Beginning in 2006, oil rigs began sprouting up across North Dakota. With development driven by horizontal drilling and hydraulic fracturing, oil and profit flowed freely. As the rest of the United States ambled through recession, thousands of high-paying jobs opened up in the state's oil fields. For years, North Dakota had the lowest unemployment rate in the country. Giddy reports prophesied decades of oil prosperity.
Since 2015, the outlook has changed. Falling oil prices mean falling revenues, and as profits continue to slide – despite ongoing rises in production – the recent unemployment spike in North Dakota oil country looks less like a blip, and more like the beginning of the end.
It began here. In 2006, a petroleum geologist named Michael Johnson discovered an oil field in Parshall, North Dakota, a town in the state's northwest corner. He had tapped into the Bakken shale formation, the source of an estimated 7.4 billion barrels of oil.
As drilling expanded, young workers flocked to small communities like Parshall to seek their fortunes, often living in hastily-constructed "man camps" – these towns had not been built for such a rapid influx of new residents. Williston, North Dakota, had a population of 14,700 according to the 2010 Census. By 2015, the town had grown to 26,977. Demand for housing soared; at one point, it was more expensive to rent an apartment in Williston than in New York or San Francisco.
Environmental degradation is another consequence of the boom. Natural gas comes to the surface as a result of oil drilling. Thanks to a lack of pipeline infrastructure to move the gas out of state for sale, producers burn off what they can't sell locally. Over the ten year span we investigated, companies sold about 72% of the 2.4 trillion cubic feet of natural gas extracted, leaving a staggering 692 billion cubic feet to store, or more often, burn. Based on EIA data, that amount would supply North Dakota homes with natural gas for more than six years.
Despite bounties, revenues slide
Unemployment in oil counties is at a ten-year high. While the national unemployment rate through the extent of the financial crisis averaged 6.7%, it included rates upward of 15% in hard-hit states like Michigan. On the other hand, North Dakota oil counties maintained an astounding average 2.93% unemployment rate, with one county, Slope, reporting an average 1.59% from December 2007 through June 2009. Now in 2016, the rate has jumped up over the 4% mark, on a trajectory that looks to meet a national average that has slowly sunk below 5%.
While the "man camps" may be filtering out, North Dakota is not out of oil. In 2015, McKenzie County (the focus of the map, at left) was pumping between 11 and 13.5 million barrels per month from the earth, and between 18 and 23 billion cubic feet of gas. Despite pumping out 20M more barrels in 2015, estimated revenue for 2015 was $4.5B less than in 2014.
The "boom and bust" narrative is not new, and the trend in McKenzie is no fluke. It is perhaps instead an indicator of what is to come: North Dakota will continue to pursue rapid extraction – but with diminishing returns.