Bridging the Opportunity Divide

What If Your Hometown Became Rich Overnight?

December 4, 2013
by
Menu
What If Your Hometown Became Rich Overnight?
An oil drilling rig is seen in an aerial view in the early morning hours near Watford City, North Dakota. Andrew Burton/Getty Images
A trailer park occupied by oil workers is seen from the air near Watford City, North Dakota. Andrew Burton/Getty Images
A construction worker puts on a special helmet before sandblasting a section of pipeline. Andrew Burton/Getty Images
Ramone Garcia sits outside of the trailer he shares with his three brothers, all working in the oil industry in North Dakota. Andrew Burton/Getty Images
Leslie Lindeman, a motor hand, barbecues on site. Andrew Burton/Getty Images
North Dakota has seen an influx of oil workers from around the globe, many of whom live in trailer parks. Andrew Burton/Getty Images
Russell Girsh, a floor hand for Raven Drilling, helps line up a pipe. Andrew Burton/Getty Images
A woman cooks tortillas in a makeshift restaurant catering to oil workers. Andrew Burton/Getty Images
A boy plays in a trailer park occupied by workers drawn to Watford City by the North Dakota oil boom. Andrew Burton/Getty Images
Phillip Chambers takes a break while drilling for oil in the Bakken shale formation outside of Watford City, North Dakota. Andrew Burton/Getty Images
When a small town in a remote part of North Dakota was hit by an oil boom, it ballooned to five times its size. One local rancher is trying to manage the surge.

Gene Veeder, 57, is a simple man with curly gray hair, and tanned, soft wrinkles around his eyes. It’s not uncommon to find him riding horses on his 3,000-acre ranch that his grandparents homesteaded in 1918, tending to his cattle or playing in his country band, Lonesome Willy. Veeder grew up in quaint Watford City, N.D., a town with a population of 1,200 where the most excitement revolved around who was attending the annual rodeo dance, and every year he’d watch more long-term residents pack up and leave, searching for opportunity elsewhere.

Today, life has become more complicated for Veeder. As the executive director of the McKenzie County Job Development Authority and Tourism Board—a post he’s held for nearly two decades—he’s in charge of economic development for his hometown, a place that’s in the midst of a massive oil boom. In the past three years, thousands of workers from all over the United States have poured into town looking for jobs in the oil field. Watford City has seen the population multiply by 500 percent since 2010, ballooning to a town of more than 8,700, and the growth isn’t expected to slow down anytime soon (it’s projected to reach 16,800 by 2020). The kindergarten class of the local school went from around 18 to 113, and some 20,000 cars now drive through the town’s two-lane main street every day.

Watford City lies in McKenzie County, the latest epicenter of North Dakota’s booming oil region. Around 2007, oil companies discovered they could use hydraulic fracturing to tap into 170 billion barrels of oil underground. Since 2010, the county has become the oil industry’s darling: Wells drilled have a 90 to 99 percent success rate of producing oil, with each one gushing out more oil at a faster pace than nearby areas. The county is now producing nearly 7 million barrels of oil every month, and the number of drilling jobs went from a mere 600 in 2007 to 7,443 in 2012, a twelve-fold increase.

[ph]

Veeder has the responsibility of figuring out how to deal with the changes. How do you plan for a town to grow five times its size practically overnight? Every service in Watford City has to be rebuilt or remodeled to handle the influx—schools, police, roads, grocery stores, playgrounds, day care centers, gas stations, sewer systems, you name it. Plus, somebody needs to find housing for all the newcomers. “It was the perfect storm. There was an economic decline nationwide, and everybody came here looking for work,” says Veeder. “But what happens when you put 20,000 trucks on the road? What happens when you bring in 30,000 young men who work all day for a lot of money? What happens when you don’t have housing for them?”

On the drive into Watford City from the west, the first thing motorists see are dozens of rows of cookie-cutter mobile homes, each not more than 120 square feet, and a brand-new hotel. It’s almost like a Levittown suburb that was built in a day. Construction sites and trucks are everywhere. It’s not uncommon to have 15 miles of bumper-to-bumper traffic coming into town, according to Veeder.

 


 

Five years ago, when he first got word of a possible oil boom coming their way, Veeder didn’t think much of it. Western North Dakota had seen booms before, and after a few years of growth, the workers and companies tended to disappear just as quickly as they’d arrived. But when he started seeing the frenzied activity across the Montana border and 60 miles to the north, it was nothing like the booms of the past. The landscape was being completely transformed. This one was going to be different. “Even in our wildest projections, we didn’t imagine it would be this prolific,” says Veeder.

The first thing he did was to gather the community and his staff to figure out a plan. They worked with the state to do a long-term population growth study, and hired an engineering firm to put together an infrastructure blueprint, which included redoing the water and sewer systems.

But when the workers started arriving, they had no place to live. Companies began trucking in trailers, mobile homes and skid shacks to house workers, and people drove into town with RVs or tents. Rents skyrocketed, with a modest two-bedroom apartment going from $500 to $2,500 a month. The county wasn’t zoned at first, so initially Watford City had little control or oversight to the development. “People were just able to buy land and randomly put up stuff,” says Veeder. It looked like the “oil field had puked all over it.”

The town also needed money—lots of it. Veeder and his team calculated that Watford City had $190 million in basic infrastructure needs. On top of that, they needed to build a new hospital, which would cost an estimated $55 million and a new elementary school, another $45 million. They went to the state with their proposal, but only received about $20 million. Oil companies in the area are taxed heavily by the state at 11.5 percent, but in addition to North Dakota socking $1.3 billion away in a rainy-day fund, nearly every small town in the region was asking for a piece of the action.

Veeder thinks more money should be coming back to McKenzie County. Doug Bolken, a city councilman on Watford City’s planning and zoning committee and director of tourism, estimates their small county has contributed $1 billion in oil field tax revenue to the state. “The impact is happening here, and personally, I think more should be coming back to us,” Bolken says. “It shouldn’t be saved for a rainy day. It’s raining, it’s pouring right now, right here. This is when we need it.”

Typically, towns can turn to property taxes to fund development projects, but with so much temporary housing, few dwellings in Watford City are even paying taxes. In addition, most available state and federal grants are determined by Census Bureau population numbers, but the latest 2010 census shows the entire county having just 6,360 people, half of its actual population today.

One mistake Veeder didn’t want to make: leaving the long-time citizens of Watford City stuck with the bill if the boom suddenly went bust. “We did that before, but when the [oil] industry left the last time, the existing residents ended up paying through their tax structure for it,” says Veeder. “We did not want to tax the current citizens for this growth.”

With so many interested developers knocking on their door, Veeder and his team came up with an idea: Why not have the developers themselves pay for the town infrastructure they needed? So far, the plan has worked. Twenty new housing developments are currently being built that will serve more than 7,000 people—and each developer pays a one-time fee that will go to fire, police, education and parks services. Watford City recently completed a new day care center, a shopping center with a 40,000-foot supermarket, subsidized housing for public employees who can’t afford the inflated rents, and is in the process of building a bypass for the truck traffic. “People are starting to see the community come together,” says Veeder.

Adam Berger, a developer from Denver, chose Watford City for his 515-unit development over other cities in the region. “[City leaders] are being smart about how they’re managing the growth, in terms of building out infrastructure,” says Berger. “I think they’re doing a better job of maintaining the fabric of their community and making it a place where families want to live.” His company has made plans for two additional developments nearby.

As much as his life has changed since the oil boom, Veeder says he wouldn’t go back to his old life. “We meet people from all over the U.S. who are trying to make it here. My grandparents from Norway came here for the same reasons. The American way is if there are natural resources here, they will be developed. It’s not going to change.”

 

 

 

Comments