By Dean A. Bangsund, Research Scientist

NDSU Agribusiness and Applied Economics Department

In an earlier column, my colleague, Nancy Hodur, highlighted how the rapid expansion of the petroleum sector in North Dakota is creating challenges for governments and businesses trying to manage the growth in employment, demands for infrastructure and delivery of public services.

These challenges have created a tremendous need to understand the potential scope and pace of future development in the petroleum industry and translate that understanding into forecasts that can be used by community leaders, planners, developers and policymakers.

Early in the research process, we found that existing tools and models were poor predictors of employment change in western North Dakota, so a new model was developed to track employment dynamics within the petroleum sector.

This model was expanded to provide regional estimates of total employment that included expected secondary job creation and changes in employment in other regional industries. More research was conducted to link employment forecasts to future housing demand and ultimately convert housing demand into population potential.

The end result was a modeling process that showed employment, housing and population changes associated with different scenarios based on the rate and extent of development in the Williston Basin.

Projections for western North Dakota stemmed from a project that estimated future electrical load growth in the Williston Basin and was sponsored by the North Dakota Transmission Authority. The engineering firm of Kadrmas, Lee and Jackson, along with researchers from the Department of Petroleum Engineering at the University of North Dakota, worked to develop several potential scenarios on the rate and extent of development in the Williston Basin.

Current insights on the potential future size of the petroleum sector in North Dakota are staggering. Total operating oil wells in the state are projected to go from around 8,000 in December of 2012 to almost 40,000 in the next 25 years. However, well counts in the state could vary from 32,500 to 46,000 during the period. Counts will depend upon future economic conditions in the industry.

Considering the state had roughly 3,200 active wells in 2004 before the current petroleum sector expansion started, heightened levels of development are expected in the state for a considerable period. Other independent studies have confirmed that expected oil and gas development in the Williston Basin eventually will reach well counts on a scale that will transform western North Dakota.

Through the next 25 years, direct employment in the petroleum sector is expected to shift from a workforce largely dominated by temporary workers, such as drilling and fracking employees, to a workforce consisting primarily of permanent workers such as those in oil field services.

These shifts have ramifications for housing demand and anticipated changes in the growth of employment in business, personal and professional services, as well as lead to a much larger permanent population within the region.

Current projections indicate that permanent housing demand in the oil-producing counties in North Dakota are expected to increase by 56,000 units through the next 25 years. Demand for temporary housing will remain at current levels for more than a decade and then are projected to decline as the temporary workforce is reduced.

Population change in western North Dakota is expected to be substantial. The permanent population, assuming an adequate supply of housing is added in the region, is projected to increase by 51 to 73 percent during the next 25 years, depending upon future development in the petroleum sector.

The state has an enormous challenge through the next 25 years to address the growth issues in western North Dakota. One of the first steps in meeting those challenges is understanding that projections of future activity for the industry do not exhibit the classic boom-and-bust cycles the state has experienced in the past and that solutions to development issues in the basin are likely to be nearly as long-term as the projected growth.

NDSU Agriculture Communication – March 7, 2013