North Dakota oil boom

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Night view of H&P drilling the Bakken. Night view of the H&P drilling the Bakken.jpg
Night view of H&P drilling the Bakken.

The North Dakota oil boom was the period of rapidly expanding oil extraction from the Bakken Formation in the state of North Dakota that lasted from the discovery of Parshall Oil Field in 2006, and peaked in 2012, [1] [2] but with substantially less growth noted since 2015 due to a global decline in oil prices. [3] Despite the Great Recession, the oil boom resulted in enough jobs to provide North Dakota with the lowest unemployment rate in the United States from 2008 to at least 2014. [4] [5] The boom gave North Dakota, a state with a 2013 population of about 725,000, a billion-dollar budget surplus. North Dakota, which ranked 38th in per capita gross domestic product (GDP) in 2001, rose steadily with the Bakken boom, and had a per capita GDP 29% above the national average by 2013. [6]

Contents

By October 2020, total oil rig count in the state had fallen dramatically. According to the North Dakota Department of Mineral Resources, the total oil rig count in the state had fallen from 58 active rigs on October 3, 2019, to only 11 active rigs on October 3, 2020, a reduction of over 80 percent.

The oil boom was largely due to the successful use of horizontal drilling and hydraulic fracturing, which made unconventional tight oil deposits recoverable. [7] Contributing to the boom was a push to commence drilling and production on oil and gas leases before the expiration of their primary term, commonly three to five years, at which time the leases would terminate unless a producing well was drilled on the lease. But once production was established, the leases continued as long as oil and gas were continually produced.

Economic effects

By 2012, income from oil royalties was reportedly paying many local mineral owners $50,000 to $60,000 per month, and some more than $100,000 per month. Bruce Gjovig, head of the UND Center for Innovation Foundation in Grand Forks, estimated that the boom was creating 2,000 millionaires per year in North Dakota. By 2010, the average income in Mountrail County more than doubled to $52,027, putting the county into the top 100 richest counties in the United States. [8]

The oil boom reduced unemployment in North Dakota to 3.5 percent in December 2011, the lowest of any state in the US. [9] [10]

The number of actively-drilling rigs in North Dakota peaked at 217 rigs in Spring 2012, with the rig count averaging 180-190 throughout 2013. [11] Each of the rigs is estimated to create roughly 125 new full-time jobs. This means a total growth of around 25,000 jobs, including an extra 10,000 jobs for workers who lay pipes to producing wells and produce processing plants. [10] Some estimates predict that North Dakota could have as many as 48,000 new wells, with drilling taking place over the next two to three decades.

Drilling the Bakken formation in the Williston Basin. Drilling the Bakken formation in the Williston Basin.jpg
Drilling the Bakken formation in the Williston Basin.

The Bakken boom propelled North Dakota into the top ranks of oil-producing states. By 2007, North Dakota ranked 8th among the states in oil production. In 2008, the state overtook Wyoming and New Mexico; in 2009 it outproduced Louisiana and Oklahoma; and in 2011 and 2012 it surpassed California and Alaska respectively. By 2012, North Dakota was exceeded only by Texas in oil production. [12]

Government revenue

The North Dakota state government receives through severance taxes 11.5 percent of the gross value of all oil produced. [13] The boom gave the state of North Dakota a billion-dollar budget surplus in 2011. [9] [10]

In addition to severance taxes, the state of North Dakota owns extensive mineral rights, which are leased by competitive bidding. In fiscal year 2010, the State Land Department reported that mineral income on its land earned $265 million for the North Dakota school trust fund, and that the trust fund had grown to $1.3 billion. [14]

The federal government is also a major owner of mineral rights in the region, and leases the rights to companies in competitive bidding. In a January 2013 federal lease sale, the top bid was $19,500 per acre for a lease on one tract in North Dakota. Of the lease sale and royalties from the federal tracts, the federal government keeps 52 percent, and passes 48 percent on to the state of North Dakota. [15]

Social and infrastructure effects

Bakken oil fields in work. Frac job in process.JPG
Bakken oil fields in work.

The industrialization and population boom put a strain on roads, water supplies, sewage systems, and government services in the Bakken Formation and Williston Basin area. For context, this area covers over half of the state. Some counties increased in population by almost double from 20,000 to 40,000. The population increased in men and decreased in women, as the physically laborious jobs attracted some, while crime drove out others. Long term viability of a boom area generally will not last, as the services do not expand at the same rapid pace of population growth. Examples of services that were not maintained in North Dakota include school consolidations and size accommodations, lack of goods on demand, poor health care availability, loss of human capitol, inadequate elderly care, and road development.

Sociologist John S. Gilmore presents the idea of a boom town 'problem triangle'. The notion is as follows: Local services do not keep up with population growth, degrading the quality of life in the community. Lower quality of life creates more difficult in attracting additional population needed to support growth of services. Private investors also are often hesitant to invest in services, as chaos/ crime is often perpetuated in these areas. The oil industry relies on employees, but these employees in turn rely on other employees (dining, retail, etc.) and services (law enforcement, school systems, health care, etc.). [16] When additional population for other businesses and services are not present, the oil employees cannot live healthy, secure lives.

Example of makeshift housing in man camps due to lack of real housing to match booming populations One possible man-camp cabin 001 - Fisher Place - Arnegard North Dakota - 2013-07-03.jpg
Example of makeshift housing in man camps due to lack of real housing to match booming populations

The boom also brought with it increases in crime and social problems. The addition of thousands of oil workers led to a housing shortage, requiring the construction of man camps for housing them. These poorly made, portable housing units were popularized due to North Dakota proliferating usage specifically. [17] Law enforcement agencies reported sharp increases in offenses, particularly violent crime, drug trafficking, gun crimes, and prostitution in these areas. While crime did not increase as dramatically as it is typically perceived to have been, there was certainly an increase in population and a decrease of police ratio. The created a cautious environment for many, as safety was less ensured by state/ national institutions. However, despite inflammatory perceptions of crime rates, there was a concrete increase of crime. Violent crime, such as rape and aggravated assault, increased 30% in the Bakken region compared to pre-man camp times. The majority of victims of ongoing sexual violence are Indigenous women, targeted due to their minority identity, twofold with intersectionality. [18]

Native American women were particularly targeted in violent crime, which was a factor in the rise of MMIW. MMIW, Native American Woman sharing her culture.jpg
Native American women were particularly targeted in violent crime, which was a factor in the rise of MMIW.

There is a prevalent notion among oilfield workers in the Bakken that there will be no consequences for assaults against Indigenous women. This exacerbates the ongoing Missing and Murdered Indigenous Women Crisis. Native American women experienced 2.5 times higher victimization of crime than other races- and women experienced 54% increase in unlawful sexual contact, most often statutory rape. [19]

An oil pipeline running through lands precious to Tribal Nations including tribes such as the Standing Rock Sioux. Bakken - Dakota Access Oil Pipeline, North Dakota (29357938502).jpg
An oil pipeline running through lands precious to Tribal Nations including tribes such as the Standing Rock Sioux.

Crime affected the relationship between boom newcomers and longtime residents. Residents saw newcomers as threats to their access to resources and services. However, the longest residing people, such as the Standing Rock Sioux and Lakota tribes, were completely disregarded in decision making in land usage and development for oil fields. One instance particularly caught the eye of the public, when the Dakota Access Pipeline risked the people's access to land, water, and sacred sites. The issue made it to the U.S. Supreme Court, but was ultimately the land and people did not get justice. The pipeline disrupts water flow from the Mississippi to the tribal land in order to deliver oil from the Bakken to Illinois. The pipeline also directly violates the Fort Laramie Treaty (Article II), which guarantees the 'undisturbed use and occupation of the sovereign nation's reservation lands. [20]

Oil rig count in the US Oilrig USA weekly.svg
Oil rig count in the US

Decline

The oil boom in North Dakota experienced a brief decline in 2014 after the Saudi Arabian oil industry increased its output and the price of crude oil fell from $108 to $40. [21] The price returned just as the U.S. economy recovered from the Great Recession which resulted in difficulties recruiting workers back to the region. [21]

Resurgence

By October 2020, total oil rig count in North Dakota had fallen. According to the North Dakota Department of Mineral Resources, the total oil rig count in the state had fallen from 58 active rigs on October 3, 2019, to only 11 active rigs on October 3, 2020, a reduction of over 80 percent. [22] However, oil production hit an all time high of 1.5 million barrels per day in 2019. Demand fell temporarily due to Covid-19. Oil prices have since recovered to over $70 per barrel in 2021 due to increased demand linked to the Covid-19 recovery. North Dakota remained the state with the second highest oil production, after Texas [23] until overtaken by New Mexico in May 2021. [24]

See also

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References

  1. ↑ Nicas, Jack (April 6, 2012). "Oil Fuels Population Boom in North Dakota City". Wall Street Journal. Retrieved April 17, 2012.
  2. ↑ Oldham, Jennifer (January 25, 2012). "North Dakota Oil Boom Brings Blight With Growth as Costs Soar". Bloomberg. Retrieved April 17, 2012.
  3. ↑ Sankararaman, Darshana; Medhora, Narottam (January 29, 2015). "UPDATE 2-Helmerich & Payne may cut 2,000 jobs as it idles rigs". Reuters. Archived from the original on February 14, 2015. Retrieved October 3, 2020.
  4. ↑ Gebrekidan, Selam (March 8, 2012). "Shale boom turns North Dakota into No. 2 oil producer". Reuters. Archived from the original on September 21, 2013. Retrieved April 17, 2012.
  5. ↑ Ellis, Blake (October 20, 2011). "Double your salary in the middle of nowhere, North Dakota". CNN. Retrieved April 17, 2012.
  6. ↑ US Energy Information Administration, North Dakota sees growth in real GDP, July 12, 2013.
  7. ↑ "The Facts About Fracking". The Wall Street Journal. June 25, 2011. Retrieved October 3, 2020.
  8. ↑ David Baily, North Dakota millionaires, Reuters, October 3, 2012.
  9. 1 2 "New Boom Reshapes Oil World, Rocks North Dakota". NPR . September 25, 2011. Retrieved December 2, 2011.
  10. 1 2 3 "Oil Boom Puts Strain On North Dakota Towns". NPR . December 2, 2011. Retrieved December 2, 2011.
  11. ↑ "Active Drilling Rig List". www.dmr.nd.gov. Retrieved February 16, 2021.
  12. ↑ US EIA, Oil production, accessed September 20, 2013.
  13. ↑ North Dakota, Oil and gas taxes, accessed September 17, 2013.
  14. ↑ North Dakota, Fiscal year 2010 report, 2011
  15. ↑ US Bureau of Land management, BLM Montana Dakotas lease sale, January 2013.
  16. ↑ Chambers, Chad (July 2020). "Beneath the surface: Capital-labor relations, housing and the making of the Bakken boom". The Extractive Industries and Society. 7 (3): 908–917. doi:10.1016/j.exis.2020.04.012.
  17. ↑ Fernando, Felix N.; Cooley, Dennis R. (September 2016). "Socioeconomic System of the Oil Boom and Rural Community Development in Western North Dakota". Rural Sociology. 81 (3): 407–444. doi:10.1111/ruso.12100.
  18. ↑ Conway, Kyle; Caraher, William R.; Weber, Bret A.; Ruddell, Rick; Campbell, Robert B. (2018). "Passing Through: Migration, Class, Crime, and Identity in the Oilfields of North Dakota". Great Plains Quarterly. 38 (4): 425–432. doi:10.1353/gpq.2018.0063. JSTOR   26535406.
  19. ↑ "Violence from Extractive Industry 'Man Camps' Endangers Indigenous Women and Children". First Peoples Worldwide. January 29, 2020. Retrieved March 18, 2024.
  20. ↑ "Standing Rock Sioux and Dakota Access Pipeline | Teacher Resource". nmai.si.edu. Retrieved March 18, 2024.
  21. 1 2 Englund, Will (2020). "Bravado, dread and denial as oil-price collapse hits the American fracking heartland". Washington Post. Retrieved January 25, 2020.
  22. ↑ "Current Active Drilling Rig List". North Dakota Industrial Commission Oil & Gas Division. October 3, 2020. Retrieved October 3, 2020.
  23. ↑ "North Dakota oil prices surge and output stalls as pipeline's fate awaited". Reuters . Archived from the original on June 5, 2021.
  24. ↑ "Crude Oil Production".
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