Beckoning the Bakken: Will the Oil Boom Reach Montana's Impoverished Fort Peck Tribes?
In Poplar, Mont., the Bakken boom is tantalizingly close. It's much closer than the 71 miles that separate this one-stoplight town on the Fort Peck Indian Reservation from Williston, N.D, the epicenter of the largest oil play in the lower 48. Bakken wells are just over the Missouri River, the reservation's southern boundary, and across Big Muddy Creek, its eastern boundary. The rigs are there on the Montana and North Dakota prairies every day pumping to the surface thousands of barrels of oil and riches.
But the wells are not in Poplar. The town itself conveys that reality. The seat of the Assiniboine and Sioux tribes remains a reflection of the poverty that's long pervaded the reservation—a reflection, as some tribal members describe it, of "historical trauma." Historical but persisting: The unemployment rate among tribal members holds at around 60 percent. On the oil patch near Sidney, Mont., and in western North Dakota, it's less than 2 percent.
Where there's oil, the activity of tens of thousands of truckers, roughnecks and flaring natural gas appears in nighttime images from space, a cluster of light suggesting a sprawling metropolis on the northern plains. In Poplar, in March, it's quiet. Boarded-up homes and businesses line icy streets. There's no parade of oil-hauling trucks; rez dogs still dare walk the highway.
Nearly three years ago, around the time North Dakota's monthly oil production hit 10 million barrels for the first time, the people of Poplar were coping with a youth suicide epidemic. Five Poplar Middle School students killed themselves, and 20 more attempted to, during one school year.
The boom isn't in Poplar, but the Bakken is. The reservation sits several thousand feet above what's thought to be the western edge of the geologic formation, an ancient slab of rock about the size of West Virginia laden with billions of barrels of oil. That reservoir now accounts for more than 10 percent of the country's total production. To the leaders of the Fort Peck tribes, it promises something more. (Related: For Blackfeet, Fracking Has Too Much Economic Upside)
Tribal Council Chairman Floyd Azure says tapping the Bakken would make the tribes "more sovereign by the barrel," echoing the mantra of tribal leadership on North Dakota's oil-rich Fort Berthold Reservation. "That means that we can take care of ourselves. If we didn't have to depend on the federal government, we'd be a hell of a lot better off than we are now. We depend on the federal government for damn near everything we have."
Azure likens oil exploration to gambling, and the tribes are all in. Over the last few years, the tribal government and individual members have together leased about 300,000 acres to oil companies. That's a third of the tribally held land left on the reservation, which covers 2 million acres. Another 280,000 non-tribal acres on the reservation have also been leased. These leases represent what one executive of an oil company with 120,000 acres of holdings on the reservation calls the Bakken's "western expansion," the prospects of which appear promising per the industry's principle of "closeology." It's enough for oil companies to bet that horizontal drilling and hydraulic fracturing—the techniques that unlocked the Bakken just to the south and east—will work here, too, on this largely untapped expanse of prairie. (Related: Oil and Gas Boom in Indian Country! Tribal Leaders and EPA Meet in Denver)
But they haven't struck oil yet. Oil companies have drilled seven Bakken wells over the past several years and each well produced more water than oil. Thousands of landholders who leased land—for as little as $50 an acre—have yet to see a dime in royalties. Still, everyone thinks it's only a matter of time before the boom arrives. Closeology isn't an absolute, but it is convincing to hopeful oilmen and tribes with nothing to lose. (Related: The Growing Economic Might of Indian Country)
The tribes can't separate oil from water. The two have an entangled history here. Drilling began northeast of Poplar in 1952. Back then, as now, the oil companies pumped to the surface more water than oil. Those companies disposed of briny wastewater, contaminated with carcinogenic benzene and other compounds, in unlined pits. Holding tanks, pipelines and plugged oil wells leaked. Over the course of five decades, billions of gallons of brine seeped into Poplar's drinking water aquifer. Between 1999 and 2010, the Environmental Protection Agency issued five emergency orders to three oil companies, forcing them to, among other things, build a drinking water pipeline to certain residences and deliver bottled water to others.
More than 10 years before the EPA's first emergency order, the tribes, having already detected high levels of chloride in wells, began planning a pipeline to draw clean water from the Missouri River. Congress authorized funding in 2000. Last year, water began flowing from a new treatment plant on the Missouri to Poplar, and much of the rest of the 3,200 miles of pipeline are being built now.
A pile of massive blue pipes sits along the highway east of Poplar—pipes that will eventually bring water to Brockton, 14 miles down Highway 2. Forrest Smith, a chemical engineer and director of the tribes' minerals department, drives past them on his way to a nearby oilfield. "The sins of the past are still upon us in the present, and we always have to deal with them," he says.
Smith, an Assiniboine from the Frog Creek clan, was schooled in Bozeman, worked on a drilling rig in California for a few years, and then came back home. As he steers his pickup over snow-packed two-track, he talks about the Bakken, calling it "a light at the end of the tunnel," a chance to put tribal members to work.
"You'll lose your culture and language faster with poverty than you will with economic development," he says.
Smith pulls up to a pumpjack standing over one of the 10 oil wells owned and managed by the tribes, five of which are in production. It squeaks and whines as the crank drives the polishing rod in and out of the earth. This is not a Bakken well, but a much shallower, decades-old vertical well that produces about five barrels of oil a day, and three times as much salt water. The tribes' five wells produce about 80 combined barrels a day, equating to a little more than $1 million a year in revenue, Smith says. All of the wells on the reservation, including those on non-tribal land, produce a total of around 1,100 barrels a day—less than one percent of the production on the Fort Berthold Reservation in North Dakota.
The enormous production from the Bakken required a revolution in the way oilmen drill. Geologists often describe the formation, about two miles down, as an Oreo cookie—two layers of shale sandwiching a middle layer of lighter-colored sandstone, the reservoir rock. The reservoir rock is thin, making it difficult for a vertical well to plug into a pay zone, and it also holds oil tightly, the two things that kept oil companies from extracting the oil since the Bakken's discovery in the 1950s.
Over the last 10 years, oilmen have figured out how to worm down and approach the middle of the Oreo from the side. They drill a well and then send down a second, flexible drill that bores horizontally, expanding the pay zone exponentially. Then they crack the rock to force oil to flow, a technique called hydraulic fracturing, or fracking, which involves pumping millions of gallons of pressurized water mixed with sand and chemicals down into the well. There would be no Bakken boom without the combined trick of horizontal drilling and fracking.
But the Bakken appears to be a different beast below the reservation. The formation is a few thousand feet shallower there, meaning the reservoir rock may not have matured to the same extent. Additionally, the Brockton-Froid Fault cuts across the far-southeastern corner of the reservation, T-boning the Bakken and pooling water. Geologist Jay Gunderson, of the Montana Bureau of Mines and Geology, says it's possible that the fault represents the Bakken's western boundary, east of which oil companies have the best chance of drilling economic wells. But no one's certain. Oil companies are still leasing land well to the west of the fault.
In the past year and a half, an oil company partnering with the Fort Peck tribes drilled two horizontal Bakken wells in that southeastern corner of the reservation. But even there the wells yielded more water than oil, rendering them unprofitable, at least at today's oil prices.
Smith, back in the pickup, says the failed wells present a problem. "As an experienced Texas oilman told me a couple months ago, 'Oh, Forrest, you guys just stubbed your toe on your first two wells, and that happens.' But that's a real painful toe-stubbing," he says.
It's painful because of what it signals to other oil companies considering doing business here.
The first thing Lynn Becker asks upon meeting in his office in Wolf Point is where I stand on oil development. I respond with boilerplate about journalistic objectivity. He says that's impossible, because, after all, I drove 500 miles from Missoula to get here, the minivan burning about 35 gallons of gas.
Becker, a veteran oilman, friendly and sharply dressed, is the vice president of Native American Resource Partners, a private investment firm that in 2009 partnered with the Fort Peck tribes to create the Fort Peck Energy Company. His office is a room he rents inside the Good Shepherd Lutheran Church, which looks more like a residence than a church. He works fulltime in Wolf Point, the reservation's largest town, about 20 miles west of Poplar traveling back home to Denver for a long weekend every couple of weeks.
NARP's business model is based on the belief that the country's 55 million acres of tribal lands are, in Becker's words, "either underexplored or highly unexploited," and that includes the Fort Peck Reservation's 2 million acres. A huge map of the reservation is pinned to the church hallway's wall, and Becker points to entire townships where there are no wells. Elsewhere, the map shows plenty of abandoned wellbores, but most of those didn't reach Bakken depths. So Becker sees the map as essentially blank. Closeology dictates that new holes should be poked all over it.
"Here on the reservation, we just need a great discovery—you know, someone to see that, 'Yeah, the Bakken oil is here for sure, and this is how we're going to get to it,'" he says.
In creating the Fort Peck Energy Company, NARP and the tribes entered into an "area of mutual interest" agreement, essentially meaning that all tribal oil and gas leases would go through the new company. NARP brought to the table access to capital and expertise, and the tribes provided their mineral rights. Each owns half of the company. Becker has said in the past that the deal moved the tribes from "passive development to active management of their oil and gas estate."
In 2010, FPEC went about leasing land. Becker, as manager of the company, assembled a team of about 10 people to solicit and process leases. They focused on the southeast corner of the reservation—the area on the east side of the Brockton-Froid Fault, closest to Montana's productive Bakken wellsand pieced together a 45,000-acre block. FPEC paid most landholders $50 per acre, a price the company set, forgoing the traditional competitive bidding process. A map of the acreage hangs from the wall behind Becker's desk.
In 2011, FPEC sold 20,000 acres of those leases to a drilling company, Australia-based Samson Oil and Gas, for $175 per acre. Samson drilled two test wells, which didn't prove up—the "toe-stubbing" that Forrest Smith talked about. In 2012, FPEC sold Samson an additional 10,000 acres of leases valued at $225 per acre, but Becker says no cash, only acreage, exchanged hands. That deal gave Samson a two-thirds stake in the 45,000-acre block, and left FPEC with a one-third stake. The tribes own half of FPEC's share.
The tribes' stake, Becker says, is still much more valuable than the roughly 3,000 acres the tribal government originally held within the 45,000-acre block. But as the tribal council turned over, as it does every two years, its members began to question whether FPEC was serving the tribes' interest. In 2011, the council bypassed its agreement with NARP and independently leased about 24,000 acres of tribal land to two oil companies for $6 million—or $250 per acre. Earlier this year, the council voted to terminate its agreement with NARP altogether, though FPEC remains.
Stoney Anketell, a council member and chair of its Oil and Gas Committee, and a veteran oilman himself, is among the more outspoken critics of NARP. He says the tribes' agreement with the company monopolized leasing, likely lowering prices paid to landholders. It also deterred other oil companies from doing business on the reservation, a situation that was only exacerbated by the two failed wells. Anketell calls those wells the "kiss of death" because they told the industry, "'Oh shit, the Bakken ends there'... That's a big thing to overcome."
Anketell's distrust of NARP stems partly from a lawsuit involving NARP President John Jurrius and the Ute Indian Tribe in Utah. In 2000, Jurrius became the tribe's financial adviser and helped it create an energy company, Ute Energy. Jurrius resigned in 2007. In 2008, the tribe banned Jurrius from the Uintah-Ouray Indian Reservation, and then later sued him, alleging that he "wrongfully and fraudulently" claimed an interest in Ute Energy. Jurrius countersued. They eventually settled the suits. Meanwhile, in 2008, Jurrius, in partnership with Becker, formed NARP.
NARP has other critics. Jay Daniels, who worked as a realty officer for the Bureau of Indian Affairs in Poplar for 20 years, says Jurrius "negotiated a bad deal for the Utes and then did the same thing at Fort Peck."
Ernie Bighorn, who ranches in Brockton and works with troubled youth, believes Becker didn't give his family and other tribal members a square deal. "We didn't have much choice," he says of the leases his family signed. "I mean, we did, but we really didn't know what we were doing, and we still don't."
Becker defends the leases. "Somebody who looks at this and says, 'Wait a minute, you paid $50 an acre and you sold to your partner for several times more than that,' that's true," he says. "But I created value by amassing this acreage ... We made all of this project doable by the fact that we put it together. So our sweat equity, if you will, is what's not being recognized in that." He also brushes off criticism of Jurrius' work with the Ute Tribe, pointing out that Ute Energy was acquired last fall for $784 million.
Becker says he wants to bring the same kind of wealth to the Fort Peck tribes. But all NARP's delivered are two wells that produced more water than oil. Becker is convinced the reservation will eventually cash in.
"Handling the water is an issue," he says. "It's just unfortunate. You know, this reservation is not the Fort Berthold Reservation, in terms of geology ... That doesn't mean that the secret of how to deal with the water won't be resolved in the future. That's highly probable. The nature of an exploration play is that the first one, two or three companies come in, and they build on the failures of the past companies, until finally somebody finds a successful answer."
Coercion and happenstance put the Three Affiliated Tribes of the Fort Berthold Reservation—the Mandan, Hidatsa and Arikara—right above the deepest, thickest part of the Bakken. There, a couple hours due east of Poplar, 830 active oil wells were producing about 130,000 barrels of oil a day in mid-March. While the majority of those wells are on non-tribal lands within the reservation's boundaries, the tribes and individual tribal landholders are still receiving tens of millions of dollars a year in lease bonuses and royalties. The chairman of the tribes, Tex Hall, he of the "sovereignty by the barrel" mantra, told the Senate Indian Affairs Committee last year that oil development dropped the tribes' unemployment rate from upwards of 70 percent to 6 or 7 percent, which he said is "unheard of" in much of Indian country.
But the oil rush exposed the tribes to "what could be the biggest swindle of Native Americans in American history," as is alleged in a class action lawsuit over a land-grab that may have cost the tribes more than $1 billion.
The scheme centered on Spencer Wilkinson Jr., a longtime casino manager and member of the tribes' development corporation, who, in 2006, co-founded Dakota-3 LLC. Over the following two years, Dakota-3 and its partners allegedly brokered non-competitive lease agreements with the tribes and individual landholders covering nearly 90,000 acres. The company reportedly paid a total of $14 million for those leases—as little as $50 an acre—and then, in 2010, turned around and sold them to an Oklahoma oil firm for $949 million.
"Hundreds of millions of dollars were lost," Tex Hall recently told a ProPublica reporter. "It's just a huge loss and we'll never get it back."
As the Wall Street Journal reported in February, Wilkinson's attorney called the lawsuits "a case of seller's remorse," adding that Wilkinson and his partners, "like anyone else in America, were perfectly entitled to try to obtain leases ... on the best possible economic terms."
Fort Berthold exemplifies that the Bakken boom, should it reach the Fort Peck tribes, would come at a cost. For all the economic activity the boom brings to Fort Berthold, such as the oil refinery set to break ground this year, residents deal with its consequences. Last month, for example, the tribes issued a public notice warning that children might play with potentially radioactive filters used by the oil industry—filters too often illegally ditched in fields and community dumpsters along the road. Because they resemble nets, the tribes said, kids could mistake them for something suitable for fishing.
Deb Madison, manager of the Fort Peck Office of Environmental Protection, and a petroleum engineer by trade, says that as the boom nears—and she, too, suspects it will—all the tribes can hope for is "controlled chaos."
She worries about fracking because of its "profound environmental impact in terms of waste disposal and potential for spills or catastrophic blowouts." She uses the word "intense" several times in describing the pressure, volume of water and drill depths inherent to the practice. She calls it "a lot more dangerous" than traditional oil and gas development. But she still thinks it's manageable. "The scale is so much higher than we're used to in these rural areas," she says. "It just takes us a little longer to catch up to it."
Madison's more immediate concern, though, is unceasing truck traffic. She worries about whether the trucking companies are insured, dump wastes in the right place, use low-sulfur fuel and drug-test drivers. "These are the things that, in the end, are to me something a little more difficult to get my head around than knowing what's in the fracking mix," she says.
In an effort to control the chaos, Madison's office proposed to the tribal council, and the council passed, a rule requiring oil companies to test groundwater before and after drilling. They're looking for elevated levels of chloride—the pervasive brine that spoiled Poplar's drinking water. She says the oilfield disaster, perpetually evoked by the reservation's 3,200 miles of water pipeline, has the tribes bracing for the Bakken "with their eyes wide open."
"They understand it," she says. "I know there's a lot of push for development, and obviously I understand that, but there's also a lot of support for the environmental side. So it's good—not good that we have [billions of gallons] of drinking water that are toast, but good in terms of how they approach development on the reservation."
However ingrained the lesson, the craving for oil runs deeper than anything. Madison, who hails from Williston, has seen the Bakken boom make familiar communities and landscapes unrecognizable, and so her resignation that it will reach Fort Peck has come with an extra twinge.
"I'd hate to see it happen here," she says. "I mean, I think some of the beauty of the area is its remoteness and the fact that there are not a lot of people and you're not bumping into folks all over the place. And you know your neighbors and they know you, and that's nice. It used to be that way in Williston, and it's never going to be that way again. The landscape is just getting torn to smithereens, and it's hard to look at ... But there are lots of [tribal members] who want to have a swing at it, to see what it's like to have a checkbook full of money and be able to get the things you've always thought about getting for your family and could never afford."
Chairman Azure, who has a face cut from rock, dark eyes and neatly parted hair, sits at a table in his office. An antlered elk skull is affixed to the wall behind him. He's blunt about the situation. Asked whether selling leases to oil companies further cedes control of tribal lands to outsiders, or helps protect the Fort Peck tribes' sovereignty, he laughs off the notion that the tribes have any semblance of sovereignty to begin with.
"We're not sovereign," he says. "We're as sovereign as the federal government's purse strings allow us. They can pull the rug out from under us at any point in time ... I look at it this way: The more money we make—if that oil boom does hit here—I'd like to see us buy up every acre of land within the reservation again. That way we will be a sovereign nation, we will be in control. But as it is now, we're not."
Azure says his people haven't been in control since 1851, the year of the Fort Laramie Treaty, an agreement with several tribes negotiated by the federal government to ensure the safety of settlers traveling through the West lured by an earlier boom, the gold rush in California. The treaty identified tribal territories, which eventually became much smaller reservations, and those effectively became smaller still when federal laws later opened up Indian lands to settlement. Today, the Fort Peck tribes and its members control about 910,000 of the reservation's 2 million acres, land held in trust by the federal government, which means the tribal government can't tax the land to generate revenue. It's a big reason why the tribes remain dependent on those purse strings. (Related: Montana's Oil Boom Has Made Reservations More Dangerous for Women)
Sitting with Azure at the table are Kevin Buckles, director of the Fort Peck Tribal Employment Rights Office, or TERO, and Stoney Anketell, the tribes' Oil and Gas Committee chairman. The two men are at the forefront of those who believe the Bakken can drastically improve the lives of the roughly 6,000 Assiniboine and Sioux on the reservation.
"There's a whole generation that's kind of floundering out there," Buckles says.
If oil companies strike oil here, landholders could receive enormous windfalls. But Anketell, for one, isn't convinced a boom would meaningfully address the reservation's unemployment problem. "You have to have people who are trained, who can pass a drug test—no small matter—and who show up to work everyday, willing to sacrifice to make money for their families," he says. Few tribal members match the profile. "It's not going to solve our unemployment rate. But it's going to make a lot of people wealthy. And that's okay, too." (Related: Important Cultural, Religious and Historical Resources Threatened by Drilling)
But Buckles holds out hope that the boom could help foster something more enduring than royalty payments. In small ways, it already has. He estimates that at least 200 members of the tribe have "boomed out," off in Montana's Elm Coulee field, southeast of the reservation, or in North Dakota, many of them working in grocery stores or for oilfield service companies. "It's not a bad deal to drive 100 miles to make 35 or 40 bucks an hour," he says. The average weekly wage on the oil patch is more than $1,200.
"And it's coming," Buckles says. "We just have to motivate and inspire our people to get a little more engaged, and be more proactive in reaching out to them ... Three years from now, if we can stay the course as a tribe, I envision us attacking that 60 percent [unemployment] number ... I really do."
Azure tamps down the optimism in the room. For all his hope that oil money can buy the tribes autonomy, he expresses an equal measure of apprehension.
"This oil boom is going to be a double-edged sword, in every aspect that it comes here," Azure says. "It'll probably do just as much harm as good."
Why, then, are the tribes unwavering in pursuit of it?
"We don't have a choice," he says.
This reporting was supported by Science Source, a project of the University of Montana School of Journalism. More information on the program can be found here.