Business and Economy
4:03 pm
Wed July 23, 2014

The Currency: Biz Reporter Brings N.H.'s Stratospheric Export Numbers Down To Earth

Orvis State Oil Well, Evanson Place, Arnegard North
North Dakota's oil boom is having a direct effect on N.H.'s export numbers.
Credit Tim Evanson / Flickr Creative Commons

The Currency is NHPR's ongoing look at economic and business news in New Hampshire. 

N.H. Export Growth: Too Good To Be True

This month's Business New Hampshire Magazine offers a cautionary tale to readers.  Here’s how it begins: The U.S. Department of Commerce and Census Bureau publishes  data showing the Granite State leads the nation in export growth in 2013.  And it was a whopping increase—22 percent over the year before! 

But as Business New Hampshire Associate Editor Erika Cohen found, that was far from the truth. 

The moral of the story?  Don’t believe everything you read.

“We produce a data issue for our July issue, where we just produce a lot of data about things in New Hampshire.  And one section of that issue was about exports," Cohen says.  "And we noticed in that issue that our oil and gas exports were very high, and that really alarmed us, given that we neither produce or refine oil in this state.”

Q: Could you dig a little bit more into why the 22 percent export growth figure is incorrect, and maybe what the right number is?

A: Certainly.  So what we looked at is we looked at our overall exports, which were $4.2 billion for 2013, and then we dug into the numbers, and looked at, within that $4.2 billion is $673 million in crude oil. 

Maggie Hassan
Governor Maggie Hassan and the state's Department of Resources and Economic Development have both cited the 22 percent growth figure.
Credit Marc Nozell / NHPR

  There’s only two things you can do to crude oil that add value to it.  You can pull it out of the ground.  Or you can refine it.  We don’t do either of those things here.  So that made us think there was something funky going on.  So what I did is I started looking around for all the sources of crude oil.  So how it would travel through, how it would be accounted for.  I called the port, but it wasn’t being shipped.   I looked at all the rail lines, but there were no rail lines going from New Hampshire into Canada.  I looked at all the pipelines, but there weren’t any pipelines that accounted for it. 

And then I discovered this kind of really interesting accounting gimmick which is sometimes, something is accounted for in the last…not the last state it stops before it leaves this country, but basically the headquarters of the business that might be responsible for that item.  So in this case, what we tracked it back to was first of all, training.  And second of all, the fact that Iriving Oil’s U.S. headquarters is in Portsmouth.  And they started receiving Bakken oil from North Dakota—and the first test train was in May of 2012.

Q: So in other words, they were recording that information as being an export from New Hampshire to wherever it was going, even though it had only passed through?

A: Exactly.  Because sometimes the technicality, what happens is the administrative accounting happens in the place where the business has a U.S. location.  So in this case, the trains are coming across the country from Massachusetts, they drive through New Hampshire, drive through Maine, and cross into Canada.  But since Irving is in Portsmouth, it’s cataloged in Portsmouth.

Q: And you mentioned the Bakken oil fields—what is their role in inflating this data?

A: So the reason that Bakken caught my attention is that a lot of the news recently about the oil boom has been about the Bakken oil fields.  And Bakken crude is a particular kind of crude that is called ‘shale oil.’  So it’s pulled out of the ground in North Dakota, Montana and parts of southern Canada.  It’s called ‘sweet crude,’ it’s lighter, but also because it has a lot of bits and stuff in it, it’s apparently more flammable.  And it’s led to another of very high-profile accidents.  So the Lac-Magantic accident was Bakken crude.  Although that was a derailment—but there have been other accidents.  That caught our attention because there was a reported test train of Bakken crude traveling through the Northeast the same month that the first recorded amount of crude oil came through New Hampshire.

Q: And how did the movement of oil from North Dakota ultimately end up tracking with the changes in New Hampshire’s export numbers?

A: Well it actually tracked pretty specifically.  There’s an oil analyst out in Montana that follows everything that happens in Bakken, and he reported in June 2012 that Irving was starting to receive Bakken oil.  Well in May 2012, Eastern Railroad News and also Pan-Am confirmed that they ran a test train of Bakken crude. 

So it starts in North Dakota, travels through Chicago, travels through New York. From New York, it switches from CNX Railway to Pan-Am, goes through Massachusetts, through the Downeaster line through southeastern New Hampshire, and all the way up through Maine, where it goes to Canada.  And that test train was the first time—May 2012—Bakken crude came through New Hampshire. 

And then it continued to come through in 2013 until August, when the Director of Emergency Management told me the month after that Lac-Magantic accident they were told there wasn’t any more Bakken crude coming through.  But crude oil continued to come through that route.  So it seems that route is a new route to get crude oil to Canada.

Q: But since the Bakken oil isn’t coming through do you think then, that that will reflect later on in New Hampshire’s export numbers, that we might see that dip?

A: We could.  So in 2013, there was $673 million all year, and in 2014 through May, there was only $156 million.  So unless things really pick up again on that line, there will be a dip in crude oil exports.  So if you take that $4.2 billion and take out $673 million in crude oil, the increase from 2012 to 2013 is actually 0.7.

Q: That’s a huge difference!

A: Right.  So what we were saying, as a magazine, wasn’t that the number was wrong.  The number was legitimate.  It came from a legitimate source.  Someone was cataloging it here, and as best we can say, it’s Iriving.  But, since we’re not adding value to it here, there’s not a real economic value we’re getting.  There may be some economic value—there definitely is some—but it’s not $673 million.

But this story is about more than just deceptive data.  Cohen says this number could have political implications.  Especially since it was used to support Governor Maggie Hassan’s controversial trade mission to Turkey amid a freeze on out-of-state travel for New Hampshire agencies.  And to tout the state’s success on the innovation front.

Downtown Bakery No Fairy Tale For North Country's "Polish Princess"

Randall is preparing The Polish Princess Bakery for an October opening.
Randall is preparing The Polish Princess Bakery for an October opening.
Credit Chris Jensen / NHPR

It’s that time of year when small-scale bakers make big money on the Farmers Market circuit.  For some of these entrepreneurs, scoring a storefront feels a bit like a fairy tale—and about as likely.  But in the North Country, we have the story of one Lancaster baker-turned-princess.

“I have the flour is measured already. These are my grains,”  Magdalena Randall says as she meanders through her kitchen in Lancaster.  She's one of the state's newest entrepreneurs.  It’s 7:30 in the morning on the 4th of July.  And Randall is at home with mixing bowls, dough, a baking oven, and a dream.

Many people in the North Country couldn’t tell you her real name. To them she’s The Polish Princess, purveyor of European-style bread.

Randall started baking about six years ago. It was way to supplement the family income and she missed the kind of bread she grew up eating in Poland. She had zero experience but did some research and gave it a shot.  “The first farmer’s market was 18 loaves of bread and it took me all day to bake it," she says.

Every loaf sold. And she kept at it.

“I invested a lot of time into studying that. I took several courses with Jeffrey Hamelman at the King Arthur Bakery.”

Randall's reputation spread--as did the demand at North Country farmers markets.

“Yesterday I baked to Berlin 160 loaves of bread. Today I will bake the same for Lancaster and very often it is not enough,” she says.  About year ago she got serious about expanding. Working full-time.

Working for herself.

"The way I look at the economy is it is sort of like a masonry project. It is one brick at a time. Is any one brick crucial? Well, no but you can’t take too many out or it will collapse."--Stewart Gates N.H. Small Business Development Center

New Hampshire has always had a lot of self-employed workers. The Great Recession only increased that according to state Director of Economic Development Carmen Lorentz. 

“The study that I was looking at covered 2001 to 2012 and saw a nine percent increase in the proportion of people statewide that are self employed. So, I do think there is a trend there,” she says.

Last year, New Hampshire ranked sixth nationwide in the percentage of workers who are self-employed. That’s according to a study by EMSI, which specializes in information about the labor market.  That’s almost 58,000 people or 8.4 percent of New Hampshire’s workforce.

Stewart Gates is with the New Hampshire’s Small Business Development Center, which offers free advice to entrepreneurs. He says regardless of the kind of work they do, the self-employed tend to share a key trait.

“They characteristically have more than the average amount of self-confidence, not to the point where they are in your face or abusive but they believe in themselves," Gates says.  "They believe in what they are about to do. There is a restlessness.”

When Magdalena Randall decided she wanted to expand she knew how to bake bread. But she needed the recipe for a successful business. Gates helped out.

“She had a good product and she had customers for it. But she felt there were more customers out there and she couldn’t serve their needs because she didn’t have enough production capability,” he says.

Once they had a business plan. Randall was able to get a loan.

Now there’s a shop on Lancaster’s Main Street, with a big sign that reads "The Polish Princess."

Randall opens the door and says (with not a little pride), “Would you like to go inside?”

Right now, there’s construction material everywhere. The previously-vacant shop is being renovated by the landlord.  But looking beyond the boxes and sheet rock Randall sees a place where she can sell all the bread she can bake along with some pastries and coffee.

She also sees one more thing: an employee.

“Yeah, definitely I will need help,” she says.

It’s tricky gaging the impact of such solo entrepreneurs on the state’s economy in a dollars-and-cents kind of way.

But Stewart Gates of the Small Business Development Center says businesses such as The Polish Princess are very important.

“In these small towns one or two holes in Main Street can make a big difference," he says.  "The way I look at the economy is it is sort of like a masonry project. It is one brick at a time. Is any one brick crucial? Well, no but you can’t take too many out or it will collapse.”

The Polish Princess is slated to open in October. In the meantime, Randall will continue to sell her bread at farmers markets.

Check here again next Wednesday for The Currency, a weekly look at business and economic news in New Hampshire.