From boom to bust: the economic impact of the Bakken.

• Author: Polzin, Paul E.

The American energy boom began with improvements in technology. Advances in geophysics, nanotechnology engineering and production management led to the shale-energy revolution and a dramatic increase in U.S. energy production. Increases in the supply of natural gas and crude oil have come from locations as varied as the Mid-Atlantic states, the Montana-North Dakota border and traditional supply areas, like Texas and Oklahoma. This increase in supply has recently led to a dramatic drop in oil prices--there have been a number of media stories about its impact on the oil industry as a whole and the possibility that an oil bust could return new production areas to their pre-boom economic conditions. This article attempts to put events into perspective by looking at the Bakken area on the Montana-North Dakota border over the entire boom and bust cycle.

Two areas will be analyzed: Richland County, Montana (Sidney), and Williams County, North Dakota (Williston). The oil wells themselves are distributed over the entire Montana-North Dakota border area, but these two communities are the largest in the region and serve as trade and service centers. Employment and income data is analyzed to identify local economic trends, but impacts on infrastructure, housing, crime and other social factors will not be examined here.

The Beginning

Richland and Williams counties weren't always booming. As Figure 1 shows, both economies experienced stagnation during the past 30 years. From 1986 until the mid-2000s, total nonfarm jobs in each county did not grow. There were small upward blips between 2007 and 2009, but the Bakken boom really began in 2011. Since then growth has been larger in North Dakota than Montana.

Nonfarm employment in Williams County increased about 140 percent from 2010 to 2014, while Richland County grew about 33 percent. The difference between the two areas was caused by the characteristics of the oil deposits, the expertise of the drillers and other factors. Most experts agree that differences in the tax rates between the states was not a major factor.

The Boom

From 2011 to 2014, there were boomtown atmospheres in Sidney, Montana, and Williston, North Dakota. Oil drilling rigs multiplied, traffic became astonishing and there were no vacancies in the few existing motels. The streets were packed with petroleum engineers, drilling managers and environmental specialists, along with roustabouts and roughnecks who put in long days.

Not only were the...