Throughout the last decade, an oil and gas boom has led to rapid development and explosive growth in areas that rest on top of shale formations.
In many cases, the shale formations are located underneath developed areas, including neighborhoods. But unconventional gas drilling allows the gas wells to be built hundreds or thousands of feet away from the developed land, while still allowing access to the valuable minerals.
Hydraulic fracturing, or fracking, is the practice of injecting a mixture of water and chemicals into underground rock formations to release previously inaccessible oil and gas reserves that were trapped within the rock.
The September 2014 issue of HousingWire Magazine profiled fracking and its impact on the U.S. economy.
The development of horizontal fracking has enabled homeowners to lease their mineral, or subsurface, rights to oil and gas companies for mountains of cash. With all of that money to be made, gas wells have become more common in Texas, Pennsylvania, West Virginia and North Dakota.
The areas that have seen an explosion of gas drilling have also seen an explosion in real estate, both in prices and development.
One state that saw enormous growth was North Dakota. In a 2014 webinar titled, “Oil and Gas Exploration for Mortgage Bankers,” Harry Weiss, of Ballard Spahr’s Environment and Natural Resources Group, called North Dakota the “Saudi Arabia” of the U.S.
But now, as shale production and oil prices are falling, the previously booming areas are facing a new problem – a glut of empty houses and apartments.
A new report from Bloomberg highlights the problems North Dakota housing is now facing.
After struggling to house thousands of migrant roughnecks during the boom, the state faces a new real-estate crisis: The frenzied drilling that made it No. 1 in personal-income growth and job creation for five consecutive years hasn’t lasted long enough to support the oil-fueled building explosion.
Civic leaders and developers say many new units were already in the pipeline, and they anticipate another influx of workers when oil prices rise again. But for now, hundreds of dwellings approved during the heady days are rising, skeletons of wood and cement surrounded by rolling grasslands, with too few residents who can afford them.
“We are overbuilt,” said Dan Kalil, a commissioner in Williams County in the heart of the Bakken, a 360-million-year-old shale bed, during a break from cutting flax on his farm. “I am concerned about having hundreds of $200-a-month apartments in the future.”
According to the Bloomberg article, the Bakken region drilling rig count currently sits at a six-year low, causing many oil workers to abandon the state in search of work.
Officials in Watford City about 45 miles away have issued 1,824 permits for apartments, duplexes and homes in the past 18 months after only three houses were built between 1980 and 2000. They are in limbo, worried about filling the units.
“This lag time is driving me nuts,” said Brent Sanford, Watford City’s mayor, during a recent tour of construction sites with names such as Emerald Ridge Estates and Pheasant Ridge. “I’m now hearing words like, ‘This isn’t sustainable.”’