ENERGY -- August 7, 2012 at 3:50 PM EDT
Energy Boom in West Creating Jobs and Growth, but Changing Way of Life
An electric crude oil pumping unit stands on a hill overlooking Williston, North Dakota. Photo by Daniel Acker/Bloomberg via Getty Images.
At a time when it's difficult to find enough industries that are creating new jobs with good wages, the boom in energy development in the U.S. is an unexpected surprise that's fueling growth in some parts of the American West and potentially transforming some of the communities in question.
This week, Ray Suarez and producer Merrill Schwerin look at the consequences and choices surrounding the new energy boom, a gold rush of sorts that's focused on oil and natural gas development rather than alternative energy sources.
It's an important moment: Major finds and the use of advanced technologies to tap into reserves that were once unattainable could help reduce US dependence on foreign sources of oil in a way few had predicted just a few years ago and could lead to lower prices. But as Ray documents tonight in his piece about the oil boom in Williston, North Dakota - where unemployment is well below the national average and where people come from other states to find a job -- the energy boom comes with some serious trade-offs.
John McChesney, a former veteran reporter for NPR who now directs the Rural West Initiative at the Bill Lane Center for the American West at Stanford University, has also been chronicling these developments as part of a major online documentary called, "An Unquiet Landscape: The American West's New Energy Frontier.'
It's a unique presentation. McChesney and his colleagues capture what these changes in the huge Bakken oil shale formation can mean for smaller communities like Williston and how the community of Pinesdale, Wyoming is already adjusting to the development of natural gas fields in the western part of the state. As you watch the documentary, it triggers an annotated video player that allows you to dive more deeply into topics being showcased during the documentary.
We caught up with McChesney about his work and some of the more important questions posed by this energy boom.
There's been growing attention to the Bakken Oil Boom and the big growth of a place like Williston or Pinesdale. What do you think people don't understand about what's happening there?
John McChesney: The headlines -- most of them, not all of them - tend to tell you, Gee, there's a place where there are amazing unemployment rates that are showing up at 3.3% or even less in North Dakota. The headlines tell you that jobs are overflowing, people are coming from all over the country to get a job. But there's a lifestyle and a landscape that are being turned up upside down in the process. Many people feel that irreparable damage is being done not only to their landscape but to their way of life. The Upper Green River Basin - which stretches from Yellowstone down to the Utah border and is mostly embraced by Sublette County -- is having its air quality turned upside down. These are towns that are being flooded with trucks and so on. This is something that is having an environmental impact and a socioeconomic impact that's often ignored, particularly when you have a nation in recession and you have these places with economic benefits.
There are environmental concerns: There are serious wintertime air pollution problems, overdoses of ozone. North Dakota hasn't figured out its environmental impact yet.
The socioeconomic impacts stretch into housing and schools. What do you do with all of these people, people who are there to get a job, earn as much money as they can and get out? If the landscape and social life is disrupted, it's not their problem.
The small governments of these small townships and counties in North Dakota are overrun. They're used to having a two-hour meeting once a week. Suddenly, they are having to make vast amount of decisions about sewer systems and the like. I've had councilmen tell me, `We don't get a salary big enough to pay our cellphone bill. Now we're being asked to spend hours a day working on these problems without additional salary.'
You report on other consequences as well?
McChesney: The revenue impact to these areas, including North Dakota and the Upper Green River Basin, doesn't start to flow for two to three years until after the impact happens. I mean the roads are ripped up. These roads are lifelines, these are how these farmers get their crops to markets. The roads are devastated by constant movement of trucks.
To give you an idea of what I'm talking about, it takes 2,000 18-wheeler truck trips to sometimes get to an area for fracking and those trips are on county roads that are gravel. The dust problems for farmers are overwhelming. You look down the road and you see towers of dust.
At the same time, riches are pouring in for some people. It's a double-edged sword. It's not all good news. We're taking a landscape that's quite lovely. And people are seeing that torn up. The bottom line is, Why can't these areas that know they will be hit by these booms plan it better? Why can't the pace of these developments be slowed to a point that's tolerable to these local areas? Why can't the flow of money be sped up so that the impacts are mitigated as you go along?
If Hewlett Packard came to town, you know, they'd have one factory, they would ask and detail out their plans for the town. In a 25,000 square mile oil development, there's no way to centralize it and get an advanced grip on what's coming you way and what's this going to look like.
The interesting thing to me is this is a pattern that repeats itself throughout history. It happened with gold, minerals, uranium. Nobody seems to learn very much from one region to the next. The money that's flowing sets neighbor against neighbor, creates divisions among communities.
It also seems to change a population drain in North Dakota. Young people were leaving, now they're moving there. What will they say if oil drops below $70 a barrel?
You say there can be other tangible benefits for these towns too?
McChesney: Yes. A lot of local people in Sublette County in Wyoming, for example, are in ranching, which is one of the important mainstays of life. But ranching is tough. Young people don't have a way to make a living during the winter. But because of the energy development out there, they can make $25, $30 to $40 an hour driving trucks. You can argue it helps hold them there too, encourages them to stay in Wyoming.
There are other rewards for these towns. Pinedale, for example, has an aquatic park that would be the envy of any small town in the U.S. They have a library that is beautiful. The schools are overflowing in terms of cash. The roads are repaired. A county budget where $50,000 was a big deal 10 years ago is not. Now they have a $30 million budget per year.
There are interesting business considerations as well in Williston. In some cases, bankers are not certain about what to do with some of the money flowing to them.
McChesney: Right. Imagine that these bankers for years have been agricultural banks; they loan to farmers. For years, they have gambled on what the crop will be like at the end of the year, or they have been lending for agricultural equipment and so on. Now they have two things they're facing.
One, they have money pouring into the bank. But they don't make money pouring in. They make money on lending. How do you make a commercial loan to a trucking company or to a pipeline storage point? How do you know how long they'll be a sustainable business? If the business has a five-year contract to help supply materials and equipment, that's one thing. But if they don't, will this company go under in two or three years? The banks are importing in people who know this stuff.
Then in Pinedale, there's a bank that practically went under in over investing during the boom times there initially. They over-loaned thinking it would go on forever. In North Dakota, you hear people saying they think this will go on for 20 or 30 years. If oil prices go much below $60 or $70 bucks a barrel, horizontal fracking and drilling won't be that sustainable and will come to a halt.
There are other questions too that could affect this. The global oil market is extremely volatile. If China's economy goes south, fracking could become uneconomical and the drill rigs will pull out of there.
We see in Ray's piece and in your work, the proliferation of these so-called man camps, these large dormitories for male workers who find that other housing comes at a premium. Now there are bans being proposed in some places. Why?
Williams County, which is where Williston is, had a temporary moratorium on them. They developed a lot of sewage, huge amounts of sewage and waste. They need electricity. The drawback is they put tremendous strains on infrastructure. What the counties would like is for families to move there and become part of the fabric there, not just young men. In Wyoming, you don't even have an income tax. So people who come in from Texas, Oklahoma don't even put income taxes into the state.
You also say some bigger oil companies who have not been in these communities are looking for a way in?
McChesney: It's an interesting food chain. If you look at the list of companies drilling - and there are 80 or 90 of them -- if most Americans looked at the list of oil companies working in North Dakota, you wouldn't recognize them, companies like Brigham, Statoil. You don't see Shell, BP. But they are coming back. Continental Oil is coming back. Once they prove they have been successful, you'll see a move.
Smaller companies have been willing to take a risk. Bigger companies are scrambling now to get into one of the biggest oil booms in American history. If you go to the Jonah Field in Pinedale, you'll find Shell and Encana in that gas field. But that's a very small area compared to the Bakken. And a corollary to that is the tiny companies are not nearly as careful with their drilling practices.
For more on the North Dakota Boom - check out also Todd Melby's coverage for Prairie Public.