The Oil Boom Hasn't Helped North Dakota Cities
A new study indicates that the massive Bakken oil boom caused the demand for government services to outpace the growth in tax revenue by as much as 40 percent.
By Sean Cockerham
While the massive Bakken oil boom drew hordes of job seekers and international attention to the remote prairies of North Dakota and Montana in recent years, it's turned into a money loser for most cities and counties in the region. Crime in Dunn County, N.D., in the heart of the nation's oil boom, skyrocketed 60 percent in just three years, and the road maintenance budget soared from $1.5 million to $25 million.
The local government couldn't keep up, with demand for services outpacing the growth in tax revenue by as much as 40 percent. The problem continues as the drop in oil prices in the past year means increasingly less money for the county to spend on projects _ while drilling, the truck traffic that eats up the roads, and demand for community services haven't stopped.
"The gap between revenues and needs is still fairly large," Daryl Dukart, a Dunn County commissioner, said in an interview. "It will take many years to balance out."
Dunn County is far from alone. Analysis from researchers at Duke University found that "most local governments in North Dakota and Montana's Bakken region have experienced net negative fiscal effects" from the shale drilling boom.
"Because of the very rural nature of North Dakota and Eastern Montana, and the very large scale of the activity that's been taking place, population growth has essentially outstripped local government's ability to provide services," said Daniel Raimi, research associate for Duke University's Energy Initiative.
It is a different story elsewhere in the nation, where local governments have benefited from the drilling surge. In Texas, which led the drilling boom along with North Dakota, "the net financial effects of recent oil and gas development have ranged from roughly neutral to a large net positive," according to the Duke University research published this week by the National Bureau of Economic Research.
North Dakota cities and counties have been slammed. Cities have struggled to provide sewer and water infrastructure "to the many thousands of people who have moved to the area," Raimi said.
"For counties the biggest challenge is roads. The oil industry relies on a large fleet of heavy vehicles. And those vehicles can do substantial damage to very rural roads," Raimi said.
There are other costs as well. Housing prices in the hub city of Williston, N.D., soared so high that Williams County had to buy one building and build another in order to provide county employees with affordable housing and office space.
McKenzie County's emergency services responded to about five traffic accidents a month before the oil boom. By 2013 it was as many as five a day. The sheriff's office went from six officers to 22.
The hub city of Dickinson, N.D., saw its single-family housing permits rise by 330 percent in one year. The city went from having no debt to some $100 million in bonds.
Dickinson City Manager Shawn Kessel gave a presentation at Duke on his city's fiscal situation that posed the question, "Are we better off, financially, because of the boom?"
His answer: "Short term _ No; Long Term _ Sure hope so."
Oil production in the Bakken fields has remained strong despite the plummeting oil prices, as companies use new technology and more efficient techniques.
North Dakota's Dunn County is still dealing with the effect of truck traffic on the roads, as well as rising crime and demand for county services. The county received $27 million in "surge" funding from the state but asked for much more and had to cut road projects from the budget, said Dunn County Commissioner Dukart.
With so much of the government revenue in North Dakota tied to the falling price of oil, the county has slashed its budget plans by nearly 40 percent, Dukart said.
The number of drilling rigs is dropping, so the need for new infrastructure is lessening a bit, according to Dukart, but not enough to make up for the lack of money.
"There's a big concern about where oil prices are going to go," Dukart said. "How do you budget when the volatility of the prices is so great? You can't _ you have to pick a number and hope at the end of the year you aren't shuffling and needing to cut projects again."