Blog Post

Beside the Bakken: Eastern Montana Feels the Effects of a Neighbor's Oil Boom

Nov 1, 2013 | Daniel Raimi

After spending several days in North Dakota, I traveled on October 17-18th to several counties and cities in eastern Montana, where oil and gas production is substantial, but far below the levels seen in neighboring North Dakota.

Oil production in select Montana counties.

Although Montana counties such as Richland and Roosevelt have also experienced the effects of a growing population and economy resulting from Bakken development across the state line, relatively low oil and gas production in eastern Montana means that revenues for local governments have been far below those seen in western North Dakota. Coupled with substantial differences in oil and gas tax structures, the impacts to cities and counties in Montana vary in significant ways from their neighbors across the border.

Driving from Watford City, N.D., to Sidney, Mont., I passed through the Little Missouri National Grasslands , a beautiful prairie landscape dotted with stunted rock outcroppings and shrubby green trees. While some oilfield traffic passed through, the road was mostly quiet, and it was not until entering Sidney that I was reunited with the pickup trucks and heavy 18-wheelers that I had left behind in North Dakota. Sidney, the seat of Richland County, has seen a major population influx resulting from Bakken development, mostly from oilfield workers who prefer Sidney’s quieter way of life to the busier cities in western North Dakota.

Sidney, along with Culbertson (roughly 50 miles north) and Glendive (50 miles south), embody some of the picturesque qualities of small-town life on the high plains. Surrounded by beautiful prairies, hills and buttes, these cities charm visitors with neon-painted main streets, friendly residents and plenty of local character.

The Cattle-ac steak house in Sidney is a prime example of this mix of old and new influences. Recent years have seen it transform from a place where neighbors gather into a bustling restaurant populated by oilfield workers and the occasional visiting academic.

Due to complex political negotiations some years ago, virtually all of Montana’s oil and gas tax revenue is shared between the state and the counties where oil and gas is produced — cities are excluded from receiving substantial oil and gas tax revenue. In Richland County, revenues from state oil and gas taxes have ranged between $15 million and $20 million each year for the past five years, and the county has invested in a variety of new capital projects, including improvements to bridges, roads and county facilities.

A drilling rig operates between Sidney and Culbertson

In some of eastern Montana’s cities, however, growing populations coupled with a lack of revenue from oil and gas taxes has created a struggle to meet an increased demand for services. In the cities of Sidney and Glendive (in nearby Dawson County), demand has grown dramatically for services such as road maintenance and sewer and water upgrades. Because of their minimal revenue from oil and gas taxes, these cities have either had to raise property taxes, which affects longtime residents, or go without upgrades that would improve the quality of life for citizens.

In Culbertson, a much smaller city north of Sidney in Roosevelt County, the story is somewhat different. Population growth has been slower, and greater economic activity has helped the city’s tax base while demand for services has increased at a slower pace.

Clearly, some cities in eastern Montana are struggling to manage development. These effects vary from place to place, and depend on a host of factors that we will explore more closely in our final report on state oil and gas tax policies.

This research was carried out at the Duke University Energy Initiative with support from the Alfred P. Sloan Foundation.