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Low energy prices giving ND manufacturers competitive edge

BISMARCK, N.D._ On a national scale, cheap natural gas retrieved through fracking is being credited with helping to resurrect the manufacturing industry.

On the state level, affordable energy means lower overhead costs for North Dakota manufacturers. Meanwhile, the state is looking for other benefits it could provide.

Many manufacturers in the state use natural gas to heat large buildings. Others, like Bobcat in Bismarck and Baker Boy and Steffes Corp. in Dickinson, also use it for production.

The 2013 Legislature approved a study by the state’s energy policy advisory commission, EmPower North Dakota, “to determine what is the best fit for value-added natural gas liquid projects” in the state, commission member and North Dakota Petroleum Council President Ron Ness said.

“We have seen several major projects announced. But many believe this could be the new energy economy in our state,” Ness said.

The projects include fertilizer plants that use natural gas to make their products, a natural gas-fired unit at the Heskett Plant, plans for a new MDU Resources natural gas pipeline and two diesel fuel refineries.

“Natural gas liquids provide a huge opportunity to add value to our state’s energy resources, The study will determine where the low hanging fruit may exist,” Ness said.

State Public Service Commissioner Brian Kalk said natural gas was as high as $10 per decatherm several years ago, but in recent years it has been as low as $2 per decatherm. When it is less than $5 per decatherm, it’s good for consumers, he said.

Bobcat uses natural gas to harden parts and run paint equipment.

“It (energy cost) is a big part of our business,” said Laura Ness Owens, a spokeswoman for Bobcat.

“We consume a lot of energy while painting … Running a factory like ours, it takes a lot of energy. We used to joke about the cost to turn on the lights,” Ness Owens said.

For Bobcat, natural gas also offers certainty. In the company’s Gwinner facility, where propane also is used, the propane has to be hauled in while natural gas is piped straight into the facility, Ness Owens said.

Randy Schwartz, chief executive officer of Dakota Manufacturing Extension Partnership, said fracking technology has benefited manufacturers nationally by providing a low-cost source of energy in the form of natural gas, providing cheap natural gas as a raw material in the manufacturing of petrochemicals and plastics, and has created a market for manufactured products used in the fracking process.

Steffes has tapped into two of those three benefits of fracking.

“We use natural gas in our production operations for our powder paint ovens and for firing ceramic brick,” said Chief Operating Officer Joe Rothschiller. “Our annual spending is approximately $206,000 … Lower prices allow us to be more competitive, especially when competing with foreign competition.”

Besides costs of operation, Rothschiller said, Steffes also has adapted to produce oil storage tanks and other products like heater treaters, flares, and cattle guards. He said the company has worked hard to make those products high quality, which has made them in high demand in the Bakken.

It is easier for manufacturers in other states making those products to stay where they are, and those that make smaller, shippable items aren’t as likely to relocate to North Dakota, Rothschiller said. North Dakota’s business-friendly environment will be what make the state attractive, he said.

Still, reduced costs for other manufacturers have helped in North Dakota, Rothschiller said. Steffes’ raw materials come from other manufacturers and they, too, depend on energy prices to be competitive.

Bobcat depends on other suppliers for rubber and steel.

“When petroleum costs go up, that’s when equipment prices go up,” Ness Owens said.

“Cheaper energy is all about fracking … We’re the benefactor of that,” said Guy Moos, president of Baker Boy.

The company uses natural gas to heat its 135,000-square-foot facility and fire up its ovens, one of which is 65 feet long and 13 feet wide. An oven that large requires 3 million Btus to start and 1.3 million Btus to keep running.

“North Dakota has been very good to us as far as energy,” Moos said, but it has been more in the form of electricity. He said natural gas prices are similar nationwide and as long as companies have access to it, they can benefit from it. Not all states have coal-fired power plants providing cheaper electricity, he said.

Rothschiller said many electric-peaking plants in the U.S. are now using natural gas — which, in turn, can lower the cost of electric generation.

“Keeping energy costs low requires a mix of resources, including coal, natural gas, nuclear, wind and solar,” he said.

There are liquids in Bakken oil that contain ethane, butane, propane and other products that Rothschiller said also will provide North Dakota with an advantage.

ComDel Innovation in Wahpeton spends about $8,000 a month on gas for heating, but its the electric bill is 10 times that, said Bruce Weeda, business operations manager.

“We have focused on electrical rates and been active with the industrial users group to try to influence that, more than working on gas rates,” he said in an email.

Schwartz said the total effects of fracking are yet to be seen in North Dakota, but Ness said he sees people from all over the world coming here with ideas and money to invest.

“Our country was on the verge of beginning to import natural gas until the shale gas discoveries increased domestic supply to the point that we can now begin exporting to other countries,” Ness said. “Just think of how that can change the trade balance and political landscape of the world.”

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