For at least 25 years, California has been developing an informal “spot market” for water. Cities or farmers looking for more water can often buy it from water districts that have more senior water rights and may not need all the water they get from state or federal water projects. But the state’s extreme drought is pushing the limits of that market. Supply is so constricted that even traditionally water-rich districts aren’t always willing to sell.
“If we’re water-short in our area, we’re not going to sell water outside of our area,” Ted Trimble says. Trimble, general manager of the Western Canal Water District, says the rice farmers in his northern California district and some others recently opted out of a tentative deal to sell their water to the Metropolitan Water District of Southern California. That’s because they found out their own water allocations from the state would be cut in half.
Right now, the California water market is “very supply-constrained," says Tim Quinn, executive director of the Association of California Water Agencies. “So when a market gets highly constrained, the number of transactions contracts and prices goes up. And that’s what’s happening in California.”
MWD was willing to pay $700 an acre foot for the rice farmers’ water. That’s twice as much as the going price five years ago, according to Trimble. An acre foot is the amount of water it takes to cover an acre one foot deep in water, or roughly the water supply used by two families of four in one year.
From Greg Gieser's at an oilfield services company in Kildeer, N.D., there are plenty of signs of a slowdown. He sees less traffic on the roads and fewer trucks clogging up the gas station. And then there's the drilling rigs—some of which are effectively mothballed.
“You'll see a field where there will be 18 drilling rigs, just sitting there, not doing anything,” he says.
And at Trilliant Oilfield Services, where Gieser is area supervisor for North Dakota, business is not exactly booming. The firm rents out equipment used for drilling new oil wells. In the past, it also made crews available for roustabout services—odd jobs on the oilfield. Both of those business lines have slowed down.
“We used to have half a dozen employees here and that's just gone by the wayside,” says Gieser. “They wanted me to hire more people, I just didn't see it, for the little bit of work that we do.”
Gieser surmises that if he had a sales rep, he could drum up more business, but the market forces aren’t working in his favor. A huge drop in oil prices is rippling across North Dakota, the second biggest oil producer in the U.S. Oil companies are backing off on the costly investment of drilling new wells because they may not be able to sell their oil profitably. Today there are about 90 rigs drilling new wells in the state, more than 50 percent fewer than a year ago.
The retrenchment is holding down revenue and headcounts at a whole host of businesses with ties to the oilfield.
Greg Gieser’s trying to keep his company going through the slow times by whatever means necessary.
“I rented a space in my yard to a company. Rented my building out. Whatever you can do to get revenue in and cut costs,” he says.
Bob Horab, the owner of a firm called McCody Concrete in Williston, N.D.Todd Melby
Meanwhile, oilfield companies want steep discounts from their service providers. Bob Horab, the owner of a firm called McCody Concrete in Williston, N.D., says negotiating those requests is like playing poker.
“I like to play poker with these guys just as much as they like to play with me. So we'll see what happens,” he says. “Who's going to tip their hand first? Am I going to chance losing their business or am I going to just fold?”
About 60 percent of the business at Horab's company is tied to oil. His concrete slabs serve as bases for heavy vessels and pumpjacks on the oilfield.
Horab says it'll likely be a while before the oil downturn really takes a toll on his business, and he may be able to offset any declines with commercial construction projects. But it’s clear that requests for discounts on his oilfield products are causing consternation in the meantime.
“The thing about it is, is, profit isn't a dirty word. They're in it for profit as am I. And if they break me, because I can't produce a profit, if I'm working at a loss, and if I go away, what good am I to anybody?” he asks. “When things come back, and I'm not here, then what do they do?”
Some business owners in the oil patch have much more immediate concerns about survival.
Mark Pyatt, owner of Killer Diesel Performance in Williston, N.D.Todd Melby
Mark Pyatt owns a repair shop called Killer Diesel Performance in Williston, N.D., where segment his parking lot has been dubbed "Death Row.” It consists of trucks left behind by customers, largely oilfield workers, who were previously flush with cash. They'd pay thousands of dollars to beef up their diesel engines so their trucks would go faster. But now, several customers aren't paying their bills.
Pyatt points to a black pick-up truck with enormous tires and wheels. He says the owner spent about $12,000 on bells and whistles and then found out the motor is bad, so he doesn’t want to fix it.
“And what's probably happened—probably work slowed down and he can't afford to. And it's been sitting here for two and a half months,” Pyatt says. “And if he doesn't pay the bill he owes, he'll never get it back.”
An employee of Killer Diesel PerformanceTodd Melby
The reversal of fortune for Pyatt has been abrupt. He says when he opened his doors last August, he had so much business that his mechanics were each earning about $9,000 a month. They still have some work trickling in, but Pyatt says it's not enough.
“They should probably be looking for jobs here shortly, and they know that,” he says.
Pyatt expects to close his doors this summer. He says a buyer is interested in taking the place off his hands and turning it around.
“I say more power to you, if that's the case,” he says. “But I have warned him fairly. I just do not believe that's possible.”
Pyatt's a tall guy with a long, scruffy beard, and the words "love hard" tattooed on his knuckles. He comes across as a mostly cheerful guy. But his outlook on the future of Williston is gloomy. If the oil industry bounces back, as many here hope it will, it won't happen soon enough to save businesses like his.
“It's called a boom town,” he says. “Why do they call it a boom town? It has to have a bust, otherwise they'd just call it a town.”
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