Energy Boom Lifts Small-Town Hope On Northern Plains
Dec 1, 2006

Wall Street Journal

WASHBURN, N.D. -- When the coal-fired power plant near this river town was being built in the 1970s, Mayor Al Christianson recalls how construction workers lined up every afternoon to buy beer from the Hi-Way Bar. "There was car after car after car," he says. "It was amazing."
Once the plant was complete, most of the workers vacated the trailers they'd been living in and left Washburn. The city's population gradually fell from 2,000 or so to its current total of about 1,300. "We really missed the boat," Mr. Christianson says.
Now, a new energy boom is reviving hopes that the good times might be back. Across North Dakota, little towns like Washburn see a golden opportunity to stem the population decline that has long bedeviled Washburn and all of North Dakota -- and they're determined not to blow it this time.
"We've got the best future we've ever had," Mr. Christianson says.
But the promise of new jobs may not be enough to attract people to cold, remote towns that lack sufficient housing, day-care, entertainment and other vital services. And not everyone in these towns is ready to make changes for growth's sake.
It's clear that new jobs are coming to Washburn. Next to the power plant north of town, a colossus of pipes and towering grain bins is rising from the prairie: an ethanol plant scheduled to begin turning corn into fuel in January. That has brought more than 400 construction and 40 permanent jobs. The companies running the plant are considering building another facility to convert coal to liquid fuels, which could bring more than 500 permanent jobs.
Optimism is spreading throughout North Dakota, which is in far better position than most states to exploit surging demand for both fossil fuels and fuels made from corn and other renewable resources. As oil prices have soared in recent years, alternatives like ethanol have grown increasingly economical. At the same time, exploration in difficult-to-tap oil fields -- such as the Bakken formation in western North Dakota -- has become more attractive.
Over the past two years, renewable energy projects that will cost more than $1 billion have been announced in the state, including five ethanol plants, three biodiesel plants and five wind farms. Oil taxes have helped to generate a $500 million state budget surplus. Watford City, an oil town of 1,357, hopes a new movie theater and steakhouse will draw young families. A new biodiesel plant in Velva, population 966, has the town hustling to find builders to meet housing demand.
But boom has turned to bust here before. The state's population peaked at nearly 681,000 during the Great Depression, then gradually declined as North Dakota bounced through the ups and downs of agriculture and oil, and young people left the state for better jobs and warmer weather. Today, with just 637,000 people, the state is so sparsely populated that it still has a single area code. Smaller towns have been hit hardest over the years as people migrated to Bismarck, Fargo and other larger cities.
In Washburn, Rachel Retterath is struggling to reverse that tide. As the city's economic development director, she's been trying for a year to bring a day-care center to town so workers with families will locate here. Day-care center operators have told her they need at least 65 children to make a center profitable, "but here you're only likely to get 18 to 20 kids," she says. "People are willing to move to small towns because they like the quality of life, but they don't want to give up anything."
Washburn perches on a slope overlooking a picturesque bend in the Missouri River about 40 miles north of Bismarck. Explorers Meriwether Lewis and William Clark made winter camp just up the river in 1804-05. Along the city's quiet streets sit five churches, three bars, elementary and high schools, and the ornate McLean County Courthouse. Hunters flock here for the pheasant, anglers for the walleye, tourists for the Lewis & Clark museum. One recent day, geese honked as a truck hauled wind-turbine blades over a river bridge.
Washburn relied heavily on farming until work began on the power plant and a lignite coal mine in the mid-1970s. Trailer parks popped up for the 1,000-plus workers who helped build the plant over about six years. A local bank hired extra tellers on Fridays to cash paychecks.
By the time the plant was done in the early 1980s, new homes were going up, but the exodus had begun. Over the years, as its population dwindled, Washburn lost a car dealership, clothing stores, farm-implement dealers and the Roxy movie theater. Home construction nearly came to a halt. The city wound up owning some of the undeveloped lots where homes were supposed to go.
Much of the same was happening across North Dakota. High interest rates devastated farmers who had borrowed heavily to capitalize on high grain prices. Dickinson, Watford City and other western North Dakota towns reeled from the 1980s oil-patch bust.
Mr. Christianson, 54 years old, whose parents closed the Roxy after running it for 42 years, watched Washburn decline while working at the power plant. Known around town as "Big Al," he ran for the Washburn city commission in 1996 because, he says, "nothing was going on." During his first term, "we spent at least two months talking about whether we were going to buy a pickup truck. One whole meeting was to decide whether it was going to be GM or Ford."
Over the next several years, Mr. Christianson and others pushed for change. Scores of locals, including many in their 20s and 30s, showed up for meetings at the American Legion hall where city officials wrote a strategic plan. "People came in and said we're tired of the potholes in the streets" and junk cars on unmowed lawns, Mr. Christianson says. In 2000, residents voted to levy a 1% sales tax for economic development and infrastructure projects like street paving.
Still, it was hard to get much going. The economic-development association, a public-private body, hired Washburn's first economic-development director in 2002, but she left after two years amid town officials' dissatisfaction that she hadn't attracted more businesses.
Her replacement, Ms. Retterath, is unusual for North Dakota -- a young person who never left the state. After growing up on a dairy farm in tiny Edgeley, Ms. Retterath, 32, graduated from the University of Mary in Bismarck and almost went to Washington to work for a senator. When the staffer who had hired her died, she says, "it was kind of my sign not to go."
She came to Washburn after marrying her college sweetheart, Justin, 33, who grows corn, wheat and beans and raises cattle nearby. For a while she commuted to Bismarck, where she worked at the state tourism department. But after having her second child, she decided she wanted to be closer to home.
Working out of a cramped City Hall office, she redid Washburn's Web site, spruced up a town brochure and spent weeks interviewing dozens of local business people. Some were leery of development, telling her: "I made my money. I don't need to be throwing it out the door to bring new people in," she recalls.
At the same time, ethanol plants were sprouting across the Great Plains. With oil prices climbing and the federal government creating new incentives to produce the gasoline substitute, farmers and private companies poured billions of dollars into building plants.
One coal-fired ethanol plant in the works elsewhere in the state asked to buy coal from the mine near Washburn. That prompted the power plant's owner, Great River Energy of Elk River, Minn., to consider building its own ethanol plant. It sounded like a great idea to Mr. Christianson, who helps develop new businesses for Great River and by then was Washburn's mayor too.
Great River and a partner, Headwaters Inc. of South Jordan, Utah, announced plans in August 2005 for the $90 million Blue Flint Ethanol plant. The companies think they have a competitive advantage because their ethanol plant will be powered by steam generated when coal is converted into electricity -- steam that normally goes to waste. Also, Great River has largely locked in its coal costs for many years to come thanks to a long-term contract with the mine.
Success isn't guaranteed. More than 100 ethanol plants are running or are under construction in the U.S. As corn prices have risen and the price of oil has moderated, ethanol's profitability has narrowed. But Great River officials say the plant could be an incubator for future energy projects. Great River, Headwaters and the coal mine's owner, North American Coal Corp., are conducting an engineering study on how to build a coal-to-liquids plant. That facility could generate electricity and produce ultraclean diesel, jet or other fuels. Investment in the plant, if it's ever built, could exceed $3 billion, company officials say. And the companies are considering two other North Dakota sites.
At the moment, what's most important to Mayor Christianson and Ms. Retterath is the ethanol plant's ability to draw families to Washburn. Two of the plant's top managers are North Dakotans who returned from other states, and many new hires came from elsewhere in the state.
Already, one got away. The plant's chief financial officer, Michael Grosz, 41, a native of Dickinson, N.D., was living in Boise, Idaho, when he hired on. "There was a distinct pull to come back to North Dakota," says Mr. Grosz, who is married with two boys. "Our parents were getting older and we wanted to be near to help." The Groszes hoped to live in Washburn but couldn't find a suitable house and wound up buying in Bismarck.
The town's housing stock doesn't turn over much. No new apartments have been built in years, and the few new homes put up in the past decade were quickly purchased. Now most builders are too swamped building in the bigger towns. Last spring, Ms. Retterath organized a meeting of builders in Bismarck "to basically tell them, we're here and we need houses."
One builder was Kyle Bergquist, owner of Elite Homes Inc. He was already talking with Washburn officials about buying city-owned lots that had lain vacant since the 1980s. The city sold him 30 lots for the cut-rate price of about $1,000 apiece, and he's turning them into Heritage Heights, a 30-home development on a hill with a view of the river valley.
Curbs and sewers are in place, and Mr. Bergquist has sold two four-bedroom homes that will have big front porches and three-car garages, for $150,000 and $180,000. One buyer is moving from Bismarck to help run a Washburn lumber yard that just sold to a Bismarck company.
The prospect of the coal-to-liquids plant has generated speculative investment, even though the plant won't happen for years, if ever. "I'm now in competition with a ton of out-of-state buyers that are buying huge chunks of land without even seeing it," Mr. Bergquist says. Two other local developers have begun projects designed to add another 50 homes.
According to the U.S. Census Bureau, Washburn's population dropped to an estimated 1,264 last year from 1,389 in 2000. Evidence that it might be moving in the other direction is so far just anecdotal.
In the past year, three couples have come from out-of-state, bringing eight children. After falling for many years, enrollment at the elementary and high schools edged up this year by one student, to 303, says Superintendent Robert Tollefson, who attributes it to the ethanol plant.
The city is building a new water plant, and some area investors are working to bring a hotel. On a strip of land that once was crammed with trailers, a farm lender is building a new office that will employ two to three people. Next door are a new branch of a Watford City credit union and new offices for two medical clinics.
Nurse practitioner Michele Leidholm, owner of one of the clinics, says, "I've lived here half my life, and on any given day I can look at the schedule and say I don't know half these people."
But growth in Washburn still faces hurdles, including some thrown up by people in town. Late last year, Bismarck businessman Scott Jorgenson bought a lot in Washburn where he hoped to build a smoke-free family restaurant serving alcohol. Ms. Retterath, Mr. Christianson and other local boosters welcomed it because the town's bars tend to be smoky and the two family restaurants don't serve alcohol.
To accommodate Mr. Jorgenson, the city commission had to consider changing the town's liquor ordinance to provide additional licenses. Owners of the local bars argued that new licenses weren't needed and in any case should be put to a vote of the populace.
Owner Ron Possen of Captain's Cabin Bar & Grill, known for its prime-rib sandwiches on toast, says he didn't appreciate that the city was also considering granting the new restaurant an exemption on its property taxes that could have saved it $5,000 a year. "Nothing was handed to me when I bought my business," says Mr. Possen, 51. "My place is for sale. If you want a place, come and buy mine."
On Feb. 21, commissioners passed a revised liquor ordinance by a 3-2 vote. The bar owners gathered more than 130 signatures on petitions calling for a citywide vote. By the time voters approved the new ordinance, 238-156, in June, Mr. Jorgenson had opened a Bismarck restaurant and given up, for now, on Washburn.
"I said, well then, screw it, I'll just do this thing in Bismarck," Mr. Jorgenson says. But he still owns the Washburn site and says next summer he'll reconsider opening there.
Write to Bryan Gruley at bryan.gruley@wsj.com