Boom on the Bakken: Demand for Construction Exceeds Supply in North Dakota

by Jessica Porter | Jan 31, 2012
Life in western North Dakota is unlike anywhere else in the country...

Life in western North Dakota is unlike anywhere else in the country. Despite extreme weather conditions, the state managed to escape any kind of economic recession and boasts an unemployment rate of just 1 percent. Since August 2008, the workforce has increased by almost 10,000 people, resulting in towns that developed minimally during the past 30 years almost doubling in size. It’s safe to say business is booming in North Dakota, thanks to the Bakken Shale.

The Bakken Shale, an underground rock formation estimated to contain billions of barrels of oil, predominately falls in North Dakota, but also covers parts of Montana and Saskatchewan, Canada. Drilling has been going on in the area in phases since the 1950s, but the current boom is expected to produce the largest amount of oil.

With so much oil comes an overwhelming need for storage facilities and processing plants—a need most oil companies currently cannot meet. The North Dakota countryside is lined with flames due to a process called flaring—burning excess natural gas that is drawn up with the oil because of the lack of storage facilities and plants. Because no oil company wants to see its profits go up in smoke, a greater demand for processing plants exists than the supply of contractors and materials to build them.

Westcon Inc., Bismarck, N.D., has been working on the oil patch since 1981. The firm has experienced construction booms in the past, but nothing like this.

“It’s great to be a part of this. We are out in the patch just like when the company started, but the requirements are much different now,” says Sue Gustafson, marketing director for Westcon. “Everything has changed so much; it’s much bigger than it was back then.”

Now, 70 percent of all Westcon’s projects are energy related, such as gas processing plants in Williston, Belfield and Watford City, N.D., that range from $65 million to $300 million in total installed cost. Westcon also is completing an existing plant expansion for Whiting Oil in Stanley, N.D., and previously constructed several compressor stations for Hess Corporation and OneOK.

Westcon Industries currently is building the $175 million Garden Creek Gas Plant in Watford City, N.D., and subcontracted Bismarck-based Miller Insulation Co., Inc. for all the piping and equipment insulation work. This relationship began more than 30 years ago and has grown during the boom. The companies now work together on many shale projects each year.

Miller Insulation has been in business since 1973 doing insulation work on the oil field and on commercial and residential projects in nearby towns. Now most of Miller Insulation’s projects are on the Bakken. Its scope of work usually includes insulating pipes and vessels for protection and to retain heat, but it also does scaffolding, sheet metal and carpentry work.

When it comes to working on the shale, there is no room for error and no excuse for delays.

“Before the boom, we did a lot of work in the ethanol industry—we’ve insulated 40 percent of the ethanol facilities in the United States—so we’re used to working in fast-paced situations,” says Brad Miller, president and CEO of Miller Insulation. “They want you to get it done quickly, but they also want you to do it safely.”

Remaining on a tight schedule can be even more difficult with the severe materials and equipment shortages that stem from the desolate location. Competition for the resources that make it to the shale is fierce. For example, Westcon needs concrete for one of its projects, but all available concrete in the area is being used for an interstate project along I-94.

This isn’t the first time Westcon has experienced concrete challenges. Because plant projects occur all year long, including in the bone-chilling winter months when the temperature can fall to minus 80 degrees with the wind chill factor, many processes need special attention. Westcon once poured concrete in minus 20-degree weather. Last winter, fuel bills to keep facilities heated when concrete was poured cost around $20,000. Weather that cold not only takes a toll on equipment and materials, but also on the workforce.

“Some people just aren’t cut out for it and can’t do it. You really have to be a tough breed of people,” Miller says. “That’s one thing about North Dakotans: If you’re still here, you’re probably pretty tough; although we have to give the travelers credit for sticking it out.”

Contractors also face an extreme housing shortage, forcing companies that work on the shale to come up with creative ways to shelter their workers. Some contractors rent rooms for employees in “man camps,” dorm-like facilities with bedrooms, common rooms and sometimes even recreational activities such as mini golf. Others companies, such as Westcon, which has about 600 workers in the area, bring in trailers. Miller Insulation, which has anywhere from 180 to 200 employees on the shale at a time, also rents trailers and rents or buys some of the few houses in the area.

In addition to the housing problem, the local infrastructure requires major upgrades, which brings general contractors to the shale from the surrounding areas, such as Fargo, N.D.-basedROERS Construction.

“Along with the oil boom comes a huge demand for buildings, roads and infrastructure and all the elements that go with it, such as retail and restaurants,” says Lance Ziebarth, president of construction for ROERS Construction. “There’s just no way the local contractors could gear up fast enough to have enough volume to take care of the need created by the boom.”

ROERS Construction has worked in Minnesota and the Dakotas for years, but in 2010 the contractor decided it was time for a permanent presence in western North Dakota and on the shale. The company’s second office, ROERS West, is based in Dickinson, N.D. The company also plans on opening an additional office in Minot, N.D., next year.

“It’s not only the energy companies that need contractors; it’s the whole community that needs the infrastructure that goes along with the boom,” Ziebarth says.

The company predominately builds commercial and multifamily residential projects, such as a $10 million wellness center at Minot State University. Multifamily housing projects are particularly in demand, with ROERS West building 190 units during the last year. The firm also does energy projects, such as a large oil facility in Minot that is part of a $20 million complex that includes a warehouse, repair shop and office space.

With the expansion to a new area, ROERS Construction has made significant changes to the way it performs work during the past 15 years—from hiring new staff to the amount of travel time required for employees. Before, ROERS was predominately a regional firm servicing projects within a 150-mile radius; now, most of its work is more than 300 miles away.

“It’s exciting, but it’s a lot of hard work. The expansion stretches ownership, management and workers in the field. Everyone has to put in extra effort,” Ziebarth says. “But it’s worth it because it’s better to be busy and the margins are better.”

Though the company sees benefits to having multiple offices in the state, employees, who mainly live near Fargo, must grow accustomed to a new way of life. Employees usually work four 11- to 12-hour days in the Bakken before a three-day break back home. To ensure work is done efficiently statewide, ROERS sends its most experienced employees west to the Bakken while newer employees and trainees stay at home to strengthen their skills in the local market.

Even though the ROERS offices are 300 miles apart, transporting materials from the Fargo headquarters to the Dickinson office and to projects in Minot has proved to be more effective than relying on local materials. Access to materials in the more urbanized eastern part of the state, surrounding Fargo, allows the company to meet demand more efficiently.

“The overall mode of operations when you go to North Dakota is you better have resources to execute,” Ziebarth says. “They need contractors who are willing to do whatever it takes to get the job done, and that’s a difficult thing to do when the resources aren’t found locally.”

The explosion of construction projects on the Bakken Shale is not expected to end anytime soon. Miller predicts work could continue booming for another 15 years, with just a few minor dips—an incredible amount of time compared to the usual boom periods of three to five years.

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