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Cover Story
Hiring Frenzy
Vol. 58   No. 6
The North Dakota oil boom has fueled uncontrolled growth--and HR headaches.

By Dori Meinert  6/1/2013
 

When Gregg Thompson stepped off the Amtrak train at Williston in January last year, he had dreams of making it big. He had heard news reports about this tiny town in western North Dakota where employers promised jobs paying $90,000 a year.

After losing three jobs in a row because of the poor economy back home in Seattle, Thompson was ready for a new start.

Nothing prepared him for that first night. The city’s 700 hotel rooms were full. To stay warm, he crawled into a trash bin behind a mattress store, figuring the discarded mattresses would provide some protection from subzero temperatures.

Despite the dismal start, Thompson noticed an abundance of "help wanted" signs while walking around the next day. He returned to Seattle, packed his van with supplies and drove back.

"It was kind of risky," he admits now, but "the opportunities and the money were so great, I decided I would tough it out."

Exploding New Frontier

Williston was a sleepy town of 16,789 just three years ago. Now it’s the epicenter of North Dakota’s oil boom, with a population expected to grow to 41,500 this year. While the rest of the country is still recovering from the recession, Williston has an unemployment rate of less than 1 percent. Many liken the onslaught of people to a modern gold rush.

But the boom has brought challenges. HR professionals—charged with hiring, training and retaining all those new workers—are at the center of this rapid growth. They can’t fill positions fast enough. They have trouble keeping workers. After being hired and trained, many employees leave as soon as a higher-paying job comes along. Even with some employees earning top pay, HR professionals recognize they can’t keep workers for long without adequate housing, highways, police and fire protection, health care, schools and other amenities that could make this town the workers’ permanent home.

"This kind of growth happened in other places of the country at a controlled rate, and so, over time, companies could see it coming" and plan accordingly, says Helen Askim, HR director for Williams County, home to the city of Williston. "None of us who have been here a long time have experienced this kind of growth before."

Although growing pains are greater in Williston because of the fast pace and large scale of the oil and gas drilling there, lessons learned in boomtowns apply to other cities facing rapid economic growth, says Julia Haggerty, a policy analyst with Headwaters Economics, a research group in Bozeman, Mont.

"Infrastructure and rapid service demand growth are the big hurdles," she says.

In Williston, the quiet open prairie has turned into an industrial zone. Thousands of trucks used for drilling operations rumble along roads built for far less traffic. The lack of housing forces many newcomers to live in cars and campers. Grocers can’t keep shelves stocked. Police, firefighters, hospital workers, trash collectors and teachers are overburdened.

The Oil Boom

Driving growth are new technology and techniques that allow drillers to retrieve oil from the Bakken shale formation below parts of North Dakota, Montana and Canada. Hydraulic fracturing, or "fracking," and horizontal drilling make it possible to retrieve the oil. As a result, North Dakota has become the country’s second-largest oil producer, surpassing Alaska and following Texas. There are more than 8,300 wells and 186 drilling rigs, with more to come.

The attraction of high-paying oil jobs makes Williston the fastest-growing small city in the nation, with a 9.3 percent population increase from July 2011 to July 2012, according to the U.S. Census Bureau.

And the Census Bureau doesn’t count the heavy influx of temporary workers who also rely on city services. City officials estimate that the "service population" of temporary and permanent residents could top 50,000 in 2017.

There are 157 oil and gas operators in North Dakota, plus hundreds of subcontractors that provide short-term workers for the labor-intensive drilling phase. Drilling requires rig workers, heavy equipment operators, truck drivers and general laborers. At each drilling site, drivers typically make 2,000 round trips for truckloads of water, sand and waste.

Oil and gas jobs statewide are expected to peak at just over 60,000 from 2020 to 2025, before tapering off to 50,000 as drilling jobs are replaced by fewer but longer-lasting production jobs, according to the North Dakota Department of Mineral Resources. Employers that own leases bring in their own workers to maintain the wells. Although it takes fewer workers to monitor wells, those jobs could last 30 or 40 years. Workforce projections vary, but they all depend on the fluctuating price of oil.

Workers who don’t qualify for oil field jobs easily find positions in restaurants, hotels and other expanding businesses. So far, drilling has created 40,856 direct and 20,000 indirect jobs statewide, according to North Dakota State University researchers. Williams County alone gained 926 new businesses from 2007 to June 2012, according to Job Service North Dakota, a state agency that matches job seekers and employers.

North Dakota 'Man Camp' Offers One Solution to Housing Shortage

What do you do when you need workers quickly but there's no place for them to stay?

When the oil drilling phase was ramping up in western North Dakota, many contractors turned to crew camps, commonly called "man camps" because the population skews heavily male.

There are 25 crew camps in the Williston area, with almost 9,000 bedroom units. Many rival the size of nearby towns. In fact, many have their own water supplies, haul out their waste and have their own security forces.

The attached modular units with dorm-like bedrooms often share a cafeteria. Common areas may include large-screen TVs, pool tables, weight rooms and computer centers. Most camps advertise 24-hour security and prohibit alcohol, drugs and weapons.

At the 343-bed Solsten Hotel, a crew camp just south of Williston, the walk-in rate is $95 a night, including meals. But employers pay discounted rates based on how many of their workers stay there.

Todd Crawford, 46, an electrician from Brainerd, Minn., says the crew camps are clean and convenient. He stayed at the Solsten recently while on a six-week job. Crawford has been going to Williston on and off for about 18 months because there isn't enough work at home.

"If I didn't have this as a fallback, I wouldn't be able to make the house payment," he says. He works 10 hours a day, six days a week, and has no desire to socialize.

He prefers the security of the crew camp to other options. A previous employer put him up in a rental house with four men to a room, where he witnessed drunken brawls.

Not all workers housed at crew camps are men. About 10 percent are women living in Bear Paw Lodge's 500 units, just north of Williston. The women share a separate wing. The camp is one of 12 in the state operated by Target Logistics. Camp employees live there, too.

Ernest Salters, 27, of Charleston, S.C., is a chef. He and other camp employees work 12 hours a day, seven days a week, for six weeks straight with one paid day off. Every six weeks, they get a two-week unpaid break. Salters was out of work for a while, and because he likes adventures, he thought he'd give North Dakota a try.

Scarce Housing

Within three days of his arrival, Thompson, 40, was offered a job as a manager at Walmart with the highest pay he’d ever earned. However, for the next month he continued to live out of his van, cooking meals on a camp stove and showering at a gym. Then he bought a used camper and paid $800 a month to park—along with dozens of other trailers—in someone’s yard just outside the city limits.

"It’s the only place in America you can make over $50,000 a year and still be homeless," he quips. In January, a year after he arrived, Thompson finally snagged a one-bedroom apartment for $1,000 a month, thanks to a friend’s connections.

Lack of housing has become employers’ greatest obstacle. To attract qualified workers, many recruiters are providing temporary housing or housing allowances. Acme Tools, for example, which plans to open a store in Williston during late summer to rent and sell construction equipment, built four apartments above the store as temporary employee housing. It also purchased a four-bedroom house as a group home for employees until they could find their own residences.

"If you don’t offer housing or compensation for housing, you can’t compete," explains Toni Gruenberg, an Acme recruiter.

Until last fall, Walmart brought in employees from other stores, housing them in hotels and paying per diems. The store used temporary workers who were bused in by a staffing agency. The Williston store now has about 350 employees but needs 150 more to be fully staffed, Thompson says.

Many oil company contractors house their workers in massive crew camps, commonly called "man camps." More than 9,000 prefabricated units have been plopped down in fields around Williams County.

JMAC Resources, a provider of oil field services, offers housing to about two-thirds of its 300 employees, says Judy Billehus, HR coordinator. The company owns town houses, mobile homes and crew camps, giving it an advantage over competitors.

Public agencies find it difficult to attract police officers and public works employees without housing. The city of Williston offers a $350-a-month housing allowance to employees. It also has partnered with a developer to build 40 rental units.

This approach has "worked wonders for us. We really struggled to keep staff," says Shawn Wenko, assistant director of economic development for Williston. Since 2009, the city staff has grown from 93 people to 203.

Williams County owns 26 apartments and rents them to employees, making it easier to attract talent. But there are downsides, as well.

"We are HR managers who end up being landlords," says Askim, who complains she spends too much time dealing with employees’ maintenance gripes. "There are huge complications that come from being an employer and a landlord. If your employee is a bad tenant, what do you do?"

If workers’ job performances aren’t up to par and the employer has to let them go, HR professionals have to evict them—knowing there’s no place else for them to live. The county’s leases require them to move within 14 days of termination.

Talent Wars Ignite

Oil and gas companies pay so well that other employers find it difficult to compete. Walmart starts entry-level employees at $17 an hour. Fast-food restaurants offer signing bonuses. Still, turnover is high.

"Although we’re paying pretty good money, we can’t match the $25 to $35 an hour that oil companies pay," says Thompson, Walmart’s grocery department manager.

Recruiters at well-established companies try to play up the stability they offer, the regular hours, the health benefits or the family-friendly atmosphere when talking with applicants. Yet "it’s a hard sell when they’re here for the dollars," says Pam Stromme, HR manager for Horizon Resources, a cooperative that operates grain elevators and convenience stores.

One day last spring, Dan Bjerknes, HR director at Mercy Medical Center in Williston, received six resignations, bringing the number of unfilled positions at the center to 60. The 25-bed critical-access regional medical facility employs 450 people. The turnover rate last year was 40 percent, compared with 17 percent in 2010 when the staff totaled 490.

"One receptionist took a job in HR for an oil industry company offering her $5 more an hour than we are paying. She had absolutely no HR experience," Bjerknes says. "Probably not a day goes by that I don’t have a wage discussion with managers and employees."

Despite the hospital’s good health benefits, "money talks," he says, and it’s difficult to keep employees. And workers frequently don’t give two weeks’ notice.

At the same time, the medical staff treats more patients and sees more severe trauma cases involving those in high-risk drilling jobs than it did just a few years ago. Emergency room visits increased from 10,774 in 2010 to 17,362 this year.

To compete with other employers, the hospital has offered market and merit increases for the past two years, and Bjerknes expects to do so again this year.

In addition, he revamped employee orientation to make it interactive and welcoming. The message to new employees is: "You may make more money someplace else, but you will not be treated better."

Bjerknes also coaches managers, who are afraid of losing employees, on how to pick their battles. Managers learn to overlook minor infractions such as dress code violations and lack of punctuality.

Gruenberg says she’s been burned too often by employees who leave for more money. Acme often trains them only to lose them to someone down the street paying $1 more an hour. She now looks for evidence that applicants have had some stability in previous jobs.

The glut of jobs has made some employees bolder and harder to manage. If they don’t like what a manager says to them, they walk. That is compounded by the fact that many employees are promoted to manager positions without proper training or experience, adds Cindy Sanford, customer service office manager at Job Service North Dakota. New managers often don’t possess the necessary soft skills.

Burnout among all workers has become a common problem. "You can only work so many hours in a week for so many weeks in a row," Stromme says. "It is chaos. Every time you turn around, there is another stack of papers." In addition to her HR duties, she supervises an accounting staff that has grown from nine people to 20 since 2006. The staff is growing faster than the company can expand its physical office space.

Frequently, workers leave because they’re homesick or can’t cope with the brutally cold winters. (Temperatures can drop to 20 degrees below zero.) Others never intend to stay. In such cases, some employers offer rotating schedules to allow workers to return home to other states for a period each month. Many construction workers and truck drivers who service drilling sites work two weeks on, two weeks off.

Nicholas Ramsey, a 32-year-old truck driver, returns to his wife and four children in Idaho for two weeks a month. "It’s exhausting and lonely, but we’re making it work for the time being. It helps make ends meet," says Ramsey, who sleeps in his truck. He and his wife have no desire to move the family to North Dakota.

The most-coveted jobs are high-paying, long-term oil and gas company jobs. Continental Resources, one of the largest oil producers in North Dakota, has hired 96 of its 114 North Dakota employees since 2010, says Ray Gonzales, vice president of HR. The company receives about 500 applications for every oil well operator position, but most applicants are too green. Production supervisors prefer those with field experience, such as drilling subcontractors’ employees.

Inexperienced people don’t usually last. The harsh weather, along with physically demanding work and long hours, drives them away, says Randy Rogers, Continental’s vice president of talent acquisitions.

Production supervisors look "for folks who aren’t afraid of getting down in the muck and getting their hands dirty and have experience doing that," says Jennifer Gibson, HR generalist at the company.

Business Lessons from Boomtowns: Look at the Long-Term Growth

New drilling techniques are allowing oil and gas companies to move into areas of the United States that have never been tapped before—from New York and Pennsylvania to the Rocky Mountains and the Southern Plains.

Researchers have studied the boom and bust cycles of energy development for decades. In doing so, they have learned some lessons that can help business and community leaders mitigate the negative impacts of rapid growth. Among the suggestions:

  • Do as much advance planning as possible, but be prepared to adapt.
  • Collect good data. What is the capacity of emergency management services? What is the capacity of the area's sewer and water systems?
  • Create a working group of stakeholders, including leaders in the growing industry, community leaders, other employers and residents. Ensure that the group has funding and a mandate to consider socioeconomic effects over time, advises Julia Haggerty, policy analyst for Headwaters Economics.
  • Obtain commitments from leaders of companies in the growing industry for long-term monitoring of environmental and social changes that affect residents and other employers. Some communities hire a liaison to work with the industry on their behalf.
  • Modernize tax systems. For example, compared with other western states, North Dakota sends far less of its state taxes from the oil and gas industry to local governments to address infrastructure and other needs, according to an April 2012 study by Headwaters Economics. Changes to state and local tax laws take time, leaving needed improvements unfunded.
  • Plan for the long term. The boom will end eventually. "If you can capture these revenues and turn them into a long-term investment, that's the best scenario," says Jeffrey Jacquet, an assistant professor at South Dakota State University who specializes in the impact of energy development. North Dakota is investing 30 percent of its state oil tax revenues into a "legacy fund" that can't be tapped until 2017.

Tensions Flare

Not surprisingly, the rapid change in the Williston area is escalating tensions between longtime residents and newcomers. National media attention has attracted people who are unemployable in their home states, straining social services and law enforcement. Since 2009, Williston police, fire and emergency calls have more than doubled.

During one March weekend, a man was shot in the face outside a strip club and another was stabbed after drinking with his crew-camp roommate.

"Are we getting undesirables? Absolutely," Wenko says. However, he adds, "there’s probably 40 good people moving here [for every] one or two undesirables."

The city’s 2013 operating budget is $81 million, up from
$47 million last year. But $29 million of that depends on state aid. In addition to road and highway improvements, the city desperately needs to add a fire substation and expand a wastewater treatment plant and landfill, Wenko says. "We need about $625 million in infrastructure improvements to help us get caught up," he notes.

The state has collected $2.65 billion in tax revenues from the oil and gas industry. But less than 1 percent comes back to Williston, he says.

Local officials are asking for financial relief. Several bills pending in the state legislature would change the distribution formula to help areas most affected by energy development. Many employers have joined city officials to advocate for the change.

Community leaders met with oil and gas industry leaders several years ago to discuss the potential for growth. "No one, not even the big players in the industry, anticipated that the pace of growth would be this dramatic," Askim recalls.

City officials are understandably cautious. An oil boom in the 1980s ended abruptly, leaving residents to pay $27 million in debts for infrastructure and utilities. This time, subdivision developers are required to pay for such improvements, putting longtime residents more at ease, Wenko explains.

Meanwhile, energy companies are looking to soften their impact on the community. In December, oil and gas operators Oasis Petroleum Inc. and Statoil and service companies Baker Hughes Inc., Halliburton, Nabors Industries Inc. and Schlumberger launched "Energy Outreach Williston" to find ways to help. So far, the group has contributed $160,000 to school improvements and county social services.

"We brought the crazy with us," says Kelley Rankin, Statoil’s facilities coordinator and communications manager. "We want to give back."

They aren’t the only ones. Enbridge Pipelines donated $50,000 to the Williston Fire Department.

Last spring, oil and gas industry employees were among thousands who turned out for a citywide cleanup day. "It’s built some great relations between longtime residents and the influx of new workers," Wenko says.

Walmart’s Thompson says tackling the challenges of a growing community sometimes means throwing out the rulebook. "We’ve gotten very good at adapting to the situation," he says. "We really are like a big extended family. Every time you have people overcoming hardships together, it brings you closer."

Dori Meinert is a senior writer for HR Magazine.

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