I think North Dakota’s oil boom is over, and the closing of a business in Williston has convinced me that it’s true.
The Williston Herald is reporting that the Bakken Club, a business that made national headlines by operating as an exclusive club (memberships as much as $25,000) in a tiny western North Dakota town, has fallen on tough times. The club has been evicted by its landlord for allegedly failing to pay rent. The club claims for its part that the landlord wasn’t keeping up the property.
I’ll leave it to others to sort out that he-said, she-said, but suffice it to say that the Bakken Club doesn’t seem to be operating on a sustainable business model. After all, prosperous businesses usually don’t get evicted.
And let’s face it, the idea was an absurd one to begin with.
A $15,000 per-year supper club for the well-monied elite in a town like Williston? It calls to mind all those sumptuous hotels and gambling halls built in the gold boom towns of another era only to close a few years later when the gold ran out.
The Bakken Club was something which could have only been dreamed up and built during an unusual moment in history. It’s closing may well herald, in a symbolic and admittedly anecdotal way, the end of the Bakken oil boom.
It’s not like we didn’t know this was coming. The state’s growth in tax revenues, while still a robust 14 percent biennium to date (according to the latest OMB numbers), isn’t exactly the boom of the last biennium. In December of 2012 biennium-to-date general fund revenues were up nearly 64 percent.
This trend is reflected in the state’s population growth as well. Although North Dakota made headlines as the “fastest growing state in the country,” yet again (still a heady thing given that North Dakota was still losing population just a few years ago), the rate of growth in population has also dropped off.
From 2012 to 2013 the state’s population grew 3.9 percent. From 2013 to 2014 that rate of growth had slowed significantly to 2.2 percent.
Oil prices have been dropping of late, and while some state leaders are still bullish, nobody quite knows where the floor is. Oil companies have begun cutting back on activity in the state; most recently Harold Hamm’s Continental Resources which announced a cut in operating rigs from over 50 down to 34.
I’m not prophesying doom. I don’t think the facts justify anyone predicting that North Dakota is on the edge of a bust. Of course, they don’t rule it out either.
I remember a few years ago interviewing some officials from Williston including former Mayor Ward Koeser who said that they disliked the term “oil boom” because a boom implies a bust. They would later embrace it in their community’s branding, though not for much longer I’d wager.
They made a good point at the time, but I’d point out that booms don’t have to be followed by busts. What North Dakota had was definitely a boom. It’s over now. That doesn’t mean the end of the world.
I think oil prices will find a floor that, while not as high as boom-time prices, will still support a great deal of oil development in the state. That development will, in turn, continue to drive a great deal of prosperity and tax revenue from the state. Western communities will continue to grow.
But it’s all going to happen at a slower pace. And for some, weary of the break-neck pace of the last few years, that’s probably just fine.
The state does need to be cautious, though, especially heading into a new legislative session next month. We cannot go forward thinking the boom times are the new normal. The boom times aren’t even here any more. We’re about to find out what normal is, and hopefully we’ll be ready for it.