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Balancing oil and agriculture

John Deede | Shale Plays Media Google+

Western North Dakota, once a desolate expanse of farming and ranching communities, has experienced a flurry of activity unlike the state has ever seen. Small towns dotting the landscape are finding themselves hubs of the shale industry since hydraulic fracturing made the sea of shale oil underneath them accessible. People from out of state flooded into oil country. Farmers suddenly didn’t get waved back to by every vehicle they met on the gravel roads. The surge of drilling has imposed many changes to the area.

Oil has certainly benefited many living in the Bakken shale formation ― personal incomes in North Dakota have nearly doubled in the past ten years to $57,084. Businesses are opening and towns are reinvigorated, but the farming community is commonly overlooked.

Charlie Sorenson, a farmer living just outside Ross, N.D., has noticed the changing rural environment. Sorenson worked in the oilfield as a roughneck in the western part of the state before the shale boom. He recalls when oil drilling outfits were comprised of local workers and there were less than 20 rigs operating within the state. Working in the oilfield before the shale boom helped Sorenson make ends meet during the cold months when he wasn’t tending his fields.

Sorenson, who has been farming for 22 years, has seen the good and the bad side of the oil boom. He works on farmland that he rents from over a dozen different landowners. Because he is not the landowner, oil companies generally do not bother with contacting him when work is being done in the field. He describes land renters as being at “the bottom of the totem pole” when it comes to drilling on the land they farm. Although the companies are required to notify the landowner and pay an easement for the disruption, renters sometimes have to eat the cost of the lost productivity.

One of the muted costs of drilling for farmers is the increased price of getting crops to market. The price to transport a bushel of wheat to the west coast ten years ago was about a dollar a bushel. Today that cost has nearly tripled. Market fluctuations and an increase in oil price over the past few years have driven the price up some, but competition from oil trains has been the main driver of the increased freight rates. The elevator operators are finding themselves sidelined by the rail companies. Crop shipments are constantly backlogged, and they are unable to get important supplies like fertilizer shipped in.

Rail companies prefer transporting oil because it provides a constant stream of revenue while the demand for crop shipments tends to fluctuate. The high wages paid by oil companies also forces elevator operators to increase their wages so that they can retain employees, further increasing freight prices. Railroad congestion was particularly bad this past year. According to a University of North Dakota study, shipping delays alone cost the state’s farmers $66.6 million in grain sales. Some elevator operators are still scrambling to get the 2013 crop harvest shipped before the 2014 crops start coming in.

Traffic has also been a headache for many farmers who used to have no problem driving their equipment down country roads. “Many workers from out of the area assume that they don’t need to move over when meeting this equipment,” said Sorenson, “One time it took 6 hours to move our air drill 12 miles due to heavy traffic and rough roads. Flashing lights and rotating beacons on our equipment seem to do little to slow and warn traffic.” The oversized loads and crumbling roads in the booming countryside have led to traffic fatality rates in North Dakota rising to the highest in the country.

Finding seasonal workers (besides family) anywhere in the oil patch has become extremely difficult. Before the shale boom, rural North Dakota’s population was rapidly aging as the children of farmers abandoned the lonely landscape in favor of finding a job in a bigger residential area. While the average age in western North Dakota has reduced dramatically since the boom, the majority of the newcomers aren’t here to farm. Farmers used to be able to hire temporary workers to help during the harvest season.

“Labor for farmers has been next to impossible to get,” said Sorenson, “Most are resorting to labor from foreign countries that work under H-2A visas. Farmers provide housing for these temporary employees, pay for their plane tickets, and pay them wages during the time they are here.” The visas are specifically for temporary agriculture work, and the workers typically come from South Africa, Eastern Europe or Brazil. The cost of transporting temporary workers is expensive, and hiring through this process takes a fair amount of time to file paperwork and interview prospective workers.

While oil and gas companies are required to pay an easement for the use of a landowner’s property, they are also liable for any damages to the land. Most of the oil companies are careful to keep the land surrounding where they work clean, but accidents can happen. When a company reports a spill on a piece of land, the landowner must be compensated for the damage. However, if a spill goes unreported, farmers have much more difficulty seeking a claim for the damaged land. With the spike of recent brine spills, many farmers worry about their soil being rendered useless from the brine water which can be 10 to 30 times saltier than seawater.

Not everything about the oil boom is hard on farmers. New businesses are opening that accommodate both drilling and farming needs, so farmers can service their machinery and get parts they need faster. Recently state officials have taken measures to reduce the amount of natural gas that is flared off wellsites. If the natural gas was captured instead of being burned, it could be used to make fertilizer. Making a profit from the sale of natural gas will benefit oil companies, and locally-produced fertilizer would mean cheaper prices for farmers. Three fertilizer plants are currently being built and are scheduled to begin production between 2016 and 2017.

The spike in population has allowed schools in small towns to stay open just as budget cuts and staffing shortages were forcing many to close their doors. North Dakota’s unemployment rate has plummeted to 2.7 percent ― the lowest in the country. Graduates no longer need to look outside the state to find a good-paying job. The oil rush has brought tough, hard-working people to North Dakota. If the Bakken boom ever busts, they just might be cut out to become farmers.

Related: N.D. dairy farmer-turned-inventor outsmarts engineers with oilfield invention