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Oil industry powers up McKenzie Electric

Posted 6/29/11 (Wed)

By Neal A. Shipman
Farmer Editor

To say that the huge upswing in oil activity in McKenzie County is having an impact on McKenzie Electric Cooperative would be an understatement.
That was the message that officials of the Watford City-based electric cooperative shared with its members at the co-op’s 66th annual meeting on June 21.
“McKenzie Electric is changing,” stated Travis Thompson, board chairman, as he addressed co-op members. “Nothing is the same today as this new growth is straining the board and our staff to keep up with the demand.”
According to Thompson, the cooperative has seen its monthly sales of electricity grow from $1 million to nearly $3 million and has seen its annual revenues increase from $22.8 million in 2009 to just under $29 million in 2010.
But in order to meet the demand for more power, the cooperative has also been forced to take on new debt.
“McKenzie Electric has taken out four short-term loans totalling $12 million to build new lines to serve the oil field’s growth needs,” stated Thompson. “The last time the cooperative took out a loan was in 1983 to meet the oil demands at that time.”
But Thompson assured the members that even with the new debt, the cooperative was still very financially solid.
While loans of $12 million to build new lines to serve the oilfield may seem like a lot of money to some, according to John Skurupey, the co-op’s general manager and CEO, the oil industry is providing a significant portion of the cost to build the lines.
“The oil companies are paying 100 percent of the cost of the new lines that serve the oil field’s needs,” stated Skurupey. “And where we are replacing lines that serve our existing customers, as well as new oilfield loads, the oil industry is sharing in a portion of those costs as well.”
According to Skurupey, the co-op built 160 miles of line in 2010.
“Electricity flowed for the first time in rural McKenzie County in 1947,” noted Skurupey. “Today, some of those lines are still in place.”
To meet the growth in demand, Thompson noted that the cooperative has six to eight contractors working at all times to build new lines to serve the oilfield’s needs, as well as replacing old lines.
And that increased labor costs money.
“We are spending approximately $700,000 a month in just contract labor,” stated Skurupey.
During his report, Skurupey also informed the member’s that electricity rates could be going up.
“We are expecting a 10 percent rate increase from Basin Electric to Upper Missouri G & T, who is our power supplier,” stated Skurupey. “We don’t know what that will mean to you, our customers,” stated Skurupey. “The board will wait to see what the final rate increase is and then they will consider any rate increases.”
Skurupey also informed the co-op members that McKenzie Electric is no longer building new lines on the Ft. Berthold Reservation.
“Because of new regulations and rules by the Tribe and the BIA, we are no longer building new service lines on the reservation,” stated Skurupey. “This is a sad situation because there are  homes and wells on the reservation that are going to be without power.”
While both Thompson and Skurupey expressed their appreciation to the cooperative’s staff in meeting the challenges of the past year, they both made it clear that the whether it is building new lines or responding to power outages caused by storms, the members come first.
“You, the members, own this fantastic business,” stated Skurupey. “Everything we do has the best interest of the members at heart.”