The economic reach of the Bakken oil fields: Eastern Montana activities have statewide impacts.

• Author: Polzin, Paul E.

Prime topics of conversation in Sidney and throughout the Bakken area are the latest rumors and speculations about the price of oil. Some people are wondering what the impact of the drop of the price of oil by 50 percent since mid-2014 will do to the economies of Eastern Montana. But it is not just the people living within 50 miles of the Montana-North Dakota line who should be concerned because the economic impacts will be felt far from the drilling and extraction sites.

The Timeline of the Oil Boom

The employment data clearly show that the Bakken boom is very recent. Figure 1 presents indices of nonfarm employment in Richland County, Montana (Sidney), and Williams County, North Dakota (Williston). These two counties are the epicenters of oil activity in the two states. Both economies were stable during the 1980s, the 1990s, and the early 2000s. There were small upward blips during the 2007 to 2009 period, but the Bakken boom really began in 2011.

The growth has been larger in North Dakota than Montana. Nonfarm employment in Williams County tripled in the three years from 2011 to 2013. In Richland County, the growth was about 50 percent. Most experts agree that the possibility of lower taxes in North Dakota did not cause the differences between the two states. Rather, the characteristics of the oil deposits, the expertise of the drillers, and other factors led to the differences between Richland and Williams counties.

Oil Industry Vendors

The oil and gas sector also includes those companies that sell to and service the petroleum exploration and drilling activities, and these firms need not be located near the drilling and extraction sites. But since these firms are affected by trends in the oil and gas industry, economic impacts can be quickly diffused across a wide geographic area.

The American Petroleum Association compiled a list of approximately 224 firms in Montana that are vendors to the petroleum industry. Their locations across the state are pictured in Figure 2. There are petroleum industry vendors--ranging from catering to oil field vehicle service--in 36 of Montana's 56 counties.

It is difficult to see in Figure 2, but the sizes of the dots are proportional to the number of vendors in each location. A clearer picture is presented in Table 1 where the vendor data has been sorted by ZIP code. The statewide distribution of vendors is clearly seen with areas such as Missoula and the Flathead, each containing a number of firms. In...