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Strong oil prices good for ND treasury, not so for roads

July 15, 2021 GMT

BISMARCK, N.D. (AP) — The same stronger-than-forecast oil prices that are swelling North Dakota’s treasury also could shrink dollars for road construction next year, officials said Thursday.

Oil is used for road construction and making asphalt. The state Department of Transportation already has approved 174 contracts for road, bridge and other projects this year that total $350 million, agency spokesman David Finley said. Bids on those projects came in earlier this year before oil prices began surging, he said.

Bids for next year’s construction projects will begin coming in November but most will come in spring 2022, Finley said.

Steve Salwei, DOT’s director of transportation programs, said none of the state-funded projects being done this year are affected by higher crude prices. Next year, however, things may be different.

“We can only construct with money we have to pay for it,” he said.


Contractors appear to be ample at present and bidding competition could lower project costs, Salwei said.

The state typically is required to match 20% of federal funding used road construction, Salwei said. North Dakota’s share of the funding won’t be known until a new federal highway bill is passed, he said.

Oil prices are a key contributor to the wealth of North Dakota, which is neck-and-neck with New Mexico as the No. 2 oil producer behind Texas. North Dakota budget officials estimate every dollar that a barrel of oil either increases or decreases has a more than $40 million impact on the state treasury annually.

Lawmakers this spring assumed oil prices at $50 a barrel when crafting their present two-year budget. Including federal funds, the spending plan is $17 billion, or about $2.1 billion more than the budget cycle that ended June 30.

North Dakota oil has been fetching about $65 a barrel in recent weeks.

In 2015, slumping oil prices that forced North Dakota’s Legislature to trim some state spending also stretched road construction dollars further due to cheaper petroleum-based asphalt, allowing for more projects to be completed.