Blog Post

Public Finance in the Booming Bakken

Oct 22, 2013 | Daniel Raimi

From Oct. 14 to Oct. 16, I traveled to the western North Dakota counties of Dunn, McKenzie and Williams, where oil production has grown exponentially thanks to development of the Bakken and Three Forks shale formations.

A drilling rig operates off a county road in McKenzie County, N.D.

Perhaps the most talked-about oil play in the United States, the Bakken play has boosted North Dakota’s state tax revenue, attracted workers from around the United States, and driven the state’s unemployment rate down to 3 percent, the lowest in the nation. According to some estimates, the unemployment rate in Williston, N.D. is, astoundingly, below 1 percent.

On the drive from Dickinson to Williston, I could see a steady stream of bobbing oil pump jacks and flickering, bright orange flames — the indication of flared natural gas — lining State Route 85. Along with these existing wells, drilling rigs are visible at nearly every point of the drive. Flood lights and many large trucks surround the rigs, which are approachable only via small, potholed, deep red county roads.

Oil production in four N.D counties.

Arriving in Williston, drivers pass through an astounding couple of miles lined by nothing but oilfield service equipment: acres of storage tanks, pipeline equipment, heavy trucks, trailers and construction equipment. In a slow line of traffic driving through a road construction zone, my sedan is the odd one out—every other vehicle for at least a half-mile is a heavy duty pickup truck or a 16-wheeler. At the Williston Walmart, the massive parking lot is nearly full of pickup trucks, and a special parking area far from the store entrance is full of cement trucks, water-haulers and other long-haul trucks. New hotel construction surrounds the lot.

In contrast to the Marcellus regions of Pennsylvania where I visited last month, city and county officials in western North Dakota all described significant challenges to managing the public service demands arising from the Bakken boom. In the cities of Dickinson, Williston and Watford City, and the counties of Dunn, McKenzie and Williams, populations and demand for services have surged while revenues from local taxes and transfers from the state government have commonly not kept pace.

Making matters more difficult, local governments have struggled to attract new staff as the boom has dramatically driven up wages and housing costs in the area. In Williston, the city has had to invest in apartment buildings and subsidize rents to attract and retain employees as private sector rent has tripled or quadrupled in many cases. Clearly, the economic development that is producing new wealth for thousands of workers creates some challenges for local governments.

Approaching a drilling rig outside of Williston, N.D.

In Watford City, a crossroads for Bakken truck traffic, the population has expanded from 1,300 in 2010 to an estimated 8,000 today. In the state’s most recent revision to the oil and gas tax laws, Watford City — unlike Williston, Dickinson, and Minot — was not classified as a “hub city,” significantly limiting the amount of oil tax revenue it could receive and making it difficult to keep up with demand for services. As for the county governments I visited, officials were supportive of the economic growth enabled by the Bakken boom, but said funding has been inadequate to maintain the hundreds of miles of roads affected by the industry’s heavy trucks.

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