The sun is rising on northwestern North Dakota, casting mottled light across the prairie and the faces of an army of oil workers. Some are ending shifts, others are just beginning. The rising light touches lines of tractor-trailer trucks clogging the roads and thousands of oil derricks nodding in the fields. And it also lights the construction crews who are racing to expand highways, extend utilities and build the facilities that an invasion of oil workers and their families requires.
Like the sun, the state's economy is rising, too, fueled by an ocean of oil freed by hydraulic fracturing, or "fracking." Recent improvements in the technique and horizontal drilling make previously inaccessible oil and natural gas recoverable. As of March, only Texas was producing more oil than North Dakota.
North Dakota has the nation's lowest unemployment rate—3.0% in May 2012—and fastest-growing economy. But in a few counties in the northwestern part of the state, at the oil boom's epicenter, the growth in the past three years has been exponential.
In the counties around the oil-rich Bakken shale formation—Williams, McKenzie and Mountrail—total construction starts averaged $52 million a year from 2000 to 2008. When the boom began, they hit $117 million in 2009 and $105 million in 2010. In 2011, starts soared to $406 million, according to McGraw-Hill Construction's Dodge database.
"The three counties saw construction starts increase 285% in 2011," says Bob Murray, vice president, economic affairs for McGraw-Hill Construction, New York City. Through the first five months of 2012, total construction starts for the three counties already has been reported at $471 million, he adds, "so 2012 is shaping up as another year of strong growth."
It is a brilliant star in an otherwise gloomy construction economy, although too small to move the needle, nationally. But for northwestern North Dakota, the microboom is sweet. As the oil workers stream in, the boom is driving big demand for housing, roads, utilities, pipelines and railroads.
Volume of Work
But opportunity brings baggage. "The boom is bringing in a lot more new firms who didn't used to work in the North Dakota market," says Paul Diedrich, president of Industrial Builders Inc., Fargo, and senior vice president of the Associated General Contractors of America. Local firms are seeing lots of competition moving in. "Without all the fracking, you wouldn't see anywhere near this volume of work," Diedrich says.
However, fracking has raised environmental worries. The Environmental Protection Agency warns of the risk of oil and fracking brine spillage and the need to properly dispose of the chemical-laced water that fracking employs. Indeed, the state's Dept. of Mineral Resources logged more than 1,000 oil spills last year, although officials say they were small.
The boom is soaking up resources. Not only is there demand for workers—24,000 jobs statewide are currently unfilled—but also for haul trucks.
"An average oil well runs 2,000 truckloads of equipment to start it and another 2,000 loads once they get it up and going," says Al Anderson, commissioner of the state's Chamber of Commerce. The trucks carry everything from frack sand, chemicals and water to pieces of the rigs to the oil itself, once production begins.
"All of the traffic and thriving businesses were what everyone wanted in small-town North Dakota in the past," says Ward Heidbreder, city coordinator of Stanley, N.D. "And now they have it."
With the wish granted, officials now have pressing needs. They are extending water and sewer systems and trying to find housing for the new workers. They are expanding schools to make room for all the new children. The city of Williston alone is spending $500 million on infrastructure upgrades.
"We're spending $150 million on a regional water system, $150 million on updating the airport, $90 million on wastewater treatment and $100 million on a four-lane truck route around the city with diamond interchanges," says Tom Rolfstad, the city's executive director of economic development. Tulsa, Okla.-based natural-gas distributor ONEOK is adding capacity, putting in two natural-gas processing plants "at $180 million dollars each," Rolfstad says.
Basin Electric Co-Op is constructing two $60-million, 45-MW, natural-gas-fired peaking powerplants in the area. One will be west of Watford City and the other near Williston, says Curt Pearson, project representative at Basin. A $347-million, 200-mile, high-voltage transmission line from Basin's Antelope Valley Station to a substation east of Tioga, near the Bakken fields, is scheduled to start construction in mid-2014.
Meanwhile, the roads are taking a beating. With 6,500 oil wells in operation, 217 wells under construction and another 35,000 projected, the semis just keep rolling, crowding the thin highways stretched across the vast state. State legislators set aside $1.2-billion for infrastructure in their last session, says Anderson. Some is simply for widening and paving dirt roads.
"Every town used to want the highway running down the main street—that's how shops survived," says Anderson. "Now that's all changed," he says, as towns endure ever-more congestion.
"Between 2006 and today, we went from an average of 2,000 vehicles a day on [Williston-area] highways to 6,500," says Francis Ziegler, director of NDDOT and president of the Western Association of State Highway and Transportation Officials. "If they were all cars, we could handle them, but 40% to 60% are trucks."
"The speed of development here is about two years ahead of the speed of government," says Stanley city coordinator Heidbreder. "I started with the city eight years ago and was told if we had one major infrastructure project every three years, that was busy. This year we'll have over 20."
Construction costs are escalating, too, says Ziegler. Overall costs [have] increased 12% a year since 2001 but rose 23% last year," he says. Ziegler blames the increase on a scarcity of supplies and materials, the cost of transporting goods into the area and competition for labor. With the oil industry paying truckers $90,000 a year, it isn't easy to get anyone to deliver asphalt for construction for less pay, Ziegler says.
Construction companies that move in can find themselves with no place to house workers. Williston permitted 2,131 single- and multifamily units and 691 hotel units at the beginning of the year, but it's not enough to keep up with demand.
Some contractors, such as Burke Construction Group Inc., Las Vegas, and companies, such as Target Logistics Inc., Boston, are building "man camps," clusters of modular units linked to form barracks. Most camps house hundreds of people—some, thousands—and come complete with recreation rooms, internet cafes and 24-hour mess halls. A month's rent for a typical single room with three meals a day is $3,500—often paid for by employers.
For many, their vehicles double as bedrooms and kitchens for weeks while they find jobs. "Some of the guys stay in trailers right on the site," says Shane Anderson, an oil derrick driller with Precision Drilling, Calgary, Alberta, Canada. "It's hard to find a place to stay around here, but I'm lucky because I got one in town."
The camps add a housing elasticity for the transient boom; but "transient" is a word local officials are careful to remember.
"We have a committee researching data to figure out just how much of an expansion we need to build for," says Monte Meiers, Williston's director of public works and engineering. "We don't want to build for 60,000 and only have 40,000 long-term residents or visa versa," he says.
Roger Thomas didn't want his crew sleeping in their cars. As division manager for Burke Construction Group's remote sites, he realized there was no way to control the construction schedule without housing workers. Thomas built a crew camp to give his company a base, and he has been there for 18 months. Thomas advises contractors contemplating work in the region to secure housing for their workers and subcontractors before making the leap.
Another challenge is arranging financing, adds Thomas. "Williston financiers aren't giving out-of-towners the time of day, and most financiers outside North Dakota say, 'Williston? Where's Williston?' " He is countering by making positive contributions to the Williston community. He is now on the Williston Board of Commerce and is a member of the Builder's Association.
Poaching is another problem contractors face. The abundance of work and high oil-sector wages tempt craft workers to jump. Deciding whether to work for energy or construction is a question every tradesperson faces, Thomas says. "The energy industry pays whatever it takes to get the job done," he admits.
Experienced craftspeople have their pick of jobs, but they are not alone in chasing their fortunes to North Dakota. Criminal activity is on the rise with the population boom, and some Bismarck residents are distrustful of workers come to fill the roles of roughnecks, pipe fitters, fuel men and more.
"I wish you could have visited sooner," says one ex-resident who asked not to be named. "It's just not the same anymore," she said, fighting back tears and turning away before finishing her sentence. But others say they welcome the excitement all the construction brings.
"Things are buzzing," says Heidbreder. "When population goes up, crime goes up as well, and no one likes that. But we're dealing with expansion problems we never thought we'd have. We're building cities."