Bakken Boom Brings Big Changes to Dakota

Prior to the 2008 oil boom in the Bakken formation, the state of North Dakota had its share of problems.

It was losing an average of 5,000 residents each year to places that could offer young college graduates jobs other than farming and teaching. As a result, births from young families in the state declined and the population began to age, explained Kevin Iverson, manager of the North Dakota Census Office.

In 2001, the state lost approximately 6,000 people, forcing conversations about consolidating schools and ways to keep rural towns alive.

"We don't have discussions like that anymore," Iverson said.

Since the Bakken Boom hit the state with gusto roughly six years ago, it is as if the history of North Dakota is being played in reverse. Thousands of people from all over the country are crossing the state's borders in an unprecedented ingress to work in one of North America's largest tight oil plays and reap the benefits of the area's most profitable oil boom.

In 2013, approximately 18,000 people moved to North Dakota. The year before, roughly 13,000 people came. The year before that, 6,900 people made the journey to the state dotted by small towns, small lakes and mountains.

Today, the state's population is at an all-time high at 723,000, putting forth a new set of challenges that include a desperate need for housing, new schools and updated infrastructure, Iverson said.

You won't hear many North Dakotans complaining, however. Most continue to reel from the historical amounts of oil being pumped from the earth that shifted their growing economy into overdrive. The pace of their economy's growth outranked all other states in 2012, according to the U.S. Bureau of Economic Analysis.

Humble Beginnings

The 200,000-square-mile Bakken formation, which lies in the Williston Basin, is located in North Dakota, Montana and Canada.

It was named after a Tioga, N.D., farmer who owned land where the formation was first discovered. In 1951, the first oil well in the Bakken produced more than 26,000 barrels that year, and other wells soon followed suit. But the limitations of mid-century technology prevented the extraction of an estimated 7.4 billion barrels of recoverable oil, according to the U.S. Geological Survey.

In the 1980s a second oil boom occurred, delivering more than 50 million barrels of oil annually for several years before annual totals settled in the 30 million range.

However, when modern technology was brought into North Dakota from the Barnett formation in the Fort Worth Basin, it was as if the code to a safe was deciphered. The door opened for small farm towns such as Stanley, Watford City, Ray, Tioga, Parshall, Alexander and Williston – the town some say is closest to the heart of the Bakken Boom.

"Clearly, this cycle that we are in is the most important cycle the Williston Basin has ever seen as a result of horizontal drilling and multi-stage hydraulic fracing," said AAPG Honorary member Steve Sonnenberg, professor and Charles Boettcher Distinguished Chair in petroleum geology at the Colorado School of Mines and past AAPG president. "If it were not for that combined technology, much of the Bakken would be uneconomical to produce."

Using horizontal drilling and multi-stage hydraulic fracturing in tandem worked well in the Barnett shale, where natural gas was plentiful. But some in the industry questioned whether the technology would work on larger, tight oil molecules, Sonnenberg said.

They received their answer in the Bakken.

And Then, Boom

As of February of this year, 951,000 barrels of oil are produced daily in the Bakken, said Tessa Sandstrom, a spokesperson for the North Dakota Petroleum Council (NDPC). The Bakken has enabled North Dakota to become the second largest producing state in the country, with its top producing counties being Mountrail, McKenzie, Dunn, Williams and Divide.

Today, the state has 10,186 producing wells, 7,000 of which are unconventional, Sandstrom said.

The state's economy is outpacing all other states – growing at 13.4 percent, three times as fast as Texas and five times as fast as the national average of 2.5 percent, said Jesse Bradley of the North Dakota Department of Commerce. The growth is attributed to economic production, new jobs and increasing export sales, he said.

The Bakken play "keeps getting better and better," Sonnenberg said, noting that some operators are beginning to drill in the upper and middle Three Forks formations located beneath the Bakken shale.

And with a $30.4 billion impact on the state, the petroleum industry is changing the face of North Dakota:

  • Its population is burgeoning and becoming younger.
  • Entrepreneurs are opening up restaurants and other businesses to serve the masses.
  • Small farm towns are turning industrial.
  • New schools and recreation centers are being built.
  • Old farm-to-market roads are being repaved and given signage for the first time.
  • Single-family homes and apartments cannot be constructed quickly enough.
Growing Pains

"Our biggest struggle, even in the early 2000s, was how do we get young people to move back and stop the decline of rural communities?" Sandstrom said. "And now we are asking, ‘How do we accommodate this enormous growth?'"

Finding housing to accommodate the tens of thousands of oil patch workers, their families and others who flock to state in hopes of jobs and better incomes continues to be a priority, Iverson said.

The average rent for a one-bedroom apartment in Williston is higher than in Los Angeles and New York, according to a recent survey from Apartment Guide, which quotes the average rent for a 700 square-foot, one-bedroom apartment in Williston at $2,394. (New York's average is $1,504.)

While thousands of single family homes and apartment units have been constructed, some people continue to live in overpriced hotels, in temporary housing provided by operators – sometimes called "man camps" – and some may even sleep in their trucks. Many are hesitant to move their families to North Dakota because of the lack of affordable housing, Iverson explained.

In this rural part of the state, constructing housing becomes more challenging without the proper infrastructure, Iverson explained.

"You need to increase the power supply, build water mains, build roads, and you need workers to build those things," he said. "Everything has become constrained. It's not a matter of building a house anymore."

Before 2008, the state issued no more than 3,000 permits a year for single-family homes, Iverson said. Last year, more than 10,000 permits were issued.

To accommodate a spike in enrollment in public schools, North Dakota has or is currently building nearly 20 new schools, 12 additions to schools and more than 60 new classrooms since 2008, said Kristen Baesler, state superintendent of the North Dakota Department of Public Instruction. With increases of as much as 9,000 new students a year, "We are in portables and in every nook and cranny of our existing buildings," she said.

North Dakota is the only state in the nation that has recently increased funding for schools grades K-12, Baesler said.

What's more, schools are quickly moving into the landlord business, building duplexes and apartments for newly recruited teachers, she said.

The food service and hospitality industries are struggling as well, Iverson said. In a state where there are more job opportunities than people, it is difficult for restaurants, fast-food chains and general merchandise stores to attract and keep employees.

Iverson said a hotel adjacent to his office is advertising sign-on bonuses of $500 to $1,000. A local Wal-Mart is offering $12.20 an hour for the graveyard shift – most likely a job stocking shelves, he said.

Pro-Industry

Despite the challenges of an exploding population, the majority of North Dakotans embrace the industry's presence in the state.

An annual survey taken by the NDPC shows that for the past three years, roughly 80 percent of the population has held a favorable view of the oil and gas industry in North Dakota, Sandstrom said.

"People here have a good understanding of hydraulic fracturing and what the risks are and that we have environmental regulations in place to protect the environment," she said.

Prior to the boom, North Dakota's per capita income was 86 percent compared to the rest of the country, Iverson said. Last year, it hit 128 percent – second only to Connecticut.

Industry also has created an estimated 60,000 jobs, 48,000 of which are direct, Sandstrom said. Job Service North Dakota reports 25,000 job openings as of April of this year – a 12 percent increase from the prior month and more than a 29 percent increase from April of last year.

"Anyone not working today in North Dakota – it's not because they can't, it's because they don't want to," Iverson said.

In addition to new schools and classrooms, North Dakota is using tax revenues created by the industry to build recreational facilities in towns such as Williston and Crosby, a town of little more than 1,200 people that recently opened an ice skating and hockey rink, Sandstrom said.

Watford City, another small town now bulging at the seams, is considering building a recreation center much like the $80 million center that opened in Williston in March – with 2,500 people visiting on the first day.

Furthermore, unpaved and under-maintained roads, designed for grain trucks and tractors and limited traffic, are seeing improvements, said AAPG member Tofer Lewis, a geologist with Enerplus Resources. Many are being widened, repaved and outfitted with signage, as residents new to the state can't rely on the locals' familiar landmarks to find their way around.

The improvements will not only accommodate an increase in activity, they will add long-term enhancements that will benefit local communities, he said.

Importantly, the Bakken boom also is advancing scientists' understanding in the technology needed to extract unconventional resources, Lewis said. The first horizontal wells drilled just a few years ago were only a mile in lateral length and drilled from a single surface pad location. Now in the Williston Basin, long-laterals are approaching three miles in length, and multiple wells are being drilled from the same pad, which greatly decreases the surface disturbance and resources needed.

"By advancing our understanding the United States is becoming a leader in unconventional resources technologies," he added. "Other countries are now looking to us for assistance and advice on how to utilize their resources.

Embracing Diversity

And for the first time in many years, North Dakotans are getting a taste of diversity.

"We've been homogenous for so long," Baesler said. In the schools, it wasn't uncommon for "Ms. Miller," for example, to have taught three generations of one family, she said. These days, to address the fact that her class contained students from 29 states, one teacher in Williston brought flags representing all the different states and asked students to share their backgrounds, Baesler said.

"Lesson plans have been adjusted to let the students learn about each other and create a bond among classmates," she added.

Despite grappling with an ever-increasing enrollment, North Dakota school districts seem to work well under stress. Quoting a recent Gallup poll, Baesler said North Dakota was rated No. 1 in the nation for parent satisfaction with the public education system.

"It's fantastic," Baesler said. "We pull ourselves up by the bootstraps and say, ‘Let's get this done. We've got kids to take care of and oil to produce.'"

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Emphasis: Rocky Mountain Roundup