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High rents, revenues as oil boom ripples through North Dakota

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New oil well
One of thousands of new oil wells pumping in western North Dakota, this one in Mountrail County on Sept. 2, 2010.
MPR Photo/Dan Gunderson

Oil companies are drilling hundreds of new oil wells in western North Dakota. The state is setting new oil production records every month, and it now ranks fourth among oil-producing states. 

Oil brings millions of dollars in new revenue to the state treasury, but the boom is losing some of it's luster in oil country. 

North Dakota's oil patch is a frenzy of activity, and Mountrail County is the epicenter. Oil wells in this northwestern North Dakota county pump more than 3 million barrels a month. By some estimates, a million dollars in tax revenue comes in  every day. 

Oil companies pay an 11.5 percent tax, the state owns mineral rights on some land and sales and income taxes are up significantly.

OIL DRIVES UP BUSINESS, RENT PRICES

Stanley, N.D. is the seat of Mountrail County seat is . Its population was 1,300 until oil rigs arrived about four years ago.  Now a constant stream of big trucks rumbles through. 

Mayor Mike Hynek says the population has about tripled in the past four years. 

Mayor Mike Hynek
Stanley, N.D. Mayor Mike Hynek says oil is creating new millionaires in the area every month, but the city can't afford to expand it's overloaded sewage treatment plant.
MPR Photo/Dan Gunderson

"It's certainly changed from a very sleepy town that was holding its own to a town that's bursting at the seams," he said, "and we don't know which direction to go." 

  Hynek  says it's better to be bursting at the seams than shrinking into oblivion like many rural prairie towns. Still, he said, the job now requires more than he bargained for. He's a farmer who's trying to finish the harvest, but he also spends a lot more time on city business and listening to local residents' concerns.   

"Generally people are pretty excited with the positive changes taking place," Hynek said. "But I also have seen a lot of frustration coming out in the last six months."

The frustration might be about constant traffic, the bumpy roads or the cost of housing. 

The mayor says a few long-time local residents left town because they couldn't afford to stay when rent tripled. Oil workers make enough to push rent costs higher. 

Teachers, police officers and waitresses are feeling the pinch.  Stanley's  housing shortage means hundreds of oil workers are sleeping in campers or cars.  

Several oil companies declined interview requests for this story and some oilfield workers say they've been told not to talk to reporters.   

Roman Smith
Roman Smith grew up in northern Minnesota, but moved to Stanley, N.D. two years ago. He now runs his own truck repair business. He says he can't keep up with demand. He and his family are sleeping on the floor at his parents home because housing is in such demand. 9/2/10 Stanley, ND
MPR Photo/Dan Gunderson

Roman Smith moved to Stanley two years ago from northern Minnesota. He now runs his own shop repairing the big trucks oil companies rely on. 

"Yesterday was a 16-hour day and I'm sure today will be the same. About 80-90 hours a week," he said.

Smith said it was easier finding shop space than a place to sleep. He has a wife and 16-month-old son. He said he is lucky his parents have an apartment in town. 

"We're just sleeping on the floor at my parents apartment right now.  They built a new apartment building right over here and they're asking $1,350 plus utilities for a two-bedroom," he said. "Yeah, it's crazy." 

But Smith insists he's happy to be here, as long as the oil boom and the good money last. 

SMALL TOWNS BALANCE FUTURE VS. BUDGETS

Back at Stanley city hall there's a map showing future housing developments, But they won't happen until the city expands it's sewage treatment system. The city can't afford the $1.2 million price tag. 

Mayor Mike Hynek worries about taking on 20 years of debt to pay for infrastructure like sewers. He said if the oil boom doesn't last, city taxpayers will be left holding the bag. Under state law, most oil taxes go to the state. Hynek thinks the state should help pay the costs associated with the oil development.   

"To keep the industry thriving and going as it should, I think to feed the goose you might say that's laying the golden egg, I think it needs to be fed a little bit more than it is," he said.

The housing crunch in Stanley  is also affecting the  school district.

New apartments
A new apartment building just opened across from the high school in Stanley, N.D., but teachers can't afford the rent. The oil boom has pushed housing prices beyond the reach of many local residents.
MPR Photo/Dan Gunderson

Enrollment at the local school is up 20 percent. Student numbers jumped from 400 to 470 so far this year, and  new students are arriving every day. 

Superintendent Kelly Koppinger said space is getting tight, but that's a problem he's is glad to have after years of declining enrollment.  

Koppinger said every new teacher he's tried to recruit asks about housing.  Most can't afford it.  There's a new apartment building across from the high school, but it's too expensive. 

"Right now for a two-bedroom, one-bath you're looking at $1,800-a-month rent," he said. "A teacher's take home pay is right around that $2,000 mark and for them to spend $1,800 a month on just rent, we couldn't recruit or retain some of the staff we did have, so we needed to get it to where housing was somewhat affordable." 

To remedy that, the school district is building several apartment units and will charge $500 a month for rent. 

HEAVY TRAFFIC TAKES TOLL ON ROADS

When you leave Stanley and head out into the hilly windswept country side the critical issue changes from housing to roads. 

Two men  bolt parts on a new road grader at the county shop on the edge of town. It's one of several new pieces of heavy equipment the county is using to maintain roads.   

But oil traffic is destroying county roads faster than they can be repaired. To keep up, the county road department has more than doubled it's workforce in the past two years.

Paved roads are being turned back to gravel because the county can't afford to fix them. Hundreds of heavy trucks hauling water and oil on gravel roads raise choking clouds of dust that damage crops and rangeland.  

The county's budget for dust control was $40,000 two years ago. This year, the county will spend $600,000 spreading chemicals on roads near farms to control dust.

New road leads to well
A road created to access a new oil well site in Mountrail County, N.D. Some local landowners say drilling rigs appear on their land without warning. Most landowners don't own the rights to minerals under their land.
MPR Photo/Dan Gunderson

Mountrail County Commissioner Greg Boschee is a farmer who lives with the dust and bad roads. He says he can't sleep with his windows open because of the dust and noise, and he worries his expensive farm equipment is being shaken to pieces on the rough roads. 

Four years ago the county budget was $7 million. Today, just the road budget is $19 million, while the entire county budget has grown to $44 million.

  Boschee says the state collected nearly $270 million in oil revenue from Mountrail County in the past year. The county got $14 million back for oil-related costs.  That doesn't even cover the increased cost of road maintenance.  

"It's not sustainable. Where we're at now just can't sustain itself," Boschee said, "yet the oil industry is bringing in more rigs, so apparently they're not leaving."

'NOT READY FOR THIS'

Greg Boschee says oil might mean a bright future for this county. But he says it's hard to look to the future when the county and some of its residents are struggling financially.  He says some people are getting rich from oil, but most are not. 

The county is not allowed to tax oil company property, so budget increases fall to local property taxes. Those taxpayers are the people he gets angry phone calls from. 

"When it's like, I'm not getting a check and you're destroying my road, those phone calls aren't very nice," Boschee said. "We're really going backwards and it's hard not to bitch when you're going backwards."

Counties and cities in oil country will be at the North Dakota state legislature in January eager to share part of the state's projected $800 million budget surplus. 

"Western North Dakota was not ready for this," Boschee said. "I don't know how you'd get ready."

State officials are studying transportation, housing and workforce needs.  They say they will propose a long term plan to the legislature to help the western North Dakota communities and counties overwhelmed by the oil boom.

Read part two of this series, which investigates the environmental and property costs that come with the oil boom.