WILLISTON, N.D.-How much is the oil boom in this state affecting its credit unions?
Some have put caps in place of $250,000 or $500,000 on deposits. Most have had to significantly boost teller wages-not surprising with local McDonalds paying at least $15 per hour. And everyone is having to deal with an energy rush that has led to North Dakota being dubbed the Saudi Arabia of North America.
At Western Cooperative CU here, CEO Melanie Stillwell said that membership growth has risen by as much as 7% year-to-date, while loans have grown by 11%. The catch is that the $259-million, 19,600-member CU doesn't portfolio its first mortgages, and Stillwell said that if numbers were adjusted to account for that business it would be closer to 15% or 20%.
"We do have pretty high consumer demand because the economy is so strong," she said. "It's so different than the rest of the country; our unemployment [in Williston] is 1% or lower," whereas the statewide rate is between 3-4%.
Just a few years ago the population of Williston, in the central western part of the state, was 12,000. But that was before the "man camps" began to sprout up, bringing an additional 9,000 residents. Similarly, the population in nearby Watford City has historically hovered around 1,400. But thanks to the oil boom, the McKenzie County Water Resource District recently calculated nearly 7,000 requests for rural water within a four-mile radius of the city.
Didn't Sign Up For This
"If you talk to the local residents, the most common thing I hear is 'Hey, we didn't sign on for this,'" said Denton Zubke, a lifelong resident of the area and CEO of Dakota West CU in Watford City.
Zubke offered the example of a typical land-owner with 2,000 acres, underneath which are 1,000 mineral acres being leased out by the oil company for $1,000 per acre over a three-year period. "So that just put $1 million into one of our members' names," he said.
And as residents receive those eye-popping royalty checks from the oil companies, CUs are dealing not only with increased deposits but increased loan payoffs. "That farmer that just got the $1 million, what he may do is pay off a half-million worth of loans," said Zubke, whose CU is about 80% loaned out. "I'm having extreme pressure on my loan portfolio in regard to payoffs, and I have extreme pressure on the deposit side with gaining too many assets. It can make me a very poor-performing credit union in a hurry."
Credit unions located across the Bakken-the name of the shale rock formation that reaches across western North Dakota, northeast Montana and Canada's Saskatchewan Province-have sought to limit deposits, capping them at $250,000-$500,000, although Zubke said his CU will accept some higher deposits from longtime members.
Long-time members and long-time members both find the mass migration of Western North Dakota is taking its toll. "Our main street is about three blocks long, and we've had traffic jams that extend in excess of four miles in every direction-it went on for close to two hours every night" during the summer, said Zubke. "You can go out on a hill in the morning before sunrise and it looks like a yellow snake of headlights going up and down the highway."
Zubke said that the McKenzie County Sheriff's Department has added more deputies due to rising crime in the area, and the state has added an additional 12 new patrolmen for the region. He noted that at least six people he knows have bought property outside of the area-in Minnesota, Arizona, Colorado and elsewhere-with the intention of moving.
$9 Million Deposit
Western Cooperative's Stillwell said that one member recently sold a business and tried to deposit $9 million at the credit union. WCCU recommends that members with deposits upwards of $500,000 meet with a financial planner about how to wisely handle the funds.
"We hardly have any rates on our deposits and certificates anymore, because truthfully we're trying to stop growing," she said. "We're not trying to grow, but it's automatic, and our growth is probably about 20%. It was higher than that last year, and we have to slow it down." Many other FIs in the area are also telling members they can't accept large deposits.
The landoffice business on the grasslands has had one interesting side effect; it's eliminated most of the tension between credit unions and banks. Zubke pointed out that institutions ar too busy struggling with increased deposits to be fighting each other. "There's no bank versus credit union issue here at all. There's so much business going on that everybody's running at full tilt."
Despite new fees from banks, "That has no impact here at this point; they'll pay whatever... they just want somebody that will open an account for them."
McWages Are Eye-Popping
The boom times are being felt far from the oil fields. Local McDonalds franchises are paying as much as $15-per-hour for entry-level positions, with some throwing in 52-inch TVs, and area CUs have had to follow suit. Stillwell said that Western Cooperative has increased its pay scale for tellers, but declined to go into specifics; Zubke said that the starting wage for Dakota West tellers is $14-per-hour, up for $8-per-hour just three years ago.
The mass migration into North Dakota is also changing the way credit uions approach staffing. Zubke explained that Dakota West is primarily hiring part-time staffers at present, because many newcomers to the area have families, are dealing with getting kids enrolled in school and often living out of a fifth-wheel trailer in the middle of the prairie. "So to expect both of those spouses to be working 40-60-hour jobs doesn't make for very good family life," said Zubke.
None of the chaos is expected to abate any time soon. With 197 rigs currently drilling in North Dakota, the state's Oil & Gas Division estimates an eventual total of 225 rigs drilling for nearly 15 years-that's approximately 33,000 wells over about 15,000-square-miles of Western North Dakota, said Zubke.
More 'Chaos'
And the region is struggling to catch up. Most of the local roads are not designed to handle that much traffic (let alone the kind of wear and tear that comes with regular use from heavy trucks), schools are not big enough, there aren't enough residences-either houses or apartments-and waste-treatment plants are functioning at close to capacity.
Many expect things to eventually stabilize, but when that will actually happen is "a big unknown," said Stillwell. Adding to the problem is that many workers are on a cycle of coming into town, working for three weeks, then returning home to a different state before returning for another three weeks of work and repeating the process.
"I think that we will see a slow transition to stability, but it will probably be over a period of five-to-12 years," said Zubke. But that won't start for a while yet, he added. "I think it's going to be chaos for another two years."
