Bakken Shale Boom Leads to Unexpected Growth

The oil and gas industry's growth has created many new jobs helping states with active wells enjoy lower unemployment rates. One of them is in North Dakota's Bakken Shale and it's seeing unexpected benefits: a surge in the needs for railroad, trucking, construction and medical staff and housing.

Riding the Dakota Oil Boom (may require Wall Street Journal subscription) explores how companies in Bakken Shale have turned to using trains, trucks and trailers to transport crude to the far away refineries for processing. This increase employment begets an increase in railroads, housing and medical services.

Railroad Terminals

North Dakota produces almost 450,000 barrels of oil per day, making it the fourth-highest crude oil producing state behind Texas, Alaska and California. The problem, however, is that pipelines are full and new ones won't be ready until 2013. To work around this, oil and gas companies are building railroad terminals, which take less time to build than pipelines.

If it's faster to build rail terminals, why use pipelines at all? Cost. Transporting crude by railroad costs an average of $5 to $10 a barrel more than a pipeline. Bakken's lighweight crude oil currently offsets the cost.

As you know, oil prices fluctuate. Companies are betting that after the pipelines go up, there will still be a demand for railroad terminals justifying their permanence. Despite this, GATX Corp, maker of rail cars, says it will "grow it very carefully."

Truckers

Tractor trailers transport over 70% of North Dakota's Bakken Shale crude from well to railroad terminal or to pipeline. Companies can't hire truckers and construction workers fast enough to keep up with the oil. Aside from demand, not many truckers want to deal with extreme winter weather, rough roads and homesickness. To fill needed positions, companies are using incentives, such as housing.

Medical

The boom could derail Bakken's growth with surrounding cities having trouble supporting growth. Along with more jobs available and people filling them comes more visits to the emergency room. CNN Money reports that medical facilities in the Bakken Shale area seeing population growth confront staffing shortages and longer patient waiting times.

One hospital has doubled the number of seats in its waiting room. It's also understaffed by 70 positions, which include nurses, doctors, janitorial staff and cafeteria employees. Because of this, residents have to wait months to see the doctor or hours in the emergency room. As more people move to the area, there needs to be more housing and there's a shortage.

What's intriguing about this is that some professionals find better pay in a different field. Some medical professionals leave the medical field for oilfield jobs. One nurse with four degrees says she earns more as a server than as a nurse.

Will North Dakota be able to keep up with demand for housing, medical staff, truckers, construction and oilfield workers? Hess Corp. Chief Executive John Hess says that oil production in Bakken Shale will triple by 2015. Currently, the company produces approximately 39,000 barrels per day and it expects to reach 120,000 by 2015. It'll be interesting to see how North Dakota deals with this good problem to have.