National Review / Digital April 30, 2012
Booming North Dakota
FOR many years, North Dakota has been the least visited state in the Union. There are no real tourist attractions here; Mount Rushmore is in South Dakota. The late newsman Eric Sevareid, who was born in North Dakota, called his native state “a large, rectangular blank spot in the nation’s mind.” But reporters from all over the world have been coming here lately, because North Dakota boasts one of the most interesting and exciting stories in the country: an honest-to-goodness boom.
The state has the lowest unemployment rate in the country, at 3.1 percent. Some wonder who could be out of work, given all the “Help Wanted” signs. North Dakota is No. 1 in job growth and No. 1 in income growth. At the heart of this prosperity is the Bakken formation, located in the northwestern part of the state. It’s a vast pot of oil. “Bakken,” incidentally, rhymes with “rockin’.” They have a bumper sticker here: “Rockin’ the Bakken.”
Oil was discovered in this area in 1951, but the trick was extracting it. Then, not long ago, came a marriage of two techniques one older, one newer. The older one was “hydraulic fracturing,” or “fracking,” for short. This is the method by which oil or natural gas is forced from rock. The newer technique was horizontal drilling. A combination of the two proved a bonanza. Earlier this year, North Dakota passed California as the third-greatest oil-producing state. Before the year is out, they should pass Alaska, trailing only Texas.
People from the other 49 states are coming to North Dakota to participate in this boom. Entrepreneurs in and around the Bakken are having a field day. The common comparison is to the Gold Rush, and that comparison is apt. North Dakota’s government is flush in money, and they are both investing in infrastructure and cutting taxes. Not every state has a Bakken, obviously this goose laying golden eggs. Still, other states can learn from North Dakota, and so can Washington, D.C.
“There are 8 million stories in the naked city,” goes an old movie line. There are almost as many in the Bakken. Gary Emineth, an entrepreneur and politico, is in the burrito business. For the Bakken, he had a special burrito made: big, manly, meal-like. He has done more business in 13 stores in the Bakken than in 450 stores elsewhere. In the town of Williston, the McDonald’s had to close in the middle of a Wednesday afternoon. They had run out of food. The Williston Walmart does not really bother stocking the shelves anymore. First, who wants to work as a stockboy when you can make a bundle in the oil patch? Second, the goods would not stay on the shelves long. The store just sets the pallets in the aisles, and the customers grab the goods and go right to the register.
Someone says to me, “Do you mind if I tell you something blue?” I’m all ears. “From what I hear,” he says, “the strippers are making more per night in Williston than they do in Las Vegas.”
The best stories, of course, are those involving men and women whose lives have been renewed by work found in this state. The nation has been down and ailing. North Dakota has been a godsend for many thousands maybe as many as 50,000, so far (and the state has fewer than 700,000). Next door in Minnesota, the Star Tribune ran an article that began, “There’s no keeping up with North Dakota’s surging economy, but at least they’re hiring some of us to do chores.” Hearing stories in North Dakota, I recall something I heard an Egyptian say at a Middle East conference. He was talking about unemployment in Egypt and other Arab countries. Young people were having to go to the Persian Gulf, in order to find work. He was sorry that they couldn’t stay in their home countries. But “thank God there is a Gulf. It has served as a safety valve for the whole region.”
In the Bakken, the greatest need is for truck drivers, to haul materials to and from drilling sites. They earn between $80,000 and $120,000 a year, with generous benefits. Dennis Lindahl, a councilman in Stanley, tells me about a family who lost their home in California. They came to the Bakken with one truck, which they ran 24 hours a day. Soon they had three trucks and five drivers, and bought a new home here with cash. Many workers are paying off their mortgages back home, or buying land back home, or saving for a business they’ve always dreamed of. Many are simply sending cash back home, to family members who need it. If these workers get a per diem, they try to spend as little of it as possible. In a Mexican or Cuban context, we would use the word “remittances.”
Not only are people coming to North Dakota, North Dakotans aren’t leaving as they have done for many years. For generations, North Dakotans who have wanted a chance in life have had to leave the state. Mom and Dad may have been left at home, but the kids were gone. North Dakota was a place you were from, not a place where you lived. Today, you probably don’t have to leave, if you don’t want to. And people who did leave are “coming back in droves,” Lindahl says. (He himself is one of them.) Not a few North Dakotans, who have always lived modestly, are becoming rich overnight: because they have surface rights to sell, or, even better, mineral rights. Or they may have some land on which people can place RVs or trailer homes.
Ah, yes, housing probably the biggest problem facing the Bakken. These sons of men have nowhere to lay their heads. You can sleep in your car or truck and many do but that can be dangerous in a North Dakota winter. (Fortunately, this last one has been mild.) Some people commute for hours. Throughout the oil patch are “man camps,” also called “crew camps”: modular housing occupied by thousands of men, some of whom sleep in shifts. These camps suddenly crop up in farmers’ fields. They resemble military quarters in Iraq or Afghanistan. One camp outside Tioga has what may be the longest hallway I’ve ever seen. I ask one of the men in charge how long it is. He answers precisely: 1,008 feet.
Thomas Fricke/First Light/Corbis
With the blessings of boom, of course, have come problems: a strain on utilities, hospitals, and the like. There’s a need for more teachers, more policemen more of everything. At the high school in Stanley, they’re holding class in the lunchroom, in the auditorium, and in the garage. They’re about to have a $7 million expansion. Some don’t like the changes that have occurred in this quiet, or once-quiet, part of the world. Before, they may have seen three to six cars a week. Now there are traffic jams. There’s dust, noise, and other unpleasantness. There has been an uptick in crime, because there has been an uptick in everything. North Dakotans have long said, “Twenty-below keeps the riffraff away.” I’m informed, “The riffraff is still about 5 percent. But now the population is bigger.”
So, there are problems but good problems to have, as many see it. These are problems that come from abundance rather than paucity. Ron Ness, president of the North Dakota Petroleum Council, grew up in Tolna, a tiny town in the eastern part of the state. He saw the town lose its school, its café, and its grocery store. He walked just 500 yards to high school. Kids after him were bused 45 miles each way. This is the kind of thing that happens when a state empties out. There are maybe worse things than boom.
AS some North Dakota conservatives tell it and they have a strong case the current prosperity has its roots in conscientious policies of the past. It began with the election of a Republican governor in 1992, they say. He was Ed Schafer, later an agriculture secretary under George W. Bush. Scott Hennen, a radio host based in Fargo, describes Schafer as “the Ronald Reagan of North Dakota.” (Hennen himself has been dubbed “the Rush Limbaugh of the Prairie” by the Wall Street Journal.) In the early ’90s, North Dakota was flat on its back, without growth or opportunity. Morale was very low. What Schafer did, in a nutshell, was reform government and make North Dakota business-friendly.
He remembers when Harold Hamm came to visit him in the spring of 1993. Hamm, an Oklahoma oilman who ran Continental Resources, and still does, told him about horizontal drilling. Some in the industry thought horizontal drilling was a pipedream (so to speak). But Hamm thought he had something, and the Schafer government crafted policies to help Hamm and other oilmen see what they could do. They did well.
Long before the current boom, North Dakota was an energy-production and energy-minded state. They have many of the elements of “all of the above,” as the politicians say. In other words, they have multiple sources of energy, including coal, hydropower, ethanol, biodiesel, and wind. (Being relatively flat and treeless, North Dakota has no shortage of wind. Sometimes, it’s hard to stand up.) Politicians, regulators, and others here stress, “We’re used to energy. It’s part of who we are. We’re not afraid of it, and we know how to deal with it.”
While some refer to the current prosperity as “the North Dakota Miracle,” others will have none of it. Ed Schafer is one of them: “It was more like a long, hard slog through the swamps. It took a lot of planning.” Last month, the current governor, Jack Dalrymple, delivered the Republican response to President Obama’s weekly radio address. Dalrymple said, “We have created a friendly business climate in North Dakota, where taxes and insurance rates are low, the regulatory environment is very reasonable, and we have the most responsive state government anywhere.” It is true that other states with wonderful resources, including oil, have had different policies and different results. Until recently, New Mexico seemed determined not to produce or compete. California’s hostility to energy production is legendary. Its unemployment rate is 10.9 percent, third worst in the country.
And yet, it doesn’t hurt to have a Bakken formation. Kevin Cramer, a member of the Public Service Commission, and a Republican candidate for Congress, is grinningly aware of this. He recalls an old Steve Martin skit on Saturday Night Live: You can become a millionaire and never pay taxes! How? Well, first get a million dollars. “Let’s be honest,” says Cramer: “No politician invented the Bakken.” He also points out that North Dakota is blessed with private lands, rather than state or federal ones: Almost all of the Bakken is in private hands. “So that made it easier right out of the chute,” says Cramer. Companies could invest their capital and get a return on it.
Ron Ness, of the Petroleum Council, suggests that four factors made the Bakken boom: geology, technology, price, and business climate. And just about everybody can agree with Jason Stverak, a North Dakota–savvy journalist or rather, with his mother: “My mother always said, ‘Success is when opportunity meets preparation.’”
This state has more than energy going for it, as people here are keen to point out. Agriculture is still a mainstay. Microsoft’s largest campus, apart from its headquarters in Redmond, Wash., is in Fargo. In his radio response to Obama, Governor Dalrymple said, “We have thousands of job openings in North Dakota today, but almost every day the national media asks me if it isn’t all due to the oil boom in northwestern North Dakota. I enjoy telling them the county with the most job openings is not among western oil counties but is the county surrounding Fargo, our largest city and on the opposite side of the state.” In that city, I meet Michael Chambers, a young man from Carrington, N.D. His parents, grandparents, and great-grandparents were beekeepers. He’s a beekeeper too, but also a science whiz: His company, Aldevron, is the first biotech company in the state, and it employs 100 people.
FOR all the state’s economic diversity, oil production is front and center now. “Drill, baby, drill,” goes the cry, along with “Frack, baby, frack.” Fracking makes a lot of people nervous (though not in North Dakota). A few days before I came here, I was with some musicians back in Manhattan. They asked me whether I was traveling anytime soon. Yes, I said, to North Dakota. Why, they asked. To look into the oil boom, I said. One of them said, “Oh, yeah fracking. Isn’t that bad for the environment?”
Here in North Dakota, I put this question to all and sundry. And the answer, honestly, is no not with intelligent regulations. Elsewhere in the country, there are concerns that fracking will contaminate the water. Not in North Dakota: The oil and the aquifers are two miles apart. Then there is the question of oil drilling in general. The footprint of such drilling is getting ever smaller. The environmental impacts are getting ever fewer. Derricks will be up for 20 to 30 days. Then they go away, leaving only simple, unobtrusive pumps (painted to blend in with the landscape). When the well is dry, the land will be back to normal, with no sign that any drilling ever took place. Contrast this with other ways in which we mess with the landscape: highways, railroads, telephone poles, telephone wires, wind turbines . . .
Over and over, North Dakotans tell me one thing: We love our land more than you do. More than musicians in Manhattan could. We have to live here. We are good stewards. We need this land. You don’t have to worry that we’ll rape and pillage our own backyard, for heaven’s sake.
There tend not to be regulation wars in North Dakota: wars between government and industry, liberals and conservatives, crunchies and capitalists. (Pretty much everyone in North Dakota is a crunchy. And, increasingly, a capitalist.) People tend to solve problems together. There is a tradition of “North Dakota nice.” Kevin Cramer says, “I tell companies, if you want to get along with me, get along with the people out where you’re working. If you don’t get along with them, you don’t get along with me.” The chief oil regulator is Lynn Helms, a man who roughnecked his way through college and worked just about every other job in the oil business, before landing in his present position. “I think it’s important for a regulator to have a working knowledge of the regulated industry,” he says. “For example, what does a rule mean to a roughneck or to a production engineer?” He says a regulator has to be able to go to a townhall meeting and take questions from all comers, all interests.
Some people consider Helms too tight with his regulations; others consider him too loose. The challenge is to find the sweet spot. “There are people in industry who will test the margins,” he says. “That’s why you have to have regulations. Then, at the other extreme, there are radicals who would write rules that make it impossible to operate or make money in the state.”
Many North Dakotans were taken aback when the Obama Justice Department brought suit against Continental Resources and other oil companies last year. The charge: A handful of birds between 25 and 30 had died in “reserve pits.” The companies were prosecuted under the Migratory Bird Treaty Act. A district-court judge threw the suit out with little ado. In the bargain, he listed some of the ways in which birds die: including flying into wind turbines. That kills an estimated 33,000 a year. Why pick on oil? Why should wind be sacred and oil the bad guy?
Kathy Neset, a veteran oil consultant in Tioga, doesn’t look like a bad guy. She is all femininity, and sweet reason. A native of New Jersey, she graduated from Brown University with a degree in geology. I say, “Do people ever say, ‘What’s a nice girl like you doing in a business like this?’” “Back East they do,” she says. She decided to come out here in the late 1970s, shortly after graduating. A friend said to her, “You mean, people actually live in North Dakota?” Like Lynn Helms, she did practically every job in the oil business, including roughnecking. It was a different business back then, she says: dirtier, more dangerous. There were accidents. There was no drug testing. Guys would have six-packs in the truck. Today, she says, “it’s a kinder, gentler oil business.”
Channeling Barbara Walters, I ask Neset what the biggest misconception about the business is. She answers, “People don’t know how technical it is. How much knowledge it takes, the huge amount of money behind it, the scientists working on it.” In a recent article about Pennsylvania, my colleague Kevin D. Williamson noted “a strong whiff of chess club and Science Olympiad” in the oil patch. True. You encounter a mixture of Poindexters and hard hats. I ask Neset, “What do you say to people outsiders like me who think oil is no good? Who have swallowed the line since childhood?” She says, “Well, I can start by asking them how they got here. Whether it was by car, train, foot, or whatever, petroleum products had something to do with it.”
Petroleum is an ingredient in sneakers, by the way. And in lipstick. And how about this? in wind turbines.
KATHY NESET has been through boom before, and boom is often followed by bust: During the boom periods, you have to guard against it, to the extent possible. There are negative stories to be written in North Dakota. A headline in the New York Times said, “Even Boom States Get the Blues.” Another said, “A State with Plenty of Jobs but Few Places to Live.” A headline in the Los Angeles Times said, “Despite jobs, not all is rosy in North Dakota.” (Please point me to where all is rosy!) An article in the Chronicle of Higher Education worried about whether North Dakota’s new wealth would find its way to colleges: “Dreams of lavish support are limited only by a persistent midwestern frugality.” Yes, that midwestern frugality will screw you every time.
There are un-silver linings, sure. But the possibilities embodied by North Dakota are exciting. Many Americans dream of energy independence, a dream really within grasp. A headline in The New Yorker read, “Kuwait on the Prairie: Can North Dakota solve the energy problem?” A headline in Maclean’s said, “Bye-Bye, Sheiks.” While others talk about “energy independence,” Kevin Cramer prefers to talk about “energy security.” Like many another free-marketeer, he’s happy to import cheap oil from abroad. But it never hurts to have some in your own back pocket, just in case. Even in the rockin’ Bakken, oilmen are getting just a fraction of what’s there: between 6 and 8 percent. With future technology, who knows what will be possible?
But there are those who would keep the Bakken from rockin’, who would kill the goose laying the golden eggs. I ask several people what the biggest threat to them is, and they say, to a man or woman, “The EPA.” (Some say price collapse, too.) If the Environmental Protection Agency decides to ban or stifle fracking, “we’re out of business,” as Cramer says. The Obama administration is clearly no fan of oil. Dalrymple said, “The federal government is killing energy development with overly burdensome regulations. The best example of this is the Keystone XL pipeline which the Obama administration will not allow to be built. . . . We cannot effectively market our crude oil domestically without a large North–South pipeline.”
There are people who consider abundant American oil a mortal threat to their agenda: their agenda for “renewables.” As John Kemp of Reuters wrote last year, many lobbyists “fear rising oil production would relieve upward pressure on prices and remove the threat of energy insecurity.” He spoke of a “Manichean struggle,” in which “leaders in Washington and state capitals across the United States are being pressed to decide between embracing the job and income gains that come with drilling” and curbing those gains, to “focus on clean technology investments and employment.” President Obama has told Continental’s Harold Hamm, personally, that he sees essentially no future for oil and gas. Hamm has signed on as an energy adviser to Republican Mitt Romney. The Obama campaign ran a TV ad saying that Romney stands with “Big Oil.”
Okay, but is that bad, necessarily? Hamm’s a bigshot, sure one of the richest men in America. But he didn’t start out that way. He was the son of a sharecropper, the last of 13 children. He knows what oil can do for people, in all sorts of ways.
“This is an upbeat story,” says Kathy Neset. It is. North Dakota, certainly in the west, is throbbing with life. On the Fort Berthold Indian reservation, there was 40 percent unemployment and “no hope,” as Lynn Helms says. Now there is virtually no unemployment and plenty of hope. People in North Dakota are feeling new pride. Someone tells me, “We were kind of the forgotten state on the prairie. Mount Rushmore’s not in North Dakota, it’s in South Dakota. But now we’re showing the way in domestic oil. We’re helping the whole country.” Someone else says, “People always made fun of us. Now it’s kind of cool to be from North Dakota, where all the action is.”
Forgetting what the boom has done for North Dakota, think once more about what it has done for others: all those Americans who are newly employed. Some of them were out of work for years. Unemployment can have nasty side effects, including depression, alcoholism, and divorce. It’s easy for the already employed to sniff at an oil boom. Men who have come to the Bakken are saying that, at long last, with work, they can look their children in the eye. That is really good news.