South Dakota might have one Washington on Mount Rushmore, but North Dakota has pockets lined with Benjamins. The state is experiencing an unprecedented period of economic growth and prosperity due to its booming oil industry — big enough to produce more than 2,000 new millionaires in 2012 alone. When new oil extraction technology allowed miners to access reserves in the Bakken Formation, a rock unit in the northwest corner of the state, North Dakota experienced a surge in oil and natural gas production that has doubled its real GDP in the last 10 years. The result will be an estimated $457 million general fund surplus by June 30, 2015. The state has started a campaign to fill the estimated 20,000 new jobs created by the burgeoning fossil fuel market and is opening its doors to the outside, welcoming in anyone who wants to contribute to its expanding economy. While the nation’s economy struggles to grow, North Dakota is enjoying unrivaled monetary success. Even its southern sibling can’t compete.
However, the rapid changes have brought unintended — and still unaddressed — consequences. North Dakota’s housing situation is in tatters. Crime is on the rise. Pollution is endangering residents and wildlife. The education system is inadequate. And with oil production forecasted to peak in 2015 and dramatically taper off in the decade afterwards, North Dakota must begin to plan for what the post-boom state should look like. Unless the North Dakotan government takes a hard look at the state’s financial future and implements much-needed reforms, the state risks missing an opportunity to turn a lottery ticket into sustainable growth.
North Dakota is more vulnerable than it seems. For a state ranked 47th in the nation for population density, its $800,000 campaign to recruit job seekers may, in theory, be a good idea. But in its efforts to entice talent, the North Dakotan government is not telling the whole truth about the lives future residents can expect to lead. The state is not spending enough money on housing to accommodate relocated workers or on services to assist them. People entering the state find themselves paying exorbitant rates for housing and sometimes living in RVs and tents that lack running water. Rent bills for property near oil fields have outstripped even downtown San Francisco’s. This may seem like a bad bargain for the unemployed, but it’s equally problematic for North Dakota’s current residents. People moving into the state are pushing poorer residents who live near oil projects off of their valuable land, and the native, working-class citizens of the state are in danger of losing their livelihoods because of overcrowding and other pressures.
Quality-of-life concerns go hand in hand with the deteriorating quality of education. Here the statistics may be misleading: North Dakota ranks second in the nation for SAT scores, but only 2 percent of high school students actually take the test. Meanwhile, the 98 percent of students taking the ACT post an average score below the national average. With a large influx of workers, schools will be facing rising enrollment — without the funding, additional teachers or supplies necessary to adjust. This mirrors the housing crisis: Current students are seeing their conditions worsen, while new students aren’t guaranteed the quality of education they expect.
Declining standards of living and tenuous demographic balances are correlated with another new phenomenon: the rise of crime. According to State Attorney General Wayne Stenehjem, drug trafficking by Mexican cartels is soaring in the Bakken region. Pounds of methamphetamine are circulating among workers. Other hard drugs such as cocaine and heroin are used abundantly around the oil fields. This increase in drug use may be understood as a response to the dismal working conditions in oil fields. Many workers maintain 12-hour shifts in 20 days on, 10 days off cycles: an 84-hour work week for nearly three weeks in a row. And along with their products, drug cartels bring violence. If a permanent drug route is established in North Dakota, social ills could plague the citizens of the state for a very long time. Combating this problem will require coordination and extensive deployment of law enforcement officials — a costly but necessary expense the state has not yet shelled out for.
And drug trafficking isn’t even the most pernicious form of smuggling in North Dakota. Ever since the oil boom, human trafficking — particularly sex trafficking fueled by the largely male oil-field workforce — has run rampant. The state government has, so far, been slow to react: Polaris, an organization focused on eliminating human trafficking, ranked North Dakota as a tier three state with regard to human trafficking laws, meaning that it effectively has the worst trafficking laws in the United States. In a state with such a rapid influx of sex workers, this sparse legal framework will have profound human consequences. Unfortunately, the federal government hasn’t lent much of a hand. In May of this year, a single FBI agent was assigned the job of managing all of the state’s human trafficking cases. If North Dakota does not invest some of its surplus money in providing safe living environments for its citizens and combating this dangerous issue, then its torrential influx of wealth will lay the foundation for years of human rights violations.
Perched atop the human tragedy is the environmental destruction that North Dakota’s oil extraction has wrought. In a rush for black gold, the state has thrown green concerns to the side. Shale fracking, the method of fossil fuel extraction primarily used in the Bakken rock formation, is a relatively new process, and environmentalists have been quick to point out its dangers. Fracking, short for hydraulic fracturing, is the process by which a special liquid consisting of water, sand and various chemicals is shot at high pressures into the ground to stimulate the release of oil and natural gas. Once the fracking liquid comes into contact with local water supplies, its carcinogenic chemicals can pose serious health risks to residents — an especially problematic concern when many live without access to well-filtered water. Moreover, agricultural products are among North Dakota’s main exports; if the crops produced by the state’s farmers are compromised by contaminated water, the state will face significant economic consequences.
The oil boom isn’t just threatening North Dakota’s agricultural yields through contaminated water. Waste liquid is commonly left out in the open after drilling and can evaporate and adulterate the air. In addition, North Dakotan frackers burn 30 percent of their natural gas output, releasing dangerous pollutants in the process. By comparison, Texas’ regulations require energy producers to capture 99 percent of their natural gas. The inadequate precautions taken by a state in an economic frenzy could lead to acid rain, which would be harmful to North Dakotans and their crops. But to reach Texas’ level of efficiency would take upwards of six years — time the state does not have and that residents and businesses are unwilling to waste.
Acid rain and contaminated water, drug and human trafficking, unacceptable housing, education and sanitation issues: These may be the seeds of a North Dakotan decline, but they are just beginning to hinder the state’s current success. Right now, the state has the highest well-being in the United States, the second-best emotional health, a 2.6 percent unemployment rate and the fourth-best life evaluation. But these numbers have been skewed by the income surge from the boom, and statistics will soon reflect the decreasing quality of life for the swelling ranks of the working class. The question now is whether the state government can put its surplus to good use and maintain high quality-of-life benchmarks through efforts like education, housing assistance, sanitation and crime prevention.
The hope for North Dakota rests in its $457 million — and growing — budget surplus, and it’s up to state legislators to invest in solutions to the state’s problems. While the coffers are expanding, the state is saving for a rainy day — one that’s already looming on the horizon, if forecasts of an oil peak are to be trusted. An additional benefit of this strategy is that it gives policymakers time, which they can use to study the effects of the oil industry and the wave of migrant workers. Frugality has so far been a virtue for the state, but a time for spending will come; when crowding reaches critical levels, it will be necessary to implement strategies to improve state services.
While investments to counteract the negative effects of the boom are essential steps, the government can go even further. North Dakota needs new areas for expansion that can continue to bring economic growth — even after the oil wells are dry. One such model can be found in Alberta, Canada. A province that runs on oil, Alberta has begun to invest in local businesses, healthcare and higher education, crafting a lasting local economy. North Dakota can also supplement its oil endeavors by developing alternative energy sources. With such a vast expanse of land, North Dakota is in a prime position to experiment with wind and solar power by offering tax credits or working with established federal programs. These measures may not pay off in the short term, but the state will reap massive dividends in the long run, when the state can no longer rely on oil to keep its economy afloat.
North Dakota hit the jackpot. Because of big oil in a small, northwest portion of the state, lawmakers have been handed a large amount of money and an even larger burden. But they have the chance to propel the state into sustainable prosperity. With proper investment and an eye towards the future, the government may be able to construct the building blocks for a new, wealthier North Dakota. But if they choose to spend imprudently, the state could see its oil pipe dream turn into a nightmare.