North Dakota’s Oil Bust in the 1980s

For Christmas 1989, Jeff Meyer of the Associated Press wrote a summary of the state’s economy in the 1980s:

Drought and low prices in the energy and farm sectors made the 1980s a decade of despair for some North Dakotans. . .

The decade began with great promise for the energy industry. Prices for oil reached an all-time high in 1990 at more than $40 a barrel, sparking a frenzy of drilling and residential development in the Williston Basin.

But those prices began to slip in 1984, and they hit a low of $9 a barrel two years later. The boom went bust and hundreds of oil workers and their families moved out of communities like Williston and Dickinson.

The basin has experienced a slow comeback in the last half of the decade. Oil prices increased steadily in 1989 and should be in the $18.50-a-barrel range at year’s end.

The price gains and the success of a new horizontal drilling technique have given the oil industry and state officials hope for a bright future.

“We are very optimistic, excited about what horizontal (drilling) may hold for the future of the Williston Basin,” said Lowell Ridgeway, executive director of the North Dakota Petroleum Council.

Despite the roller coaster his industry rode in the 1990s, Ridgeway is proud of the contribution it made to the state’s economy. Oil and gas company paid $1.1 billion in state severance taxes during the decade, he said.

“It was during the ’80s that we feel the industry because a very vital cog in North Dakota ‘s economy,” Ridgeway said.

Years later (1996), the Bismarck Tribune wrote a broader overview of the history of the state’s oil industry that split it into three cycles:

Wes Norton, director of the Oil and Gas Division of the state Industrial Commission, said the industry has seen many gradual changes in safety and environmental areas.

Although the Williston Basin never became the oil producing area oilmen dreamed of in the 1950s, it is again drawing nationwide attention from oil companies.

It is one of the few areas in the country with active leasing, Norton said. Stark and Bowman counties are the major areas of development.

Norton, who has been working in the state oil and gas regulatory system since 1960, has seen the impact of oil on the state.

“”It has been significant to the economy of western North Dakota,” Norton said. “”A lot of people subsidized their farms and ranches with mineral income and working on rigs. A lot of North Dakota people found a living in the state from oil and gas.”

Norton said the state has seen three cycles in oil production.

“”The first cycle peaked out in the mid 1960s,” he said. Calling it the Discovery Cycle, Norton said it was a time comparable to a gold rush fever, hoping North Dakota ‘s oil production would be as prolific as that in Texas.

The second cycle — the Price Cycle — was influenced by the high prices of oil in the 1970s.

Drilling peaked in 1981 and production peaked in 1984.

“Oil production in the state steadily decreased until last year,” Norton said.

He describes the present cycle of increased oil activity as the Technology Cycle. The increased drilling and production is being influenced by 3-D seismic, horizontal drilling techniques and enhanced recovery methods.

Norton anticipates the Technology Cycle will be steadier, longer and better than the previous two, providing long-term security for the state’s industry.

In 1995, Steve Foss of the Grand Forks Herald had looked back on the boom years of the late ‘70s and early ‘80s:

Bucky Wolf has been there before.

Wolf, Dickinson chief of police, saw the city swell from a sleepy agricultural and stock-raising center of 16,000 in the mid-1970s, to an oil boom town of 22,000 in the early 1980s. And that’s not counting workers who lived outside the city limits.

During the boom years, Dickinson was a cop’s nightmare, as oil rig workers swarmed into town to celebrate their new-found wealth. Often, that meant heavy drinking and fights.

In those days, Wolf said, while officers were answering one call, there was always another one waiting for them.

Dickinson residents were nervous. City Auditor Doug Jaeger said an uneasiness existed most of the time.

All because of oil. . . .

City Auditor Jaeger said the city worked like mad to build apartments, expand its schools and upgrade sewer and garbage systems when the population exploded 20 years ago.

Jaeger said the city couldn’t upgrade and build fast enough to meet people’s needs, and by the time they finally caught up, the boom was over. People moved away. The city was left with an infrastructure to support 24,000 residents, but a population of 16,000.

Dickinson languished in the depression after the boom, but not for long.

The city carried a debt of $28 million in 1981. That debt has been reduced to $6 million, well below the $10 million a city of Dickinson’s size can effectively carry.

As important, Dickinson retains the schools, sewer and garbage service, and housing to support 24,000 people. And in 1994, for the first time in eight years, the city sold more lots than it took back for delinquent taxes — 44 lots sold, 22 taken back.

“We are in a position to deal with things far better than last time. Everyone tells me this is not a boom that will bring in a lot of people. There may be more wealth involved than people.” . . .

Western North Dakota ‘s oil industry saw its last great year in 1984. State petroleum council figures show that 52.6 million barrels of crude oil were produced that year, resulting in $160 million in oil and gas production and oil extraction taxes.

But in 1993, the last year for which the council has figures, 31.1 million barrels were produced, with tax revenues of only $46.4 million.

Finally, in late 2000, a Bismarck Tribune editorial surveyed the landscape and offered some thoughts on the past and possible future of North Dakota’s “boom-and-bust cycle of energy economics”:

North Dakota may be heading into an era of higher energy prices. If so, this is both a burden and an opportunity.

It would be unwise to suggest that the boom-and-bust cycle of energy economics has ended in North Dakota. It hasn’t been all that long ago that North Dakota went through a real roller coaster ride. But there’s a difference between the world and national energy situations today and those of a generation ago.

In the 1970s, when U.S. energy prices were low, they were held down artificially, by government controls. The main reason that North Dakota went through such a roller coaster ride in the 1970s and 1980s was the deregulation of energy prices. Once the price controls went off, production surged. That broke the grip of the oil cartel on worldwide energy prices. So, prices came back down. That rocked the oil economies of western North Dakota, notably in Dickinson and Williston. . . .

Meanwhile, as State Geologist John Bluemle has noted in his forecasts for the future, nation after nation, including even Saudi Arabia, is expected to see oil production peak in the current decade. That’s not to say there will be energy shortages. There’s plenty of fossil fuel energy left, and higher prices should finally spur the development of alternatives. The point is that energy will cost more.

In North Dakota, we’ll suffer. We drive a lot of miles per capita, so we’ll be poorer after we pay our gasoline bills. Because they rely on fossil fuels at every step of their production cycle, farmers will face a further squeeze on profits.

In North Dakota, we’ll prosper. Higher prices will, over time, revive the oil patch. . . .

No doubt the economics of energy still will resemble the boom-and-bust cycles of the past. It may be, though, that the cycle will start at higher points on the chart, so that the highs will be higher than ever and the lows won’t be so low as the lows of the past.

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