Growth Despite Setbacks

This was the year that national became local for the economies of Bismarck- Mandan and North Dakota.

The biggest local business story, the shuttering of Bobcat Co.’s plant in Bismarck, had a big impact for its workers and some area businesses. But the closing was a reaction to the broader economy, which saw the recession and the bursting of the housing bubble that fueled part of the company’s sales.

The brightest part of the state economy continued to be energy, and North Dakota’s rising national profile as a producer of oil and a growing source of wind energy. The state’s mix of energy resources puts it at “the point of the spear” in a comprehensive national energy plan, as U.S. Secretary of the Interior Ken Salazar put it during a visit here.

With the help of energy, North Dakota continued to buck the national trend and maintained low unemployment despite high-profile cases like Bobcat’s layoffs. The strong economy caught the attention of people around the country and in the national and international media, curious about what state was doing right.

Major closing

The most jarring piece of business news of 2009 arrived this fall when Bobcat announced in September that it would close its manufacturing plant in Bismarck, where the company has been producing machines since 1974, when it first operated as Melroe Manufacturing. Citing the recession, the company explained its decision, saying that it needed to consolidate operations by moving 475 jobs to its factory in Gwinner.

“It’s a little like having two washing machines and only a single load,” said company President Rich Goldsbury, announcing the closing. “We’re in a position where we just got too much capacity.”

The state’s most prominent multinational company, Bobcat’s sales had peaked in 2005 and suffered a 70 percent drop in sales after construction of new homes and other real estate went into the deep freeze after years of growth. The hit the bad economy delivered to the company was one of the strongest — at least for the Bismarck area — reminders of the problems beyond the state’s borders.

At the time of the announcement, Bismarck- Mandan Development Association President Russ Staiger said “it brings us to the realities that the rest of the country has been experiencing” and that “the golden bubble that we have been operating under has burst.”

Bobcat was not the only company to cut back because of the economy. Microsoft in Fargo laid off part of its staff as part of cutbacks at all Microsoft locations. Alien Technology, a maker of radio frequency identification tags for retail products, closed its Fargo plant in May, laying off 30.

But the Bobcat closing was significant for being a home-grown company and a mainstay of Bismarck’s manufacturing base.

Oil business flows

The energy sector’s profile in North Dakota’s economy soared in 2009. Oil exploration and drilling here continued to grow despite a drop in oil prices from peaks above $140 in early 2008. By October, the state had climbed to fourth place among oil-producing states. The identification of the Three Forks-Sanish formation as a possible second oil field next to the Bakken formation further fueled expectations of the production potential in the western half of the state. When geologists identified a possible third oil deposit — the Birdbear Formation — between the two that have already been tapped, oil companies found themselves too busy with those to pursue the new cache.

The state’s growing oil production was complemented by the increasing importance of wind power. According to Public Service Commissioner Tony Clark, by the year’s end, the state should have 1,020 megawatts of wind power on line and more than 5,300 megawatts worth of additional capacity in the form of proposed projects that have been brought before the Public Service Commission. By point of reference, the generation capacity of the state’s coal plants is around 4,000 megawatts. The potential for wind energy’s expansion is huge as well. The American Wind Energy Association ranks the state first in terms of potential capacity, at 138,400 megawatts.

“North Dakota has a greater variety and more sources of energy than any other state, and it’s changing our economy right before our eyes,” said Sen. Byron Dorgan, D-N.D., at an energy conference in Bismarck in November.

Steady economy

The growth in energy was coupled by a good year for agriculture, thanks to cooperative weather, and both helped to make North Dakota an island of relative prosperity while the rest of the country experienced the worst economic decline in decades. When the national unemployment climbed above 10 percent in October, the rate in North Dakota stayed at 4.2 percent, according to Job Service North Dakota.

The state’s real estate market also remained stable despite the national real estate crash that fed the recession.

“We didn’t have a bubble up, and we don’t have a bubble on the down side,” said Dave Flohr, an official with the state Housing Finance Agency.

North Dakota’s ability to defy the national trend attracted attention from across the country and other parts of the world. The state topped listings of the best places to do business, and recent media visits to find out the reasons behind the state’s success include NBC Nightly News and ZDF German Television.

Bismarck-Mandan Chamber of Commerce President Kelvin Hullet said in October he has seen the positive publicity for the state translate into more calls to his office for information about the area. The number of relocation packets he sent out in an average month six years ago was five. Today it is 38, and traffic on the chamber’s Web site has increased 30 percent, he said.

Other officials say that North Dakota’s success is the result of efforts made in the past to build the economy while avoiding the pitfalls that triggered the subprime mortgage.

“The national recession draws back the curtain and demonstrates that we have some of the fundamentals correct,” said state Commerce Commissioner Shane Goettle. “It validates things that we know but don’t often champion.”

Although the Bobcat closing was a reminder that the state was not completely immune to the bigger economic problems, the balance of the news showed that North Dakota has remained steady during a tumultuous year.

(Bismarck Tribune business reporter Christopher Bjorke can be reached at 250-8261 or chris.bjorke@ bismarcktribune.com.)