National Grasslands do not appear to be activities quickly adopted by aging individuals (e.g., mountain biking, backpacking, primitive camping).

Because of the lack of information about the composition of tourism and recreation activities in the Little Missouri National Grasslands area and the role of the National Grasslands in attracting visitors, as well as the uncertainties regarding the effects of Alternative 3 on tourism in the area, no quantitative estimates were developed of the economic effects of changes in tourism that might result from implementation of the Revised Plan. Instead, comparisons of the amount of local and regional expenditures from recreation that would be required to compensate local and regional economies for reductions in basic sector revenues from livestock grazing and petroleum production were provided. Recreation associated with the National Grasslands within Billings County would need to generate $11.6 to $12.2 million in additional local (i. e., captured by residents/businesses within the county) expenditures annually to compensate the county's economy for reductions in basic sector revenues from livestock grazing and petroleum production. Similarly, recreation-based expenditures would have to increase by $11.9 million to $12.9 million to offset losses in McKenzie County. Local recreation expenditures would need to increase by $9.5 million to $10 million annually in the Slope and Golden Valley Counties' economy. Thus, local expenditures from recreation on the Little Missouri National Grasslands would need to increase by $33 million to $35 million (sustained annually) in order to offset annual losses in basic sector revenues from livestock grazing and petroleum production. Increases of this magnitude appear very unlikely to occur. Indeed, the authors consider an overall negative effect on area tourism to be as likely to result from the Revised Plan as a positive effect.

Implications of Findings

Based on the analysis summarized above, it is clear that the proposed Revised Management Plan (Alternative 3) would have very substantial effects on two of western North Dakota's key basic industries--agriculture and petroleum. The livestock sector in the affected counties is heavily dependent on grazing obtained from the National Grasslands, and the proposed plan would reduce the overall county-wide (i.e., across all Federal, state, and private grazing lands) grazing capacity in those counties by 20 to 26 percent. Substantial reductions in livestock production and sales would result in major secondary effects on other sectors of the regional economy. The total secondary (multiplier) effects on the regional economy are estimated to range from $23 million to $30 million. This level of economic activity would support from 282 to 364 secondary jobs in various sectors.

The impacts on the petroleum sector are estimated to be equally severe. The restrictions embodied in Alternative 3 are estimated to result in 103 fewer wells being drilled during the 10-year period that the Plan is assumed to be in effect. Of the 103 wells eliminated, 79,3 are assumed to be producing wells, which would result in about 15.1 million barrels of oil and 15.1 million MCF of natural gas production being eliminated. The average annual impact of these reductions in petroleum sector output during the ten years that the Plan is assumed to be in effect (Period I) includes a reduction in petroleum sector revenue of $26.5 million, a further $24.5 million in secondary economic impacts, and a loss of about 388 secondary jobs, in addition to 69 direct jobs in oil exploration and extraction that were estimated to be lost.

In conclusion, the proposed Plan (Alternative 3) would have very substantial negative effects on the livestock and petroleum sectors--sectors which have traditionally been the pillars of the affected counties' economies. The reduction in livestock and energy sector sales resulting from Alternative 3 would represent about a 7.5 percent decrease in the total economic base of the Little Missouri National Grasslands region. The total economic impact of these losses would result in a decrease in gross business volume in the region of $80 to $90 million annually and a loss of 740 to 820 jobs in the area economy. While not all of these job losses would occur in the four-county area (some would occur in trade centers located in neighboring counties), these losses represent 15 to 17 percent of the area's total employment in 1998. Whether the Plan would have positive or negative effects on the tourism sector is unclear at this point, but positive effects on tourism sufficient to offset more that a small fraction of the reductions in the livestock and petroleum sectors seems highly unlikely.

Use of Findings in Public Decision-making

The Forest Service released the proposed Plan in July 1999. Within a few weeks, leaders in the Little Missouri National Grasslands area had become alarmed about the possible implications of the Plan and had organized a coalition (Heritage Alliance of North Dakota or HAND). HAND held a series of meetings with the North Dakota Governor and members of the Congressional delegation, who pointed out that an evaluation of the regional economic impacts of the Plan would be critical to ultimate decisions regarding its acceptability, in August 1999, HAND engaged the authors to conduct the economic impact study.

The study was completed in early December, 1999 and was the subject of briefing sessions for the Congressional delegation and the Governor's staff, as well as a press conference organized by HAND. Since that time, the findings have been presented to numerous regional groups and gatherings. At the time of this writing (April 2001), no decision regarding the acceptability of the Plan has been announced. However, a revised Plan is due to be released in May 2001.
Table 1. Population and Employment of Counties encompassing the Little
Missouri National Grasslands, North Dakota

 Population

County 1980 1990 1998

Billings 1,138 1,108 1,058
Golden Valley 2,391 2,108 1,876
McKenzie 7,132 6,383 5,682
Slope 1,157 907 865
Total 11,818 10,506 9,481

 Employment

County 1986 1996 1998

Billings 791 564 508
Golden Valley 1,031 915 851
McKenzie 3,080 3,173 3,112
Slope 463 397 392
Total 5,365 5,049 4,863
Table 2. Economic Base of Counties encompassing the Little Missouri
National Grasslands, 1997

 Sector

County Agric. Gov't Energy Mfg. Tourism Total

 $ million (1997)

Billings 15.0 3.0 115.7 0.0 22.4 156.1
Golden Valley 27.3 8.0 8.4 1.3 2.0 47.0
McKenzie 46.4 29.5 115.4 2.9 15.3 209.5
Slope 26.5 2.7 5.8 0.3 0.8 36.1

Total 115.2 43.2 245.3 4.5 40.5 448.7

 percent

Billings 9.6 1.9 74.1 0.0 14.3 100.0
Golden Valley 58.1 17.0 17.9 2.8 4.2 100.0
McKenzie 22.1 14.1 55.1 1.4 7.3 100.0
Slope 73.4 7.4 16.1 0.8 2.2 100.0

Total 25.7 9.6 54.7 1.0 9.0 100.0
Table 3. Private, State, and Federal Grazing Acres and Animal Unit
Months under Grazing Association Control, Little Missouri National
Grasslands, North Dakota, 1998 *

 County Totals Controlled by associations

Land Acres AUMs Acres AUMs

Federal 1,043,421 377,298 1,037,226 376,220
State 147,737 49,127 98,288 32,875

Private 1,316,909 534,782 646,643 266,135

Total 2,508,067 961,207 1,782,157 675,230

* Data in the table represent potential AUMs produced and controlled
based on average land productivity and grazing conditions in the
various only. Actual AUMs grazed will differ from AUMs include the
grazing of crop aftermath.
Table 4. Change in Federal Grazing, Alternative Three, Proposed Revised
Management Plan, Little Missouri National Grasslands

 1998 Estimated Range Percentage
 Permitted of Grazing Use (b) Change (c)
Area AUMs (a) High Low High Low

Medora District 189,497 120,917 98,932 -36.2 -47.8
McKenzie District 186,329 117,833 96,409 -36.8 -48.3

Total 375,826 238,750 195,341 -36.5 -48.0

(a) Permitted AUMs reported by grazing associations.

(b) Estimated grazing use reported by U.S. Forest Service adjusted to
reflect current animal units per cow-calf pair. Does not represent
guaranteed grazing use. Allocation of grazing use by the U.S. Forest
Service within the various districts may vary from estimates
presented when actual grazing levels are set in the site-specific
allotment management planning process (1).

(c) Based on comparing estimated grazing use reported by the U.S.
Forest Service to permitted AUMs reported by grazing associations.
Table 5. Land, AUMs, and Cow-Calf Equivalent Pairs Affected, Little
Missouri National Grasslands, Alternative Three, Proposed Revised
Management Plan, North Dakota

 Amount of Production
Land Current Acres
Ownership Acres AUMs Affected
 (000s) (000s) (000s)

Federal 1,037 376 1,037
State 98 32 46
Private 646 266 280
Total 1,782 675 1,364

 number of head

Cow-calf
equivalent Pairs 63 na na

 Change from Current Situation
Land Under Alternative 3
Ownership High Low High Low

 AUMs (000s) AUMs (000s) (% change)

Federal 238 195 -137 (-36.5) -180 (-48.0)
State 23 20 -9 (-29.5) -12 (-38.8)
Private 225 212 -40 (-15.2) -53 (-20.0)
Total 487 428 -187 (-27.7) -246 (-36.5)

Cow-calf
equivalent Pairs 45 40 -17 -23
Table 6. Annual Loss in Regional Economic
Activity from Grazing Reductions, Alternative
Three, Proposed Revised Management Plan

Economic Measure High Grazing Est. Low Grazing Est.
 -- 000s $ -- -- 000s $ --

Lost Livestock Sales 6,518 8,579
Secondary Economic Effects 22,764 29,962
Gross Business Volume 29,282 38,541

State Tax Collections
 Sales and Use 213.3 280.8
 Personal Income 88.6 116.7
 Corporate Income 35.4 46.4
 Total 337.3 443.9

Secondary Employment Lost (FTE) 282 364
Table 7. Energy Production Eliminated, Alternative Three, Proposed
Revised Management Plan, Little Missouri National Grasslands

Item Amount
Drilled Wells Eliminated 103
Producing Wells Eliminated 79.3
Oil Production per Producing Well 190,193 barrels
Natural Gas Production per Producing Well 190,193 MCF
Total Oil Production Eliminated 15,084,200 barrels
Total Natural Gas Production Eliminated 15,084,200 MCF
Oil Production Eliminated on Federal Lands 10,106,400 barrels
Public Domain 3,864,300 barrels
Acquired Lands 6,242,100 barrels
Natural Gas Production Eliminated on Federal
 Lands 10,106,400 MCF
Public Domain 4,062,600 MCF
Acquired Lands 6,043,800 MCF
Oil Production Eliminated on State Lands 859,800 barrel
Natural Gas Production Eliminated on State
 Lands 859,800 MCF
Oil Production Eliminated on Private Lands 4,118,000 barrels
Natural Gas Production Eliminated on Federal
 Lands 4,118,000 MCF

Sources: (6) and unpublished U.S. Forest Service data.
Table 8. Annual Loss in Regional Economic Activity from Energy Sector
Reductions, Alternative Three, Proposed Revised Management Plan, Little
Missouri National Grasslands, North Dakota

Economic Measure Period I (a) Period II
 000s $
Energy Sales 26,525 7,401
Secondary Economic Effects 24,524 6,844
Gross Business Volume 51,049 14,244

State General Tax Collections
 Sales and Use 225.7 63.0
 Personal Income 110.5 30.9
 Corporate Income 127.8 35.7
 Total 464.0 129.6

Secondary Employment Lost
(FTE) 388 93

(a) Period I is for 10 years of the management plan and Period II
represents the nine years following Period I.
Table 9. Total Gross and Net Government Royalties, Energy Taxes, and
Grazing Fees Eliminated with Reduced Energy Production and Livestock
Grazing, Alternative Three, Proposed Revised Management Plan, Little
Missouri National Grasslands

 Total Revenues to
 Government Treasuries
Government/Revenue Source Gross (a) Net (a)
 000s $
North Dakota
Royalties from State-owned Lands 3,153 3,153
Share of Federal Royalty on Public Domain Lands 5,338 3,390
Share of Federal Mineral Lease/Bonus
 on Public Domain Lands 2,058 1,441
Oil and Gas Gross Production Taxes 14,232 11,433
Oil Extraction Tax 5,453 5,453
Totals 30,234 24,870

Federal Government
Grazing Fee Collections (b) 2,148 1,611
Royalties on Public Domain Lands 10,676 5,338
Royalties on Acquired Lands 16,582 12,437
Mineral Leases/Bonuses on Federal Lands 10,765 7,045
Totals 40,171 26,431

 Loss of Grazing Fees
Counties (000s $) (over 10 years) Energy & Grazing
Billings 121 - 161 na 3,386 - 3,426
Golden Valley 41 - 54 na 808 - 821
McKenzie 232 - 304 na 4,985 - 5,057
Slope 70 - 92 na 2,401 - 2,423
Totals 464 to 610 11,580 - 11,726

na - not applicable.

(a) Gross revenues were estimated before the revenues were
redistributed to other governments. Net revenues represent gross
revenues less the amount of revenues redistributed to the various
counties and/or state.

(b) Grazing fee collections based on 10 years. Federal revenues listed
were an average of the collections lost between the high and low levels
of grazing in Alternative 3.


References

(1.) U.S. Forest Service (1999) Draft Environmental Impact Statement for the Land and Resource Management Plans 1999 Revisions. U.S. Forest Service, U.S. Department of Agriculture, Chadron, NE.

(2.) Coon RC, Leistritz FL, Hertsgaard TA, and Leholm AG (1985) The North Dakota Input-Output Model: A Tool for Estimating Economic Linkages. Agricultural Economics Report No. 187, Department of Agricultural Economics, North Dakota State University, Fargo.

(3.) Leistritz FL, Murdock SH, and Coon RC (1990) "Developing Economic-Demographic Assessment Models for Substate Areas." Impact Assessment Bulletin. 8 (4): 47-65.

(4.) Bangsund DA and Leistritz FL (1992) Contribution of Public Land Grazing to the North Dakota Economy. Agricultural Economics Report No. 283, Department of Agricultural Economics, North Dakota State University, Fargo.

(5.) Shaver JC (1977) North Dakota Rangeland Resources 1977. Society for Range Management and the Old West Regional Range Program, Denver, CO.

(6.) Oil and Gas Division (1999) Evaluation of Revised Management Plans for Dakota Prairie Grasslands. Oil and Gas Division, North Dakota Industrial Commission, Bismarck, ND.

(7.) North Dakota Geological Survey (1999) Study of the U.S. Forest Service Environmental Impact Statement and Proposed Land and Resource Management Plan. North Dakota Geological Survey, Bismarck, ND.

(8.) Keith J and Fawson C (1995)"Economic Development in Rural Utah: Is Wilderness Recreation the Answer?" The Annals of Regional Science, 29:303-313.

F. Larry Leistriz * and Dean A. Bangsund Department of Agribusiness and Applied Economics, North Dakota State University, Fargo, North Dakota
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Author:Leistritz, F. Larry; Bangsund, Dean A.
Publication:Proceedings of the North Dakota Academy of Science
Article Type:Statistical Data Included
Geographic Code:1U4ND
Date:Apr 1, 2001
Words:7332
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