Low oil prices are siphoning thousands of jobs from the vast, wind-swept fields of North Dakota, where not long ago workers could all but name their wage, but had to stand in line to get housing.
The cutbacks are forcing some Twin Cities companies that are helping build the Bakken to shelve new projects, but many say there’s more than enough work to last several years, and that there’s now a gusher of jobs in the Twin Cities to replace those that might be lost across the border.
“It’s becoming a more normal market,” said Kent Roers, a Twin Cities investor who recently pulled the plug on an apartment building in western North Dakota and has been scouting for projects closer to home, including Rochester. “We were already looking elsewhere because we knew we had to diversify.”
Kent and his brother, Brian, left their careers to work full-time in the Bakken. They’ve developed about $140 million in commercial and residential projects in various parts of North Dakota, including 150 apartments and an office building in Williston.
A year ago, apartments were renting as fast they could build them in a market where rents can exceed $2,200 for a 700-square-foot unit. But with oil money drying up, there’s no guarantee of that anymore.
“And people are price-sensitive,” said Kent Roers. “They’re looking at specials and deals.”
Domestic oil production has stalled dramatically. The number of rigs drilling for oil and gas in the U.S. fell last week for the 17th week to 1,028, which is about half the number that were operating in November 2011, according to Baker Hughes.
And currently there are just 90 active rigs in North Dakota compared with a high of 203 in June 2012. That’s why the most vulnerable projects in the region are those that cater to rig workers. That includes housing planned for areas where new wells were going to be dug, and speculative projects in boom towns where there was once an undersupply of everything from apartments to tobacco shops.
Ravi Norman, CEO of Fridley-based Thor Construction, said there’s been a definite decline in new business opportunities. The company was planning to partner with another Twin Cities-based company, Mortenson Construction, to build a Hyatt Place hotel in Bismarck for the MHA Nation (comprising the Mandan, Hidatsa and Arikara tribes), but the project was recently put on hold.
Norman said he’ll pursue work that’s closer to home where it’s easier to get workers and access supplies and materials.
“We are less inclined to chase work in North Dakota with so many opportunities that seem to be available in Minnesota,” he said.
Though oil production is waning, many existing wells are still pumping out high-quality crude, creating long-term demand — and revenue that will help pay for new shopping centers, schools and hospitals.
That’s why demand for infrastructure-related projects is expected to remain strong, said Dean Dovolis, a Twin Cities architect who has helped design about $50 million in projects, including a senior center that was commissioned by the local tribes.
“Areas that have quality oil are still growing strong,” he said. “They’re taking their bounty and plowing it into infrastructure and facilities that should have been developed years ago.”
That’s why Cory Bryson, a business representative for Local 563 in North Dakota, said there’s still strong demand for people to help build roads, hospitals and other infrastructure.
“I’m sending out more guys than I did last year, so on my end I don’t see a slowdown,” he said.
Bryson said there’s a “heavy” Minnesota presence in the area, and he regularly gets calls from more than a dozen big Minnesota companies, a who’s-who of commercial contractors including Mortenson and Park Construction.
Many of those companies initially headed to North Dakota in search of projects when there was still a dearth of work in Minnesota.
“North Dakota led our business for a while, but we’re now booming in the Twin Cities,” said Dovolis, who opened an office several years ago in Bismarck. “Now we’re fighting a war on two fronts.”
One of the newest frontiers for developers has been Watford City, a rural county seat town near the western border of the state where the population nearly doubled from 2010 to 2013, to 3,300 people. The population of the surrounding county is expected to triple over the next 15 years, creating need for more than 5,000 houses and apartments.
Oppidan, a Twin Cities-based company that has done several projects in North Dakota, recently developed a 120,000-square-foot shopping center with a liquor store and Happy Rice Buffet in the middle of what was once a cow pasture in Watford City.
The company is also in the process of building two apartment buildings and a 52,000-square-foot oil and gas facility for General Electric just north Williston.
Oppidan developer, Jay Moore, said the business opportunities keep rolling in. Even during a recent spring break getaway, he got a call from someone who wants them to build another apartment building.
“We are not seeing any pullback,” said Moore. “We’re in the Bakken for the long haul; we’re bullish on the Bakken.”
The Roer brothers are similarly confident. Though they’re taking a breather, they believe it’s just a matter of time before oil prices spike again, creating another wave of demand.
“We’ll be underbuilt again in two to five years,” said Brian Roers, a former CPA. “And we’ll be back in the Bakken.”
This article was written by Jim Buchta from Star Tribune and was legally licensed through the NewsCred publisher network.