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Oil industry comes with great costs

By Staff | Dec 27, 2013

North Dakota is on a euphoric high, with the oil industry pouring billions of dollars into the state treasury, mineral owners’ pockets and business ledgers. Western towns once written off as dead have sprung to life.

The state has gained world-wide importance, on course to churn out a million barrels a day, passing up all other oil-rich states except Texas.

While the Bakken boom has been heady for this blank spot on the map (as once described by native son Eric Sevareid), state policymakers need to keep their heads and not let gratitude trample their perspective of what is happening on the ground.

While the new money is fabulous so are the costs of dealing with the impact of the Bakken. Here is a quick summary of the cost to the state, local governments and private citizens.

At one point, Stanley School Superintendent Kent Hjelsmstad estimated that schools in Northwestern North Dakota needed $200 million to cope with the influx of new students with more on the way.

Forecasting a population increase to 7,500, Watford City officials are looking at an expected cost of $400 million to expand public services and facilities.

The last session of the Legislature appropriated $1.5 billion in general funds for new highway construction and expenses, three-fourths of which is going to oil-affected areas of the state.

Attorney General Wayne Stenehjem has stressed the significant increase in drug crime, meaning that more money is desperately needed for law enforcement. McKenzie County has been forced to hire a full-time states attorney to handle the new prosecutions brought by the oil boom.

Emergency medical crews are taxed beyond their limits. The agencies involved in medical services in the Oil Patch reported an increase of 60 percent over the past five years and they predicted that it would reach 150 percent in 2014-15.

Oil field waste is now over 500,000 tons annually, meaning that new costs are occurring for the State Health Department whose job it is to monitor oil and chemical spills.

Dave Glatt, head of the Department’s environmental section, noted that “the environment as we know it is not going to be the same.” That cost cannot be quantified in dollars.

But the costs related to the Bakken are not confined to the public sector. Private citizens especially those who were residents before big oil have been paying as well.

The most dramatic impact has been the cost of housing. The market has become so competitive that rents of $2,500 for two-bedroom apartments are not uncommon.

One senior confronted with this tripling of rent explained that “we are all on fixed incomes, living mostly on Social Security, so it’s been a terrible shock.” (God bless the memory of Franklin Roosevelt.)

An area policymaker underlined the problem by noting that “grandma can’t go to work in the oil fields and make 150 grand a year.”

Other folks suffering from the oil boom are the landowners who did not own the mineral rights under their fields and are now being trampled by the development with very little, if any, benefit.

Actually, there are so many untallied costs involved that it will be years before we can quantify the impact on the state, its local governments and private citizens. So while we revel in the new money and the population growth, we need to balance these benefits against the costs.

And right now the cost-benefit ratio is not as good as it looks on the surface.

Next week: The Oil Industry is Getting Off Cheap.

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