Boomtown USA

By Eric Killelea

Photos by Jerry Burns

North Dakota has boomed before, but few predicted how the current resurgence of the oil industry would affect prairie communities recovering from prior busts. In Williston — the state's oil epicenter — the population more than doubled in just over a decade, climbing from 12,512 in 2000 to 29,595 in July 2013; it could reach 44,000 by 2017, according to North Dakota State University.

People here say it's easier to find work than housing. The unemployment rate is less than one percent, and the average annual wage stands at $77,636, according to city data. But that money has to stretch because Williston is also the most expensive city in the U.S. for renters, according to Apartment Guide, an online website for apartment hunters. The average cost for a one bedroom apartment: $2,394 a month.

So a building boom is under way. Between 2010 and 2014, the city nearly tripled its footprint through annexation to accommodate new developments.

There are other issues, too: busy roads, overwhelmed schools, and lack of funding for infrastructure expansion. These problems won't fade if another bust occurs.

"No one knew this was coming, but you have to play the game with the cards you're dealt," says Ward Koeser, former president of the commission board. Koeser, 64, was a math teacher before starting his own communications business in the 1980s. He was elected mayor in 1994 and retired this year. "My dream remains [that] we will become the best little city in America," Koeser says.

Howard Klug, a former city commissioner, dominated the June mayoral election with 75 percent of the vote. His victory over entrepreneur Marcus Jundt and former archaeologist Jim Purkey made it clear that residents want the style of governance now in city hall. Klug, a North Dakota native, won after a heated campaign against opponents who are relative newcomers. In winning the election, Klug vows to make Koeser's vision a reality.

Center stage

Williston, the largest city in Williams County, sits in the south-central part of North Dakota, atop the oil-rich structure known as the Bakken formation. The thin layer of dense rock covers 25,000 square miles in North Dakota, Montana, Saskatchewan, and Manitoba. It's been an exploration target several times since oil was discovered in 1951 near Tioga, also in Williams County.

The Bakken and Three Forks formations are embedded in the Williston Basin, a depression in the crust of the earth. Ninety percent of the current rigs drilling are within a 75-mile radius of Williston, using chiefly hydraulic fracturing, according to state data.

Although most state officials agree that the basin holds tremendous sources of oil, it's not clear how much is recoverable. In 2013, the U.S. Geological Survey released an updated oil and gas resource assessment for the Bakken Formation and the Three Forks Formation in North Dakota, South Dakota, and Montana. The U.S.G.S. said the formations contain an estimated 7.4 billion barrels of recoverable oil, double the previous estimate. The number of wells producing in the state's part of the Williston Basin reached an all-time high of 10,658 in April, says Lynn Helms, director of the North Dakota Department of Mineral Resources. The rig count was 188, with the expectation the number would increase during the summer months.

Gov. Jack Dalrymple officially announced that the state hit its milestone of producing one million bpd in April. The sweet crude price was $91.75 per barrel in June, and the state expects prices to stabilize as daily production increases to 1.5 million bpd by 2020, Helms says.

North Dakota's 2013–2015 budget is $14 billion, including $6.9 billion in state general fund spending. Oil carries a 6.5 percent extraction tax and a five percent production tax, which filter into the state general or trust funds. In 2010, the state created its Legacy Fund, which says that 30 percent of all extraction and production tax revenues collected should remain untouched until 2017, when they are transferred into the general budget.

As of January 2014, total deposits in the fund were $1.7 billion, according to the state treasurer. The fund is currently growing at the rate of $75 million per month.

The state collected $2.6 billion in total oil tax revenue between August 2013 and May 2014. Officials in Williston and Williams County have long argued that their constituents should receive a higher percentage of the oil and gas gross production tax collections. As a partial remedy, House Bill 1358, which reconstructed the oil and gas gross production tax revenue, was signed into law in May 2013. It provides more funds to "hub cities" such as Williston — those with a population of 12,500 or more. It also provides larger allocations to counties, schools, and emergency services.

The state allocated about 11.64 percent annually of its oil and gas tax collections to Williston and Williams County during the 2011–2013 period, according to the North Dakota Legislative Council. That went up to about 25.36 percent for 2013 through 2015, amounting to more than $30 million distributed annually.

"This isn't going away tomorrow," Helms says. "This is going to involve five generations of North Dakotans. My grandchildren's grandchildren will [be involved]."

Expectations are high, but officials in Williston and Williams County remember past busts. The area experienced smaller booms in the 1950s, then in the 1970s and 1980s. An abrupt slowdown in the early 1980s left communities with vacant apartments, unoccupied mobile home parks, empty businesses, and huge public debt from the infrastructure investments made to accommodate growth. The city was left with $28 million in debt that was paid off through taxes, but memories of missteps still linger, Koeser says.

Problems

Williston lies north of Theodore Roosevelt National Park at the upper end of Lake Sakakawea near the confluence of the Yellowstone and Missouri Rivers. The Little Muddy River, which Lewis and Clark called the White Earth River, borders the east side of the city. Today the landscape also includes semitrucks, nodding pump jacks, gas flares, and oil storage tanks traveling on Burlington Northern Santa Fe rail lines.

While much of the growth is visible in Williston, Williams County's 57 cities and townships have also been affected. Most of the land within the 2,077-square-mile county, including Williston's extraterritorial area, is zoned for agriculture; industry and industrial workers don't necessarily make an easy fit.

Heavy truck traffic related to hauling sand, water, oil, and machinery results in road damage and safety concerns. More than 450 drilling rigs are moved to new locations every month. The heavy rigs break gravel roads, and county crews struggle to keep up.

More than 10,000 workers are living in crew camps or "man camps" located outside city boundaries, many requiring water to be hauled in and sewage to be hauled out — to the few community treatment plants. Residential subdivisions are scattered in rural areas of the county, putting new homes far from emergency services and infrastructure. There is increased competition for housing, resulting in rising prices for land, houses, and rental units.

Hit the ground running

Both the city and county hired new planning directors to mitigate concerns. Kent Jarcik, director of planning and zoning in Williston, faced a heavy caseload when he started work in 2007. "Other cities had 50 to 60 years of uninterrupted planning," Jarcik says. "There hadn't been continuity here."

On arrival, he worked to establish multiple traffic studies, the 2010 Williston Comprehensive Plan, and the 2011 Annexation Study conducted by the SRF Consulting Group and the North Dakota Department of Transportation.

City officials have strived to accommodate a projected population of at least 50,000 within the decade. They chose to annex land north rather than proliferating random locations around the community. Industry was guided to the north and traffic to the west — the latter by means of a new, permanent truck bypass.

The Bakken Industrial Park broke ground along U.S. Highway 2 in 2011. Granite Peak Development, of Casper, Wyoming, helped initiate the 720-acre industrial park, which now houses numerous oil- and gas-related businesses, including Love's Travel Stop, a water depot, and space for overnight parking for more than 400 trucks, says Terry Metzler, the state operations manager for GPD, the largest developer in Williston. "It was a $7.5 million project expedited in nine months," Metzler says.

A temporary truck reliever route is operating while the permanent bypass is constructed. The $162 million, four-lane reliever route will run 13 miles west of the city when it is finished in 2015. The route directs traffic northwest of Williston, linking trucks to development near the industrial park, according to the NDDOT.

Expansion

More city staff members have been hired to help the planning and zoning department manage growth, their salaries paid for with income from permits, sales taxes, and oil revenue. Principal planner Donald Kress relocated from Los Angeles in 2012. Staff planner Rachel Ressler arrived one month later, and code compliance officer Nick Vasuthsawat joined the city last year. With an administrative assistant and another staff planner, the city planning department is fully staffed — for now.

Staff has worked to annex more than three times the city's existing land while accommodating a rush of temporary housing facilities. Williston measured 4,571 acres in 2010, according to city documents, and had expanded to 12,994 acres by 2014.

Planners have been seeking mixed use and mixed density developments, linking commercial uses with residential. City commissioners approved the annexation and development of GPD's Sand Creek Town Centre, a lifestyle shopping district, in 2011. But, in adhering to the comprehensive plan, commissioners then denied GPD's annexation proposal to develop 129 acres for the Whitetail Ridge project. The proposed site was outside the city's extraterritorial jurisdiction and the Tier 1 Growth Area. As a result, the board balked at providing municipal services and expressed a desire to develop already annexed, infill land.

Williston also put a moratorium on permits for man camps in September 2013. There were 17 approved crew housing facilities within city limits by this spring, Kress says, providing a total of 1,966 beds.

Target Logistics, a Boston operator of dormitory-style housing, announced a $30 million contract to provide lodging for oilfield workers in North Dakota in 2014, according to the company website. The man camps have private bedrooms and either private or shared bathrooms and a common dining hall.

Law enforcement officials say the man camps mainly house male workers, as the name suggests. There is a zero-tolerance policy on alcohol and drugs, and overnight guests are forbidden.

"Some of these facilities were approved under a city workforce housing ordinance; some had been approved under Williams County regulations and they came under the city's jurisdiction through annexation," Kress says. "The policy does not allow crew camps to expand; the city is no longer taking applications for new crew camps."

Another side of the housing coin: Officials are seeking ways to retain permanent housing. The city building department issued 339 commercial and residential permits valued at $42 million in 2007. It issued 1,665 residential building permits with a value of $353 million in 2013 — and planners reviewed 27 plats that resulted in 2,850 multifamily units and 477 single-family homes.

Saving resources

Ray Pacheco, the county planning director since May 2013, says the county issued 770 commercial and residential building permits with a value of $254 million last year. He says he is battling to preserve the county's rural character.

Initially, developers rushed the doors of county commissioners, wanting to build temporary RV and mobile home parks. "They thought little North Dakota could be overrun," Pacheco says.

His first step as director was to update an existing comprehensive plan that hadn't been enforced in previous years. The county hired two staff planners, one code enforcement officer, and two administrative assistants to help him. "My goal is to try and slow things down so we can manage [growth] better," Pacheco says.

Like Williston's, the county's comprehensive plan includes a tier approach meant to encourage incremental growth. The plan builds on the concept of growth efficiency: Areas closer to existing infrastructure and services are considered more efficient for development than areas farther away, Pacheco says. The goal is to encourage compact and contiguous development patterns that can be efficiently served by public services.

Man camps and RV and mobile home parks are being phased out. "We don't want to look like one big RV park," Pacheco says.

Inevitably, some temporary workers stay permanently. Mercy Medical Center — the largest hospital in the county — reported 750 births last year and expects more than 850 births this year, and during the June election, Williston's voters overwhelmingly passed a $34 million bond referendum for a new high school building. The referendum allows a new school to be built on 30 acres of land west of the airport. The project will cost $56.5 million.

In the rural district, enrollment has increased 63 percent since 2007. The district has 367 students in three elementary school buildings and is installing modular classrooms to meet space demands. The city district has 3,183 elementary and high school students — a 39 percent increase since 2008.

"It has a sense of permanence," Helms says. "There's an effort to recruit people that want to come and live in the community and make it whole."

Supporters and detractors

There is also interest in the state's need to transport oil by rail. BN Railway ships most of the oil out of the Williston Basin, and developers are searching for land along the main line to build spurs.

Williston and Williams County have been cautious in approving those rail spur proposals after a number of derailments, including one in Cassleton, North Dakota, last December. Officials also consider how a large rail project could affect residential neighbors.

"Our comprehensive plan never predicted gas plants and rail spurs," Pacheco says. "The character of the county is changing, and our regulations are being updated to meet those changes."

Developers wanting to build in the county express frustration with the planning department, but others are grateful for the regulations. Dan Kalil, chair of the Williams County Commission, is a supporter.

"There is so much pressure on the planning and zoning board to approve [projects] overnight," says Kalil, whose family farmed and ranched in the county for more than a century. His father was a city commissioner, and Kalil has been involved in politics since the 1980s.

On the other side is Patrick McGarry, director of business development at R&R Professional Services, Inc. McGarry came to Williston from Aspen, Colorado, in 2011 to build houses. He resides now in North Dakota but made his 100th flight south to see his family in May. He uses Sloulin Field International Airport in Williston, whose manager is trying to gain state and federal support to relocate the facility to a larger location.

McGarry has assisted on several projects in the city and county, including the North Star Center's 535-acre development, which has 2,024 residential units on annexed land now within Williston's city limits. He believes the city has planned well. He abides by the city and county comprehensive plans, but finds some regulations overly protective, especially its strict build-out limitations.

"The bust is when the oil rigs leave," McGarry says. "Oil is still coming out of the ground. . . . The county loses millions in investments." County commissioners have denied several of his projects, including a 162-acre rail spur project near Trenton.

In the trenches

As their population base grows, the city and county are evaluating drainage issues, funding mechanisms, water and sewer extensions, and fire and police services. Water and sewer infrastructure is of prime concern and often the key factor when officials get requests for land annexation and development.

The city prefers developers to incorporate gravity sewer setups to flow southbound into the lagoon system rather than installing lift stations, Jarcik says. Those lagoons will eventually be replaced by a new wastewater treatment system.

Water distribution is a limiting factor as well. Under an agreement that has been in effect since 1997, the city sells treated water from the Missouri River to the Williston Rural Water District. The city has also welcomed the creation of the Western Area Water Supply Project, a domestic water project that uses Missouri River water treated at the Williston Regional Water Treatment Plant.

It is expected that WAWSP will provide drinking water throughout the Bakken region to an estimated 100,000 people by 2035, according to its website.

In Williston, the Tier 1 Urban Growth Area pinpoints where the city can focus immediate growth. Tier 1 is set to "comfortably" accommodate 60,000 to 75,000 people, Kress says. While most of the tier land has been annexed, officials plan to reevaluate the city's land-use study in 2015.

Development has financial implications as well. Over the past five years, the city increased its budget from $25 million to $196.2 million — with most of the revenue coming from sales taxes and oil revenue — but the city remains $142 million in debt after selling bonds for various infrastructure projects, according to city data.

The repayment plans include more than $60 million guaranteed from state oil revenue, and $45 million from city sales tax revenue. About 93.75 percent of the incoming sales tax is committed to paying debt, according to city data.

Strapped for funding, the city must play the cards it's dealt. Both the city and county must wait until the 2015–2017 state legislative session and the 2020 census count to seek additional funding. The state does not allow its communities to impose impact fees on developers, Kress said, but under typical development agreements, developers pay for on-site road construction and maintenance.

Meanwhile, the Williston region is expected to keep growing.

Eric Killelea is a reporter for the Williston Herald, where he covers city, state, and federal energy and government issues.

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Images: Top — A cluster of oil field material barrels is a sharp contrast to the rolling prairie just beyond a drilling rig site near Watford City in McKenzie County, North Dakota. Though the county is producing more oil than Williams County, its infrastructure is lagging behind. Middle — Along with oil, revenue, and jobs, the latest oil boom has brought many challenges to rural North Dakota communities like Williston. Bottom — Roads are stressed, housing is expensive and scarce, and city infrustructure and public services lack the capacity to meet the needs of a rapidly growing population. Photos by Jerry Burnes.