Oil country eases into break from frantic growth

KILLDEER, N.D. – Dawn Marquardt strolled into the gleaming new Aquatics and Wellness Center here, spoils of the oil boom in North Dakota.

"This is my baby," said the Killdeer city administrator, pointing out the indoor pool and the exercise room with a fleet of fancy workout machines that rival a big-city gym.

The oil boom that ignited North Dakota's economy in the early part of this decade created new jobs, new businesses, new housing and new amenities such as this aquatics center. And while the downturn that started in late 2014 tamed western North Dakota's economy, it never crushed it.

That's evident in Killdeer, a small town in the heart of the oil patch and a microcosm of the state's petroleum economy.

"I don't think this truly was a bust, where everything just died and businesses up and left," said Marquardt, who has been Killdeer's city administrator for 14 years. "You saw a slowdown."

Small towns like Killdeer prospered as oil surged above $100 a barrel, attracting workers and boosting tax revenue. Then oil prices plunged, setting the state's economy on pause as rigs shut down and production faded.

Now, as the industry has recovered somewhat, Killdeer residents are hoping it rises steadily, without the chaos of the boom years.

Housing markets — which were so overheated during the boom that some longtime Killdeer employers built residences for their own workers — have stabilized. So has the job market, with employers still scrounging for workers in Dunn County, which in May had a meager unemployment rate of around 2 percent.

Killdeer's population sits at 1,200, down from 2,000 at the boom's peak but well above the 700 people it had in 2000. Transient workers come and go, but people have also moved to Killdeer and stayed.

It's an enviable trend as many rural towns struggle to survive.

"The pressure before was, how do you make the community grow and bring people in?" Marquardt said. "What you heard before was, 'Our town was dying.' "

Killdeer is the largest town in one of North Dakota's least populated counties, a place of gracefully rolling hills dotted with cattle and pump jacks, the nodding oil well-tops that look like mechanical birds.

Historically, the town and Dunn County have relied on ranching and growing wheat and hay, though oil wells were drilled as early as 1960.

Now oil revenue is the county's — and Killdeer's — biggest source of revenue. Pipelines and other oil and gas infrastructure make up 62 percent of Dunn County's tax base, with agriculture second.

In 2010, the figure was reversed.

The oil money spigot constricted over the past year for the entire state as output fell. North Dakota collected $1.48 billion in oil production and extraction taxes in its most recent fiscal year, down from $2.8 billion a year earlier.

North Dakota in 2016 also faced its first net out-migration in eight years, with 4,684 people exiting, according to the state Department of Commerce.

However, the state had net in-migration of nearly 60,000 people during the previous five years.

Throughout western North Dakota, some of those migrants have planted roots. In Killdeer alone, several major Bakken oil field players have offices, and a natural gas processing plant opened last year.

"The hope was to get it to where people would stay instead of being a transit stop, and some did stay," Marquardt said.

Dawn English, a 40-year-old Texas native, is one of them. Her husband came to work in the oil fields in 2010, initially as an equipment operator. He lived in a recreational vehicle in the early years, and both spouses shuttled back and forth to see each other.

English moved to North Dakota in 2014, and she and her six children now live on a 750-acre farm about 15 miles west of Killdeer. She and her husband manage the farm in addition to his oil industry job. Last year, they sold their former home in Fort Worth.

"We really enjoy it here," English said at poolside while some of her children played at Killdeer's aquatic center. "I feel like my kids have a lot more opportunities here. They're not so lost in the shuffle."

Her daughter Jennah, 14, sat beside her. Jennah is legally blind and needs assistance at school, which she has gotten more of in Killdeer than in Fort Worth, English said. The school issued her a special laptop computer, and with smaller classes, she gets more time with her teachers.

Plus, Jennah said it's been easier for her to make friends in Killdeer.

The oil boom also brought a building boom, including the $6.7 million aquatic center that opened last year.

"One of the things we heard from people who came here was that there was nothing recreational to do," Marquardt said. The city also built a park with tennis courts, basketball courts and baseball diamonds.

On the commercial side, an industrial park on the east side of town expanded, a couple of new motels were built and three large apartment buildings went up.

Land adjacent to a new park — with a spectacular view of the countryside — is platted, with sewer and water pipes ready. But plans for about 50 homes are stalled.

A few blocks away sits one of three new apartment buildings; it's only about half occupied. But rents are about half what they were at oil's peak.

During the boom, affordable housing was so short that Killdeer employers outside of the oil industry — a farm co-op, an aerospace manufacturer and the local school district — built or bought housing for their own workers.

Killdeer Public Schools purchased a house, a triplex and four duplexes as it hired more teachers to cope with increasing enrollment. "A one-bedroom for $1,800 to $2,500, you can't do that on a teacher's salary," said Superintendent Gary Wilz.

As oil flourished, Killdeer's student enrollment rose from 367 in 2007 to a peak of 486 in 2015, Wilz said. The district still had at least 450 students when school ended this spring.

The population boom prompted Killdeer and Dunn County to increase spending on services, particularly for public safety and road maintenance. Dunn County had 47 employees in 2010; now it has 84, said Daryl Dukart, a county commissioner.

At the Dunn County sheriff's office, deputies' ranks rose from three to as many as 17 before being shaved to 13 as budgets were cut.

The downside of a population influx is an increase in crime, from assaults to drug infractions. Even with oil's swoon, some of those problems haven't gone away. "We are not seeing a real slowdown in sheriff's calls," Dukart said.

The oil boom brought some city chaos to a rural region, and for some residents it was too much — so they left. "Killdeer was not the little small town they knew," Marquardt said.

For others in Killdeer and Dunn County, the oil industry brought opportunity.

"Before oil came, our kids had to go out of state to get jobs," said Donna Scott, a Dunn County commissioner who ranches cattle with her husband, Bill.

The Scotts have three children, ages 28 to 35. One son is a welder whose work includes oil field equipment. Another son, along with his dad, started a fencing company that does oil field work. Their daughter moved back to Killdeer to open a coffee shop.

For Warren Hoffman, oil sparked a career transformation. Hoffman, 55, worked 30 years for the city of Killdeer, mostly as a police officer, retiring as police chief in 2010. Then he took a job with an oil company and now helps manage well sites for WPX Energy.

"Before oil, there really wasn't any opportunity. You stuck and held onto your job," Hoffman said. Oil "was like a ship going by, and you had another option. [Plus] everyone knows the oil business will pay more."

Oil has also been good for Lil Hoffman, Warren's wife, though she's seen firsthand the bust's effects. She and Warren have had 36 foster children over the years — in addition to their own 10 kids — so she can cook for crowds.

In 2005, just before the oil business began rolling, she opened Nana Lil's Café in Killdeer, an Americana eatery featuring everything from malts and cheese curds to fried chicken and chicken-fried steak.

The boom was a godsend. But with the bust, Hoffman's lunch and dinner crowds grew thin.

Still, even during the worst of times, the "landmen" — oil company workers specializing in mineral rights and lease issues — helped her retain a core lunch business.

In recent months, as oil companies have increased drilling and upped employment, business has perked up. "As you can see, it's kind of crazy," she said, grilling burgers during a recent lunch rush.

Eric Kehr, owner of the wood-floored steakhouse Buckskin Bar & Grill, has seen business improve this spring, too. But he's not ready for another all-out boom.

As Killdeer bulged with oil money from 2012 through 2014, Kehr's sales rose about 300 percent. But there was a downside: He had to expand his staff in a tight labor market, and restaurants can't match oil field pay. "We ended up hiring anybody with a pulse," Kehr said. Turnover was constant.

The Buckskin's sales are down about 50 percent from the oil peak but still comfortably ahead of the pre-boom years, he said. And the labor market has cooled some.

"I believe the boom was good for our area. But if I could decide whether or not to do the oil boom again, I would prefer that it heat up slowly."

Mike Hughlett • 612-673-700