A North Dakota Oil Boom Goes Bust

A North Dakota Oil Boom Goes Bust

The Atlantic

In a field of brittle yellow grass and clotted mud about five miles north of Dickinson, North Dakota, stands a cemetery of sorts. Drilling rigs stretch into the sky like tall skeletons. The occasional lone truck rattles along a dirt road. Otherwise, the location is deserted.

Similar graveyards have been popping up across the western half of the state since the price of oil sharply declined last fall. These once-great moneymakers that drew thousands to the state are now idle, or “stacked,” in the lingo of the oil fields. As more and more companies have stopped drilling following the decline in the price of oil last year, the term has become all too familiar.

During the good times, jobs were plentiful and businesses prospered. High-school graduates earned six-figure salaries in the oil fields, and cash flowed into the hands of those lucky enough to own the mineral rights to land rich with oil. North Dakota’s sudden success coincided with an economic slump in the rest of the country; job seekers rushed to the state fleeing hard times. For seven straight years, North Dakota boasted the lowest unemployment rate in the country. Early this year, it slipped from that coveted spot.

Though many native North Dakotans remembered the oil bust in the late 1980s, this time it was easy to believe that the boom would last. “Your grandchildren’s grandchildren will be working in the Bakken,” Lynn Helms, director of the North Dakota Department of Mineral Resources, said in October. Just over a year ago, North Dakota was producing more than one million barrels of oil per day, more than any state but Texas. This time around, it seemed, things would be different.

But as soon as the price of oil dropped late last year, things began to unravel, and rigs started to close. Of the 192 drilling rigs active in April of 2014, just 94 were open one year later.

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Two pumpjacks pull oil from the ground in western North Dakota. (Mara Van Ells)

Charlie Cogdill, an agent for Halliburton, has been through four oil busts over the course of his career. He describes drilling as “the tip of the spear,” the first part of the industry to be affected by the slowdown. A downturn in oil prices produces a ripple effect that spreads from drilling to fracking, from the workers on the rigs to the small communities where those workers live.

What will happen to those who uprooted themselves and their families to move here? What will happen to the towns that suddenly flourished? What will happen to those who pinned their dreams on the North Dakota oil boom?

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Early this spring, 16 miles east of a town called Watford City, Dallas Lawrey watched from his trailer as one of his last drilling rigs was taken apart piece by piece.

The bust hit the drilling industry the hardest. As more and more drilling rigs stack, more and more men like Lawrey worry that they won’t be able to hang onto their jobs.

At high noon, the rig buzzed with activity. Men wearing steel-toed boots, clear safety goggles, and mud-splattered hard hats were everywhere, driving trucks and moving machinery. A team hosed down and cleaned the rig before it was stacked as an extra safety consultant watched to ensure protocol was followed while the rig was disassembled. Just beside a dirty, frayed American flag, another flag—a white one, bearing the name of the drilling company Nabors—flapped in the wind. The crew took down the flag of XTO Energy, a subsidiary of Exxon Mobile, after they learned the company was idling the rig.

Lawrey, a long-time resident of Dickinson, North Dakota, worked in the oil fields most of his adult life and is the main provider for his family. His wife, Sara, works as a secretary for the private Catholic elementary school his two youngest children attend, earning them discounted tuition but little else. The family moved into a spacious new home five years ago, which they have yet to finish paying off. Lawrey recently bought Sara a “spendy” new Suburban.

For the past five years, Lawrey worked for XTO Energy as a drilling consultant. “I think they’re going to keep me on,” Lawrey said in March. But that’s not how things shook out. Lawrey worked his last day for the company on April 21. He is now working full-time for a friend’s excavating company. “I’m kind of enjoying the break from the oil field, to be honest,” he says.

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Although drillers and their supervisors are the ones most affected by the slowdown, the livelihoods of those who sell equipment to the oil field have also diminished in recent months.

Jesse Kilwein, 27, is one of those workers. On behalf of Little Dog, LLC, he sells the tools that drillers use to break apart rock formations. In 2012, Little Dog serviced 68 rigs. By March, that was down to 25 rigs and Kilwein’s boss, Charlie Cogdill, expected that number to keep falling, and it did. Before the slowdown, Kilwein and two other full-time salesmen would each work with five or six different drilling companies every day. Little Dog has so few rigs left to service now that Kilwein and his co-worker Zach Schlabsz make their rounds together. The staff has shrunk significantly as of late—the other full-time salesman, two shop hands, and a secretary have left the company or been laid off.

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Jesse Kilwein and Zach Schlabsz, salesmen for Little Dog, LLC, unload a drill bit, the equipment that helps drillers break apart rock formations. (Mara Van Ells)

Cogdill gave the two employees he laid off a month’s severance and told them to find another job while they still could. “Having been through this before, I know how it goes,” he said. “What I told them was, ‘I can keep you on for two, three more months but, in the end, this is going to happen.’”

Both Kilwein and Schlabsz are anxious about the slowdown. With fewer rigs to service, salesmen who are paid commission make less money. And both men have young families to support. Kilwein’s wife, Kayla, gave birth to the couple’s second daughter earlier this month. The couple had been hoping to buy a house, but that now seems out of reach. “We are constantly looking,” Kilwein says. “With the market the way it is, it’s hard to find the right place for the right price right now.”

The slowdown has spread to the oil-production side as well. Although not seriously affected yet, production companies are taking steps to save money. Jesse Crone is the regional manager of Extreme Energy Services, one such company. Crone’s team has already taken one pay cut, and he’s laid off two people. “Every week you see more and more rigs coming out of the field,” he says. “I’ve been taking pay cuts myself.”

Crone has worked in the oil industry for 10 years and remembers when work slowed temporarily in 2008. “When times are good in the oil field, no one ever thinks about the slowdown. But the slowdown’s [always] just around the corner,” he says. “It’s either feast or famine,” his wife, Chelsey, adds.

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The promise of steady work lured the Air family—Clint, Jamaica, and their children—to Dakota territory.

They came from Apple Valley, a town of 70,000 people, considered small by the standards of Southern California. When the housing market crashed in 2006, Clint’s eight-year-old surveying business collapsed. “There was no work,” he says. “It was horrible.” Clint worked in Australia for a year but wasn’t able to obtain long-term visas for the whole family. When they returned to California, in 2008, the economy was still in a slump. Jamaica worked at a vacuum store owned by some of their friends. The couple started a side business slaughtering rabbits and shipping them to restaurants, which brought in an extra $600 a month. Still, they were barely making ends meet.

Then, the Airs’ luck changed. A headhunter recruited Clint to be a surveyor in North Dakota for a Texas-based company. He moved to Dickinson in June 2013 and Jamaica brought the kids out in August.

During the economic downturn back in Apple Valley, Clint says, a part-time, minimum-wage opening at a McDonald’s would bring in a long line of applicants. But during the boom in western North Dakota, fast-food chains, desperate for workers, paid above minimum wage and offered hiring bonuses to potential employees.

Prior to the slowdown, Clint managed five crews of two people each, most of whom were from Texas. Many of the crew members have since been laid off, although a few of them were able to return to projects in Texas. By March, Clint was working on his own, and the four trucks that belonged to his crews—each containing about $100,000 of surveying equipment—were parked outside his home. Since then, one crew has returned to North Dakota, but the others remain out of state.

The Airs had always thought North Dakota would be a temporary home, but not this temporary. They had originally planned to stay and save money until their son, Destin, now an eighth-grader, graduated from high school, and then they’d move to Oregon or Washington. But after experiencing the steep cost of living firsthand, the family had resolved to leave after the current school year if the rents didn’t drop. Since the rents did drop, the Airs will be staying in Dickinson for the time being.

The Airs are planning to stay put for now, but some families can’t manage that degree of stability. The district has lost 120 students over the course of the year, a 3.4 percent decrease, according to Vince Reep, the assistant superintendent of Dickinson’s public-school system. The loss is in sharp contrast to the steady influx of young students the schools saw for two years prior. “We grew by over 500, nearly 600 children in two years,” Reep says.

The departing children and families left empty homes behind. Dave Bauer, who manages 700 apartments, garages, and houses in Dickinson says that in September of last year, he had barely any vacancies. Then in October, he began receiving notices from residents saying they were leaving the state for reasons related to the oil slowdown. This spring, the vacancies piled up.

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Recently, the price of oil has crept slowly upward, but it has stagnated at around $60 per barrel. The improvement is enough to inspire a sliver of hope but isn’t enough for drilling to ramp up again in again earnest.

“It’s the first to fall and the last to come back up,” Cogdill, of Little Dog, says. “Unfortunately, we’ve fallen a little farther than I thought we would,” he says.

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New apartments in Dickinson, N.D., that were built to house the influx of people working in the oil field now advertise openings. (Mara Van Ells)

Some are hopeful that oil production will rebound, but Cogdill predicts that drilling won’t bounce back for at least two or three years, even if the cost of oil shoots upward. For one thing, it would take time for drilling to ramp back up after the rigs have been stacked and crews have been laid off. In any case, he believes production would need to fall significantly in the United States before the price of oil would increase and new drilling would start up again.

These are just Cogdill’s predictions. As to what will actually happen to the industry: “I don’t know. Nobody really knows,” he says.