News

When Oil Boomtowns Go Bust

Fracking and other new technologies resulting in a lot of towns becoming suddenly wealthy, but as oil and gas prices fell, those industries suddenly dried up.

by Peter Moskowitz
05 July 2016, 12:00am

"Empty tank cars head back to North Dakota for more Bakken crude" (2013). Photo via Flickr user Roy Luck.

"Empty tank cars head back to North Dakota for more Bakken crude" (2013). Photo via Flickr user Roy Luck.

One-third of energy used in the US comes from natural gas. In 2015, the US consumed 7.08 billion barrels of oil and other petroleum products—more than 20 barrels per person. Those numbers are mind-boggling, but stranger still when we imagine what it takes to pull that gas and liquid from the ground, and consider how much of it originates in America.

Thanks to technologies like hydraulic fracturing, which allows drillers to break up oil and gas-soaked rocks with a mixture of water and chemicals pumped thousands of feet beneath the surface, domestic gas and oil production is at an all-time high.

Oil production has been so brisk in the US and elsewhere, in fact, that prices have collapsed. In 2008, oil was trading for over $100 a barrel; today, it goes for less than half that. And that's led drillers to cut back, abandoning rigs in towns across the country, and sometimes even shuttering their operations completely. At least 130 North American oil and gas companies, representing tens of billions of dollars, have gone bankrupt since the beginning of 2015, and more will likely follow.

The big question among environmental activists and oil companies alike is, how long will the slump last? Seth Shonkoff, the director of environmental think tank PSE Healthy Energy and a professor at UC Berkeley points out that drilling a new shale gas or oil well costs $8 million before the first drop comes out, so without a huge jump in oil prices, the decline will likely be prolonged. Offshore rigs (mostly located off the coast of Louisiana) are declining rapidly too, as they're even more expensive than shale gas wells. Tar sands production up in Canada is also being slashed.

The quick rise and fall of US-based fracking and oil operations has left many towns temporarily prosperous, others on shaky financial footing, and many landscapes pockmarked with drilling rigs and compressor stations, crisscrossed by pipelines.

Nearly every state in the union produces some oil or gas, but there are a few regions that account for a lot more than others, and therefore have been hardest hit by the fluctuations in the market: the Marcellus, located in Pennsylvania and Ohio, the Bakken, located in North Dakota, and the Eagle Ford, located in Texas. The effects of the downturn are similar everywhere: The once-plentiful drilling rig jobs that often paid $100,000 a year have vanished, as have many of the people who came to oil and gas regions looking for those jobs.

But that doesn't mean the infrastructure that supports oil and gas production has disappeared. New refineries, which can pollute the communities that surround them, have been built across the country, especially in the Midwest and South, to process the oil and gas; new pipelines stretching from coast to coast to distribute the oil and gas have been built too (though the construction of some are now on hold because of price collapses, as well as increased environmental activism). Without adequate pipeline infrastructure, the job of transporting oil is left to trains, which many have called dangerous, as they can derail and explode. And the environmental effects of the boom will be long-lasting: Wherever new oil and gas infrastructure has been built, water sources, the land, and the air have been polluted.

Here's a look at how three of the US's biggest-producing regions are faring in this new age of oil and gas.

Marcellus Shale gas-drilling tower in Lycoming County, Pennsylvania. Photo via Wikimedia Commons

The Marcellus (Eastern US)

The Marcellus Shale is a layer of rock buried under much of Ohio and Pennsylvania. It extends into New York, but fracking is banned in that state. The gas that could be extracted from it is estimated to be worth $1 trillion, and could be worth even more if drillers can figure out how to gain access to currently inaccessible parts.

Pennsylvania has had an oil industry for a century, but that pales in comparison to the Marcellus. When fracking companies first figured out how to gain access to parts of it in the mid 2000s by breaking up gas-rich rock thousands of feet below the surface via fracking, dozens of Pennsylvania communities turned into boomtowns. Thousands of trucks to transport the fracking liquid, water, and waste were brought in, hotels opened to cater to the oil and gas workers, and restaurants and stores in many towns were suddenly full. Now much of that is gone, but a lot of the damage has remained.

"In northeast Pennsylvania, the boom came so quickly, and there were real consequences to that," Sam Bernhardt, an organizer with environmental nonprofit Food and Water Watch told VICE. "Truck traffic and noise and roads filled with potholes. Everywhere you look there are compressor stations and other infrastructure. Really from any hillside in Susquehanna County if you look out over a valley you'll see pipelines cross-cutting everything."

The quick ramp-up of fracking in Pennsylvania, along with the high population density of the state, has meant potentially thousands of people have had their well water and land contaminated by fracking fluids, which can cause a host of medical problems, including cancers. That, combined with the economic decline, has meant that many who came during the boom for work years prior are now leaving it behind.

"I'll call people up and hear that they just don't live here anymore," Bernhardt said. "You can't really organize a community when a community doesn't exist anymore."

But the decline shouldn't be overstated: In the southwest of the state, where the gas is "wet"—i.e. has a lot of chemical compounds in it besides gas—companies are still extracting at high rates because wet gas can be used for more than just energy production. Shell is about to build a $6 billion "ethane cracker" outside of Pittsburgh, which will transform ethane (one of the components of wet gas) into a variety of plastics and petrochemicals. So even with the Marcellus in decline from what it was a few years ago, it's by no means over.

And production hasn't exactly collapsed yet—it's stayed just below last year's averages, but that's a bad sign: in the years prior, gas production was doubling and tripling, so an evening out is a sign that companies are pulling back their operations and not putting in new wells. That signals a decline for gas everywhere in the US, as the Marcellus and nearby Utica shale account for 85 percent of all shale gas production in the country

An oil rig in Williston, North Dakota. Photo via Flickr user Matt Novak

North Dakota

Williston, located in northwestern North Dakota had a population of 13,000 in 2009, and 30,000 in 2015—that's how fast its oil sector grew. Williston isn't the only place that produces oil in the region, but it's the central boomtown of North Dakota. The Bakken still only accounts for about 10 percent of all US oil, but production is so concentrated around a small area that it has turned certain towns into traffic-clogged mini-metropolises. All of North Dakota is feeling the strain of the decline—tens of thousands of oil workers have been laid off in the last few years. But the state and the government of Williston prepared for their boom and bust, which has left them better off than other places.

John Kautzman, the auditor for the city government of Williston, has been in the city since 1982 and has seen it cycle through many oil booms and busts. This last one was its biggest. After years of growing, oil production in the state has fallen for several months in a row, with January marking the lowest amount of drilling activity in over a decade.

North Dakota's most recent boom started when companies found a layer of oil-rich shale called the Bakken and began extracting oil from it in the early 2000s. But unlike many other towns across the US, North Dakota planned for the ebbs and flows of the oil market and put away money it made during its production peak for a rainy day. That left the state with a $1 billion budget surplus, which it's now using to build to accommodate all its new residents and infrastructure, plus $2.4 billion in its rainy day fund. Williston currently has a $170 million budget surplus, according to Kautzman.

But Williston is still adjusting to the up and down market—it had to expand its sewer lines and water plant, its roads and schools. Now those things aren't being used as much.

"You used to not be able to make a left turn on our roads because there was so much traffic," Kautzman told VICE. "Now you can make a left turn. The amount of activity we had before was unsustainable."

The most extreme effects of the downtown seem to be over—there used to be former oil workers who became homeless sleeping on Williston sidewalks, and you don't see that anymore. You don't see hotels open one day and go out of business the next. Kautzman said he's a fan of the economic activity oil brings, but he wishes there were a way to more rationally control its economy.

"We prefer economic activity to no economic activity," he said. "But it'd be nice if someone was able to control the [figurative] water pressure. Instead we get a fire hydrant or a garden hose."

A train carrying oil from the Bakken and Eagle Ford production areas. Photo via Flickr user Roy Luck

Eagle Ford, Texas

Eagle Ford's shale production decline has been swift and dramatic: In February 2014, there were 221 active oil rigs in this rural region, which is located a few hours east of San Antonio. Now there are about 45. There are no big cities in the Eagle Ford region, but Gonzales, a tiny town of about 7,000, is representative of nearly every town in the region. Where there used to be packed "man camps"—trailer parks and small apartment complexes set up for oil workers—there's now a whole lot of nothing.

The Gonzales Christian Assistance Ministry is some of the only help people can get in town. Beatrice Gomez, 53, has lived in the town her whole life and now runs the nonprofit, which distributes food, provides some financial assistance to those who need it, and helps people find housing.

She told VICE that people working on the rigs used to make $80,000 or sometimes more a year, and now the only jobs left are at the area's massive chicken processing plants, where wages are low. Meanwhile, landlords refuse to lower the rents they jacked up to $1,200–$1500 from $500–700 when the oil boom started in 2010, and that means there are a lot of families without enough food or a place to sleep. The food bank is now serving three times as many people as it was a few years ago. Gomez sees 1,100 people a month at her food bank—in other words, about one out of every seven people in the town.

"Oil helped the little person that was trying to get ahead," Gomez told VICE. "But then at the end it left them back where they're at."

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