The North Dakota Oil Boom: How and Why
Oil burning. Photo: The Overnighters
With a population totaling approximately 725,000, North Dakota has the lowest rate of unemployment in the United States and a $1 billion budget surplus. Every year, 2,000 North Dakotans become millionaires. The population of the state has increased 4 percent in two years. Much of this can be attributed to the state's oil boom. Williston, North Dakota is situated in the center of the Bakken -- a geological formation stretching through parts of North Dakota, Montana and Canada that is the source of the eponymous Bakken oil boom. The Bakken oil boom is the biggest oil boom the area has ever seen and seven times larger than the previous boom in the 1980s, which lasted for approximately 10 years. It has catapulted North Dakota to the top of the list of oil-producing states in the United States -- only Texas produces more oil per year.
In 2006, technological advances and a shifting geo-political climate created a perfect storm for investors in oil exploration and drilling. New shale gas reserves were discovered in the Bakken shale formation, and advances in hydraulic fracturing techniques (also known as "fracking" or "hydrofracking") made these new reserves more readily accessible. Hydraulic fracturing breaks up underground rock with a pressurized liquid made of water, sand and chemicals. When the United States renewed its pursuit of energy independence from foreign energy sources, such as the Middle East and Venezuela, tax incentives and other legislation motivated oil companies to funnel money and labor into U.S.-based initiatives, like hydraulic fracturing in new reserves. All of these factors combined to create the North Dakota oil boom.
Federal Reserve Bank of Minneapolis. "The Bakken Oil Boom." https://www.minneapolisfed.org/publications/special-studies/bakken/oil-production
Bailey, David. "In North Dakota, Hard to Tell an Oil Millionaire from Regular Joe." Reuters, Oct. 3, 2012. http://www.reuters.com/article/2012/10/03/us-usa-northdakota-millionaires-idUSBRE8921AF20121003
Eaton, Joe. "Bakken Oil Boom Brings Growing Pains to Small Montana Town." National Geographic, July 8, 2014. http://news.nationalgeographic.com/news/special-features/energy/2014/07/140709-montana-oil-boom-bakken-shale/
Boom, Then Bust
Job seekers at a campground in Williston. Photo: The Overnighters
Booms can happen in any industry. The California Gold Rush in the 1850s, for instance, is an example of an early industrial boom in the United States. A boom occurs when technological, legislative and environmental factors align to create an ideal moment for investment in an industry. Oil booms have regularly occurred in the United States since Pennsylvania's oil rush in the 1860s. They are familiar territory for Texas, Oklahoma, Louisiana, Colorado, Wyoming and Alaska -- the major oil-producing states in the United States. The Midland-Odessa area in Texas has weathered more than four boom-bust cycles.
An oil boom is a time of inherently high risk and high reward. Economic diversity is a hallmark of a good economy, and relying on one industry for economic growth makes a community vulnerable to market shifts and swings. When multiple industries hold up a community's economy, it becomes more resistant, and a downshift in one industry doesn't mean a collapse of the economy overall.
An oil boom creates wealth in multiple ways. The entry-level worker -- known as a "roustabout" -- performs unskilled general maintenance and manual labor. A roustabout makes on average $34,680 per year, which is close to the median wage for all American workers. Oil rig workers, however tend to move up the pay scale quickly. As oil rig workers retire and operations continue to expand, companies scramble to fill positions. A number of oil companies offer training programs for their workers to certify them for higher level work. For those with less than one year's experience, the average yearly earnings are $66,923 -- or a little less than double the entry-level salary.
The money earned by oil rig workers flows into the local economy. Unskilled positions such as jobs waiting tables offer wages of as much as $15 per hour in boomtowns, as employers hope to draw workers into the area to meet the demand of a rising population with money to spend. As workers move to town looking for work, prices of everything from a two-bedroom apartment to breakfast at the local diner begin to rise.
Landowners in oil boom communities reap profits in another way. In order to drill for oil, an oil company needs to secure the mineral rights to property owners' land. North Dakotans who allow drilling on their property see monthly paychecks of $50,000 or more. However, because North Dakota differentiates between surface rights and mineral rights, landowners must still own their mineral rights in order to profit. Many landowners sold those rights during the smaller oil boom in the 1950s, not expecting the area to see the massive Bakken boom of today. Only those landowners who retained their mineral rights are able to profit directly from drilling on their land.
Many areas that experience booms have been through the boom-bust cycle before, and residents know that the bust can be devastating. A boom can go bust for many reasons. In the oil industry, worldwide geopolitical factors can affect business at home in the United States. Oil companies leave town, shutting down their rigs -- and many of the people who moved in leave to find work elsewhere. This sudden exodus affects communities in obvious ways, such as a jump in unemployment and the collapse of inflated real estate prices, and in less obvious ways, like young workers deciding to forgo college for work in the oil field. Infrastructure -- such as schools, housing, hotels and restaurants -- is built up to accommodate the boom, and then those businesses and buildings are at risk for repossession when the population (and demand) plummets.
Unfortunately, the communities affected by the Bakken oil boom in North Dakota can use their own history as a barometer for what to expect when this boom finally goes bust. The North Dakota oil boom of the 1970s left behind debt and empty infrastructure -- that is, until the next boom hit.
Ellis, Blake. "What Happens When North Dakota's Oil Boom Goes Bust?" CNN, Dec. 6, 2011. http://money.cnn.com/2011/12/06/pf/oil_boom_bust/
Gunderson, Dan. "Oil Prices Falling But Bakken Producers Expected to Tough It Out.
Minnesota Public Radio, Dec. 9, 2014. http://www.mprnews.org/story/2014/12/09/bakken-oil-falling-prices
Melby, Todd. "Seeing Opportunity in North Dakota's Oil Boom." Marketplace, Dec. 11, 2012. http://www.marketplace.org/topics/sustainability/seeing-opportunity-north-dakotas-oil-boom
PBS. "America By the Numbers. Episode 4: Native American Boomtown." http://www.pbs.org/wgbh/america-by-the-numbers/episodes/episode-104/
Sontag, Deborah, and Robert Gebeloff. "The Downside of the Boom." The New York Times, Nov. 22, 2014. http://www.nytimes.com/interactive/2014/11/23/us/north-dakota-oil-boom-downside.html
Social Impact: Housing Insecurity and Health
Campground. Photo: The Overnighters
Housing insecurity -- defined by the U.S. Department of Health and Human Services as "high housing costs in proportion to income, poor housing quality, unstable neighborhoods, overcrowding or homelessness" -- is one of the most prominent social effects in areas experiencing oil booms.
Throughout the Bakken oil boom, towns in North Dakota have seen their populations grow by 50 percent. The population of Williston, for example, exploded from 15,000 people in 2010 to more than 30,000 in 2013. This kind of population surge leads to shortages in housing. Over two years, more than 1,000 men and women took advantage of the "overnighters" program at Concordia Lutheran Church. It was the only program of its kind in Williston serving so-called "economic refugees."
Building investors don't like oil booms because the booms will eventually bust. Investors aren't likely to invest in infrastructure that won't be needed in 10 years. This kind of insecure investment climate leads to housing shortages and strained public infrastructure, like overburdened roads and schools. New apartment buildings have hundreds of names on their waitlists.
Even local government can experience roadblocks to offering attainable housing (housing that is available -- not necessarily affordable). With land values skyrocketing throughout the region, it can be difficult to find land on which to build new housing. And, as we see in the film, communities are not always keen on spending funds to house new residents.
Temporary housing in the form of trailers and RVs is a go-to solution for this problem. Another common solution is the creation of so-called "man camps" -- semi-permanent housing where hundreds of men live together, dormitory-style. Often, the oil-rigging companies themselves sponsor these camps, but in temperate seasons man-camps can take shape as RV or tent living. In general, there are far more male oil workers than female oil workers. Increased boom-time demand in female-dominated careers, like hospitality and health care, draws women to boomtowns like Williston, but at a far lower rate than men. Women are also more likely to move with their families, rather than on their own. The high rate of single men looking for housing frequently leads to dormitory-style housing solutions.
Housing insecurity has multiple detrimental effects and is a public health issue. The Annual Review of Public Health qualifies the effects of housing insecurity as "hard" or "soft." "Hard" effects include those that affect the physical health of the body -- like being exposed to heat or cold or difficulty in accessing services or facilities. "Soft" effects include aspects of mental health, such as exclusion from a community and lack of social capital.
These "soft" and "hard" effects are exacerbated further by other markers of "outsider" status in a community such as Williston. For many of the men who participate in the overnighters program, searching for a job in Williston is a new beginning -- a chance to start over in a new community. For those who have criminal records, finding and keeping housing is difficult even outside of the oil patch. Laws govern the movements and housing of registered sex offenders, for example. In North Dakota, offenders moving to the state must first register and be listed on a public website. Although there are no state laws in North Dakota that restrict where a sex offender may live or work, it is not illegal for landlords to refuse to rent to offenders.
These strains on the health and safety of the population of a boomtown can become a focus of municipal, county and state lawmaking and appropriation, leaving governments to answer the question of whether or not to incorporate the new boom population into their communities.
Bashir, S.A. "Home Is Where The Harm Is: Inadequate Housing as a Public Health Crisis." American Journal of Public Health 92, no. 5 (May 2002): 733-738.
Becker Cutts, Diana et al. "US Housing Insecurity and the Health of Very Young Children." American Journal of Public Health 101, no. 8 (Aug. 2011): 1508-1514.
CNN. "North Dakota Wants You: Seeks to Fill 20,000 Jobs. http://money.cnn.com/2014/03/18/pf/north-dakota-jobs/
Cohen, Rebecca. "The Impacts of Affordable Housing on Health: A Research Summary." Insights from Housing Policy Research, May 2011. http://www.nhc.org/media/files/Insights_HousingAndHealthBrief.pdf
Eligon, John. "An Oil Town Where Men Are Many, and Women Are Hounded." The New York Times, Jan. 15, 2013. http://www.nytimes.com/2013/01/16/us/16women.html
Helman, Christopher. "Dear Texas: Enjoy The Oil Boom. Just Don't Blow It This Time." Forbes, Apr. 25, 2014. http://www.forbes.com/sites/christopherhelman/2014/04/25/dear-texas-enjoy-the-oil-boom-just-dont-blow-it-this-time/
Hricik, Mike. "North Dakota's Influx of Men Smaller Than Other Booms." Bakken Today, July 20, 2014. http://www.bakkentoday.com/event/article/id/37031/
Job Service North Dakota. "Oilfield Jobs."
Malter, Jordan. "What a Two Bedroom Costs in an Oil Boomtown." CNN, Jan. 30, 2015. http://money.cnn.com/video/news/economy/2015/01/30/north-dakota-oil-boomtown-williston-two-bedroom-rent-2800.cnnmoney/
Rao, Maya. "Searching for the Good Life in the Bakken Oil Fields." The Atlantic, Sept. 29, 2014. http://www.theatlantic.com/features/archive/2014/09/searching-for-the-good-life-in-the-bakken-oil-fields/380677/
State of North Dakota Office of Attorney General Sex Offender Web Site. "Information for Out of State Registered Offenders". http://www.sexoffender.nd.gov/shared/Outofstateoffenders.pdf
United States Census Bureau. "Population Estimates." http://www.census.gov/popest/about/terms.html
U.S. Department of Health and Human Services. "Housing Instability." http://aspe.hhs.gov/hsp/isp/ancillary/housing.htm
Weber, Bret A. et al. "Rural North Dakota's Oil Boom and Its Impact on Social Services." Social Work 59, no. 1 (Jan. 2014).