Ag and Oil: Can They Coexist?
By John McChesney
I should have known what it would be like here when I could not find a motel or hotel room within a hundred-mile radius of Williston, North Dakota.
Even after a year of reading about the oil rush on the Bakken field in western North Dakota, nothing had prepared me for what I found when I drove in. It seems that nearly every 18-wheeler tank truck in America is on the road here, making tens of thousands of trips , hauling water, fracking fluid, waste water, oil, and oil well condensate. Then there are the semis hauling fracking sand, gravel for drilling pads, gravel for roads, drill casings, pipeline sections, drilling rigs, huge oil tanks, and more. Dozens of small – we’re talking really small – rural towns with one main street dot the area, and those trucks rumble through the towns at all hours, creating monumental traffic jams and deep potholes.
Tankers by the hundreds blanket huge lots on the edges of towns. On the two-lane roads linking towns, you stare up the tail end of the tanker ahead, and flinch as the massive grills of Kenworths, Peterbilts, and Macks whoosh past on your left. It’s brutal out there. Last October through June of this year saw 1,142 crashes involving trucks, with 16 fatalities and 242 injuries. One official told me that some workers come here, take a two-week course in big rig driving, and hit the road as amateurs.
The Bakken oil play is one of the biggest in American history. The formation covers an area roughly the size of West Virginia, one third of North Dakota. There are more than 200 drilling rigs working here, up from 40 or so just two years ago. That’s more rigs than in any state except Texas. Lynn Helms, the state’s oil and gas czar, a slight man with a graying beard, obviously enjoys talking about the Bakken boom. We met in his unassuming office near strip malls on the edge of Bismarck, the state capital. He told me that he expected the rig count to reach 225 by year’s end. “There are 40 people directly employed by one of those rigs and another 80 whose jobs center around that rig. So that means we are right about 25,000 people who are directly employed by those 201 drilling rigs. There’s another 10,000, plus or minus, that are installing natural gas pipelines, natural gas plants, all the infrastructure to service the wells that they construct.” And those numbers don’t include all the people who have been drawn to the state but don’t yet show up in employment estimates. North Dakota’s total population is only 670,000, and most of those people live on the eastern side of the state. The western side of the state is, or was, extremely rural.
The land is not flat out here. It’s rolling and wrinkled grassland with brush-filled draws and small canyons. Many of the gentler rolls are covered with chrome yellow wheat fields, most being harvested as I drove across the Bakken. The contrast between the old agricultural base and the new industry is stark; green combines crawl through wheat fields along a landscape punctuated with bobbing pump jacks, oil tanks, and towering drilling rigs. At night natural gas flares spread across the horizon like battle signals.
Lynn Helms says that so far only 3,000 wells have been drilled. Only? Well, he says, that’s only 10 percent of the wells planned for every square mile of this vast rural area. Another 48,000 wells could be drilled over the next 20 years. Western North Dakota, he says with a slightly rueful smile, will never be the same.
Now you might expect that in a state with only 3.3% unemployment while the rest of the nation is stuck above 9%, most people here would be whistling “happy days are here again.” But that’s not what I found. Williams County sits in the heart of the Bakken, and the town of Williston is the county seat. People I talked with in other nearby towns said they no longer visit Williston. It’s just too jammed up. Dan Kalil is the chairman of Williams County’s Commissioners. “What we have now is the complete industrialization of western North Dakota,” he told me. “To expect a county of 20,000 people to absorb another 20,000 people overnight is ludicrous.” Balding, tanned, wearing a khaki Wrangler shirt and sporting a drooping moustache, Kalil is a farmer and a rancher and has lived here all his life.
He says agriculture and oil have gotten along here previously, but this, he says, is energy exploitation on an unprecedented scale. “They’ve come here so quickly they’re consuming all of our resources. They’re consuming all of our people looking for jobs. All the employee base is used up. Our roads are being used up. All our water is being used up. All our sewage systems are being used up, overwhelmed. All of our leadership time as local public officials is consumed with this. All of our resources are being used up by the industry and the industry is the only one getting anything done.” Kalil says County Commission sessions, which used to last an hour or two, now run up to five or six hours, and there’s a committee meeting nearly every day. Local government leaders are being asked to confront problems with which they are totally unfamiliar.
Man camps—clusters of hastily constructed prefab units--are springing up all over the area. Many hold hundreds of workers; some are well managed, others are not. Thousands of men without wives or families have poured in here. Things can get unruly. At the first restaurant bar I sat down in, two young men next to me recounted their recent brawl in the tiny town of Parshall. One of them, from my hometown of Santa Rosa, California, said a vodka bottle had encountered his head and a fist had landed on his friend’s jaw. Net result: a serious concussion and broken jaw. The other combatants were Indians from the Ft. Berthold reservation in the middle of the Bakken. In Williston alone, police calls jumped from 6,500 in 2009 to 16,000 last year.
Law enforcement agencies here are having a hard time retaining recruits, who soon discover they can make a lot more working in the field. In spite of the burgeoning number of man-camp units, the upward pressure on local rental rates is astonishing. The Williston Herald reported recently that long-time residents in an older apartment complex were sent notices of dramatic rent increases, including 92-year-old Ardis Mortensen, who was told her rent would nearly triple to $2,000 a month.
But don’t get the idea from all this that most people here are opposed to the oil boom. That would be a mistake. Most people here are in favor of extracting the oil. They’re aware that they can’t stop this juggernaut. The Bakken is just too rich. If you own mineral rights, you’re probably considerably more on the positive side, and if you don’t, you’re likely to be resentful of being steamrolled. But the more commonly-shared sentiment here is that things are just moving way too fast.
Here’s why. Most of the drilling company leases in this area were negotiated with mineral owners back in 2006-2008. They are either three or five year leases and are expiring in 2011. If the oil companies don’t start to drill within the time limit of the lease, it expires. John Schmitz, a silver haired, square-jawed native, is what’s called a landman, and he negotiated a lot of these leases. “[Those] leases were bought for $100, maybe $200, and right now you could get somewhere between $1500 and $2000 per acre. And when you consider that there’s 1280 acres in that drilling unit, that number is substantial.” That’s an understatement. An oil company’s cost could jump from a quarter of a million dollars to over $2 1/2 million. Ergo, the frenzy to get hundreds of holes in the ground at nearly the same time.
Oil and gas czar Lynn Helms says the state is hesitant to get involved in a slowdown. “How would we decide whose well didn’t get drilled and whose well did get drilled? We talk about it and possible mechanisms for that but we don’t have a good one. And our concern at this point is that it would be the heavy hand of the state government reaching in and impacting individual contracts and decisions, which is a place we are very hesitant to go.”
The state doesn’t get high marks from many locals on its pre-planning for this rush. Williams County Commissioner Dan Kalil points out that when a big company plans to set up a plant in a town, it comes in and says how many employees will be coming, what kind of infrastructure—schools, medical facilities, roads-- will be needed. But with the oil industry, it’s much different. “The oil industry is made up of so many individual companies, and hundreds and hundreds of subcontractors from roustabout companies to service companies, to just the guy with a belly dump, all spread out over hundreds of miles.” So it’s hard to know just whom to negotiate with about advance infrastructure needs. Nevertheless, Kalil thinks the industry should ante up more in advance to help offset impacts. But Bob Skarphol, the state legislative representative from the area, says that’s nearly impossible. “It’s extremely difficult to find a way for the industry to take responsibility for the infrastructure. You know, who’s going to pay for what portion of it?” Skaphol’s solution is to keep extraction taxes high (there’s already pressure to lower the 11 ½ percent rate) until the infrastructure catches up to the boom.
The lack of proper planning for an energy boom is hardly new in the West. It happens over and over again. Talk to the folks in Sublette County, Wyoming about their recent experience with the gas boom there. Same problems. Towns are ground down under the early impact of a boom while revenues don’t start to flow in time to help. Meanwhile, an agricultural way of life is swept aside, leaving many with bitter feelings.
Dan Kalil is not sure how long he will hang on. “I don’t know how much more of the transformation that I personally can take. My son and I were having a discussion this morning on driving out, and he asked me where else would I want to live. I never wanted to live anywhere else. This is where I always wanted to be; I’m doing what I always wanted to do. I’m farming and ranching. But we’ve lost our quality of life, we’re losing our culture and our traditions. We’re trading a third generation culture for a transient culture.”
Lynn Helms was recently in the southwestern part of his state, warning people there that the oil drilling tsunami was headed their way as well, and that they should get ready for it so they wouldn’t be overwhelmed like their neighbors to the north. Helms claims that three years ago he told the folks up north what was coming, but they didn’t listen because of their experience with a previous boom that quickly went bust. Dan Kalil says he doesn’t remember any such warning, but, he says, what would we have done in any case? “Build four-lane highways with no money?”
More to Come
We are tracing the arc of energy booms in the rural West, from the first stirrings of a future boom in the Niobrara play in eastern Wyoming, through the blistering pace of drilling in North Dakota, to the aftermath of the gas boom in Sublette County in western Wyoming. We’re concentrating on the social and economic impact of these booms, the wrenching changes in culture and custom, the transformation of ecosystems, and the significant material rewards to be reaped from a carbon harvest. Do boom regions learn from the experience of others or does each reinvent the wheel when the frenzy hits? We are also working on a study of state and local tax revenues collected from energy extraction and how that money is then used.
Last modified Wed, 2 Nov, 2011 at 15:01