Features

Badlands Crude


A fracking well burns on Fort Berthold. According to a tribe member, there have been about 70 reports of ­oil-related ­pollution since 2009

Photograph by Ben Grieme

A fracking well burns on Fort Berthold. According to a tribe member, there have been about 70 reports of ­oil-related ­pollution since 2009

Tex Hall, head of three affiliated tribes, runs an oil empire in the DakotasPhotograph by Ben GriemeTex Hall, head of three affiliated tribes, runs an oil empire in the Dakotas

Tex Hall strolls across a parking lot at the Fort Berthold Indian Reservation in North Dakota and enters the tribe’s administrative headquarters. Hall, 56, is wearing jeans, cowboy boots, and an ornate silver belt buckle the size of a tortoise shell. He removes his sunglasses. Inside, the tribal business chamber has the air of a bustling county courthouse. Hall is the reservation’s top elected leader, chairman of the 12,000 members of the Mandan, Hidatsa, and Arikara Nation (also known as the Three Affiliated Tribes). Over the past century, Fort Berthold has struggled with poverty and high unemployment, but recently its fortunes have been on the upswing. The reservation has struck oil.

Fort Berthold, which covers an area slightly larger than Rhode Island, sits above the Williston Basin, a geologic formation rich in shale oil. About five years ago, engineers figured out how to extract the oil using hydraulic fracturing, or fracking, techniques. Since 2008, according to tribal records, more than $500 million in oil revenue from fracking leasing rights and royalties has flowed into Fort Berthold.

North Dakota’s economy has erupted. Unemployment hovers around 3 percent. There are overrun trailer parks, six-figure trucking jobs, rollicking strip clubs, and scores of real estate operatives furtively scouring land records in search of untapped treasures. Four years ago there were no producing oil wells on Fort Berthold. Now there are 297, with hundreds more expected in the coming years. Entrepreneurs are clamoring to conduct business with the tribe. To operate on the reservation, however, they are supposed to get the approval of the Tribal Business Council—MHA Nation’s top governing body—which consists of Chairman Hall and six other elected officials.

The council convenes just one day a month. Not long ago, the infrequent meetings were well suited to the sleepy economy. But in the current fevered atmosphere, the council’s scarcity of face time has transformed the gatherings into a kind of high-anxiety endurance challenge, testing how badly outsiders want to win access to the reservation and to what extent tribe members can influence the oil boom. Whatever the future of the reservation looks like, it will be won or lost here.

On the morning of the council’s meeting in July, some of the several dozen visitors who had arrived from around the country had shown up an hour prior to the 10 a.m. start.

An hour passed. Then two. Finally, at 12:20, Hall strolls into the chamber, passing a poster at the front of the room advertising the tribe’s annual oil and gas expo. “Today’s Modern Day Gold Rush,” it reads. “The Dream Starts Here.” The sometimes messy reality of oil exploration starts here, too. Hall settles into his seat, front and center, and calls the meeting to order.

In recent years, as the revenue from Native American casinos has flatlined in the face of competition from other forms of legalized gambling, tribes around the country have grappled with a difficult question: to drill or not to drill? Hall is one of the country’s leading advocates for native oil exploration. “The economic benefits of this oil and gas development are far-reaching,” he testified before the U.S. Congress in July.

Through Glenda Embry, the tribe’s public information officer, Hall agreed to an interview, which he later postponed. Several subsequent attempts made through Embry to reschedule the interview were unsuccessful.

With the influx of money, scores of problems have bubbled up with the crude, including lawsuits, environmental scares, and questions about where the money is going. Tribe members say their local government is rife with conflicts of interest, and across the reservation feelings of injustice run high. “This case focuses on a new version of a very old story: the misappropriation of land resources belonging to Native Americans,” alleges one lawsuit pitting tribe members against the federal government. “Present circumstances confirm what history has repeatedly shown: the bigger the prize, the more egregious the land grab.”
 
 
Inside the tribal business chamber, Ramona Two Shields addresses the tribe members. Before retiring, Two Shields spent several decades working for the U.S. Navy. These days she leads a group of elders preaching fiscal discipline to the council and suing the U.S. Department of the Interior, which oversees reservations. “If you sit back and say nothing,” says Two Shields, “they are going to use all of this money.”

In the late 19th and early 20th centuries, the federal government divvied up the reservation into a patchwork of 160- and 320-acre allotments that were given to individual members of the tribe. At first, the tribe itself owned little land. But over the years, as families looked to sell their homes and move off the reservation, the tribal government stepped in as a buyer, gradually accumulating more property.

The oil boom has divided Fort Berthold, culturally and economically, into those who own land (typically older tribe members who inherited property from their parents) and those who don’t. “That’s a new phenomenon for us,” says Marilyn Hudson, a landowner who serves as administrator at the tribe’s history museum. “Previously we were a homogeneous society.” Those who don’t own land now increasingly look to the Tribal Business Council for support. At the moment, the tribe owns the mineral rights on 108,775 of the 552,812 acres within the producing regions of the reservation. Many of the parcels are gushing oil. From January 2008 to July 2012, the tribal government accumulated $53 million in bonus payments and an additional $64 million in royalties. Each month millions more roll in.

Hall championed the creation of the People’s Fund, a pool of money designed to periodically distribute cash back to the tribe’s members. He says it has $30 million. Four years into the oil boom, the People’s Fund has yet to make any disbursements. Many residents see the oil boom as the tribe’s last great hope for economic salvation. “We really need to develop a long-term vision for a generation beyond us,” says Hudson. “Because we all know once the oil is gone, it’s gone.”Drilling at the reservation has brought more than $500 million in revenue since 2008Photograph by Ben GriemeDrilling at the reservation has brought more than $500 million in revenue since 2008
 
 
Those who do own land have profited from the boom, though even many of them feel they’ve been cheated. In the fall of 2007, the Bureau of Indian Affairs (BIA), acting in an oversight role as a trustee of the reservation, began auctioning off Fort Berthold’s mineral rights. Individual landowners could accept or reject the oil companies’ offers. Many happily took the money.

Years later some landowners have soured on the deals. “We pleaded with [the BIA] to hold the mineral lease auctions down in Houston, Texas, or Denver, Colorado, or Billings, Montana, so the big oil companies could bid. Instead they held them in New Town, N.D., with very little advertisement, and only the small speculators came to bid,” writes landowner Nelson Birdbear. “My minerals were leased. But it could have been a lot better.”

In the summer of 2011, Two Shields became the lead plaintiff in a class action in the U.S. Court of Federal Claims alleging that the Department of the Interior had failed in its fiduciary duty to properly manage the reservation’s mineral rights. The suit alleges that the BIA auctioned off mineral leases at submarket rates. “The BIA merely rubber-stamped the bids from the oil companies that obtained these supercheap leases,” reads the complaint. “The BIA did so knowing that many (if not most) allottees are poor, had no experience with leasing, and were glad to get a little money.”

Lawyers for the defense have moved to dismiss the suit, arguing that it amounts to redundant litigation because the plaintiffs are already participants in a similar class action against the federal government. The lawsuit is ongoing.

Two Shields warns that the payments from the People’s Fund might never materialize unless the tribe comes up with a fiscal plan. But in recent years the state of the tribe’s finances has remained a mystery to most members. Hudson says that while Hall’s administration regularly shares data on incoming oil revenue down to the penny, they offer no detailed information about how the money is being spent. “We are an Indian chartered corporation, and we are corporate stockholders,” she says. “We should be getting statements and annual reports.” Neither Hall nor Embry would respond to questions about fiscal transparency. In the absence of financial reports, misgivings have flourished—particularly about the chairman’s privately held oil company.
 
 
Growing up on Fort Berthold, Hall dreamed of playing professional basketball. When that didn’t pan out, he earned a master’s degree in education administration and worked in the reservation’s school system, according to the tribe’s website.

Along the way, Hall discovered a gift for politics. In 1998 and 2002 he won back-to-back elections for tribal chairman. Under his administration, the tribe invested in economic development projects, including a buffalo ranch. In 2004 state authorities swooped in to investigate reports that the tribe’s bison were dying of malnutrition. One local resident told the Associated Press that the conditions were “worse than a concentration camp.” At the time, a spokesperson for Hall denied any mismanagement. In 2006, amid allegations of fiscal irresponsibility from his challenger, Marcus Wells, he was voted out of office.

In the fall of 2007, according to state records, Hall formed an oilfield subcontractor company, Maheshu Energy, designed to sell supplies such as casing pipes to energy companies drilling on the reservation. He didn’t stay away from politics for long. In 2010 he again ran for chairman. He was reelected.

For the past two years, while managing the tribe’s collective oil interests, hosting commercial oil and gas expos, and testifying in Washington about the benefits of native oil exploration, Hall has continued to run Maheshu Energy. The dual role has drawn criticism. In May 2011, Steve Kelly, a tribe member who operates a handful of oil-related businesses, appeared at a council meeting and argued that tribal law required the chairman to either eliminate his economic stake in the oil field or abstain from voting on oil-related matters. “I don’t mind competition,” said Kelly. “But I can’t compete with the chairman.”

Hank Bolman, the owner of a roustabout business, which provides oil companies with myriad maintenance services in the field, then accused the chairman of “writing letters out to different companies, threatening them—‘you have to use my pipe or you don’t come on the reservation land.’ ” The chairman denied writing any such letters. He recommended the business owners take their complaints to the tribal ethics committee. Kelly pointed out that in practice the committee didn’t really exist; the council had never appointed anyone to sit on it. Reached by phone in July, Kelly says the conflict was never settled. According to Kelly, Maheshu Energy, which started in oil pipes, has since expanded into a diverse range of oilfield services. “He has his fingers in everything,” says Kelly. Neither Hall nor Embry responded to questions about Maheshu Energy and concerns over the chairman’s potential conflict of interest. At the May 2011 meeting, Hall said: “It’s about being able to do the work, keep a contract.”
 
 
Richard Mayer runs Thunder Butte Petroleum Services, a company owned by the tribe that intends to build a refinery on the reservation. Mayer calls it part of a plan to create jobs, turn a profit, and free the tribe from federal handouts. He says the construction of the refinery will cost roughly $300 million to $320 million and take 18 to 24 months. (It’s not clear what Maheshu Energy’s role in the refinery is because Hall didn’t respond to questions.) The current plan, says Mayer, is to build a refinery that will take 15,000 barrels per day of local crude and turn it into diesel fuel and naphtha, an oil product often used as a gasoline additive.

Last year major energy companies were racing to exit the refinery business. Recently, however, the prospects for fuel makers have improved, thanks to lower oil prices. Mayer says he expects the refinery to be immediately profitable. “The very first year in operation, we will be contributing to the tribe,” he says.

Critics say that if things could go so wrong at a buffalo ranch, they wonder what might happen at a complex refinery. Mayer downplays the concerns. “I’ve lived here my whole life,” he says. “I have children that live here. My No. 1 concern is safety.”

Four years into the boom, some residents say they have yet to see much upside. Lisa DeVille, 38, a tribe member who lives on Fort Berthold in the small town of Mandaree, recently conducted a survey of her neighbors about the quality of life. The results, she says, revealed widespread concerns about increased crime, overcrowded roads, and environmental degradation.

DeVille says that since 2009 there have been roughly 70 reports of oil-related pollution at Fort Berthold. She worries that if there is ever a major accident, the tribe won’t have the infrastructure in place to respond adequately.

Many locals already feel endangered by the surge in truck traffic on the reservation. The steep roads that cut through the hilly Badlands tend to be a single lane in either direction with no shoulders. Each new oil well requires hundreds of visits from large trucks, which now routinely race up and down the hills, hauling in water and equipment and carrying out the oil. In September 2011 a semi passing through the area collided with a pickup driven by a local family, killing four passengers, including two young girls ages two and five.

The reservation has an outpatient health clinic but no hospital. The nearest emergency rooms are 100 miles away. DeVille says many residents were hoping the boom would result in better community health services. But like most upgrades at Fort Berthold, they’re something tribe members have yet to see. “Where’s all the money going?” asks DeVille.
 
 
Back at the council meeting, Hall announces a brief recess at 3 o’clock. Fifteen minutes later he’s sitting shotgun in a passenger van, his cowboy hat resting on the dashboard. In the back, staring out the windows, are visiting regulators from the U.S. Bureau of Land Management. The van rumbles down a dirt road and turns into a drill site. The visitors are greeted by a convoy of friendly oilmen from WPX Energy, a Tulsa-based company, and from Halliburton, which is fracking two wells there.

A Halliburton employee leads the group on a tour, past a seesawing pump-jack and dozens of noisy fracking vehicles painted bright red. At one point everyone pauses for photos. For once at Fort Berthold, there’s no hint of tension between the Native Americans, the oil companies, and the federal regulators. Everyone smiles. Later, Hall’s administration will post some of the photos on the tribe’s website.

As the tour winds down, the guide invites Hall and his guests to a cookout. By this point the chairman is again running way behind schedule. The meeting was supposed to resume at 3:30 p.m. It’s nearly 5. “Well, what do you guys have?” asks Hall. “Steak,” says the man from Halliburton. Soon, everybody is sitting around a picnic table enjoying a gratis supper.

Shortly after 6 p.m., the chairman resumes the council meeting. The rush of business proposals continues. Hamburgers are served. A team of architects from Minnesota presents designs for an expansive tribal government center, which Hall’s administration is planning to erect nearby. The monthly meetings, Hall explains, have grown too crowded. The total projected costs, according to the architects, will be in the range of $39 million to $44 million. “Is there a basketball court in there?” says Hall, smiling.

A couple more hours pass. Eventually, a staff member informs the remaining visitors that they must step outside so the council can conduct a closed-door session to review new hires. He assures everyone that afterward the agenda will march forward. The guests wearily decamp to an adjacent lobby. They have come long distances for a few minutes of the chairman’s time. At midnight, they’re still waiting.

Gillette_190
Gillette is a staff writer for Bloomberg Businessweek in New York.

We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus