Boom and Gloom 

Montana's Blackfeet Nation recently signed the largest oil exploration deal in the tribe's history. Is it a vital step to saving the reservation, or an agreement destined for disaster?

Officials with the Blackfeet Nation last met December with representatives of the Newfield Exploration Company out of Houston, Texas, to sign over oil leases on 224,000 acres of tribal land in the eastern portion of the reservation. The deal called for the drilling of eight exploratory wells by the end of 2010 and full-scale development of a portion of the Southern Alberta Basin through 2014—including at least one deep well per year. The tribe has not made public the final dollar value of the deal, but says the Blackfeet stand to gain more than $12 million from Newfield. In short, it's the largest oil agreement the tribe has ever signed.

Grinnell Day Chief, oil and gas manager for the Blackfeet Department of Commerce, rattles off all the public details of the agreement from his desk in Browning. A camo cap with the orange Newfield logo emblazoned above the bill sits on a shelf behind him, a bonus gift from what is unquestionably a lucrative opportunity for the tribe. If Newfield teams hit the rich oil reserves they believe lie deep under the Cut Bank area, the Blackfeet will be raking in a 20 percent royalty check from every barrel sold.

"This is the first time we've had this deep exploration since the early '80s," Day Chief says. "This is the boom. We're in it right now. You can go ask anybody anywhere where everybody's doing business in Montana, and most of it is here on our reservation. ...If they find what they're looking for, next year we'll have 100 brand new wells that will be drilled. A year after that it will double to 200. We'll have up to 10 to 15 rigs working on the reservation if the play they're looking for is here. It's here, it's just how do you get it out of the ground?"

Newfield is hardly the first oil company to come calling in Browning. In the past five years, the tribe has entered into agreements with three different companies—Anschutz Exploration Corp. out of Denver, Colo., the Rocky Mountain office of Texas-based Rosetta Resources Inc., and now Newfield. The leases mostly cover tribal and allotted lands, Day Chief explains, with some private lands owned by tribal and non-tribal residents thrown in. Much of the drilling done by the three companies has focused on the Cut Bank area, but Anschutz has drilled two wells between Browning and East Glacier and has plans to drill two more.

In Day Chief's words, these are boom times for the tribe on the oil front, and the offers just keep coming; Day Chief says the latest are "just a little bit too late." The tribe's already leased out a majority of its available acreage. What's left is being saved for a day when the value of development grows even greater.

"We were just offered another $150 an acre for some acreage we have available on the south end of our reservation," Day Chief says. "But that's just an offer. I'm sure someone else is going to come up with a better offer...I've been here for six years. Five years ago, we probably got interest from one company a year. We always couldn't come to terms or we'd enter into some smaller agreements. But as of lately, I get calls almost every other day from companies looking for land to lease from us."

Oil exploration goes back a long way on the Blackfeet Reservation. Since the 1930s, an endless parade of companies has punched more than 1,400 wells in search of oil and natural gas. Some found nothing worth investing in and capped what they'd drilled. Other ventures proved more successful, and by the Blackfeet Department of Commerce's count the reservation currently hosts 240 producing wells operated by nearly a dozen different companies extracting a total of 550 barrels of oil a day.

Day Chief and his office have learned fast how to play the resource leasing game. Federal regulations regarding oil deals required a minimum royalty payment of 12.5 percent until the late '90s, when that figure jumped to 16.5 percent. But in recent years, Day Chief says, the number of offers has put the Blackfeet in a much greater negotiating position. They accept nothing below a 20 percent royalty return now, he says, and that means major revenue for a reservation suffering a 72 percent unemployment rate (according to the Bureau of Indian Affairs' 2005 Indian Labor Force Report) and a poverty level two and a half times the national average.

click to enlarge While much of the oil and gas development on the Blackfeet Reservation is focused on the Cut Bank area, companies like the Anschutz Corporation have already drilled wells near Highway 2 between Browning and East Glacier. Those skeptical of large-scale development fear that activity could harm native wildlife. - PHOTO BY ALEX SAKARIASSEN
  • Photo by Alex Sakariassen
  • While much of the oil and gas development on the Blackfeet Reservation is focused on the Cut Bank area, companies like the Anschutz Corporation have already drilled wells near Highway 2 between Browning and East Glacier. Those skeptical of large-scale development fear that activity could harm native wildlife.

The Newfield deal alone has already had a $5.5 million impact on the reservation. The tribe's roughly 16,000 enrolled members each received a Christmas gift of $200 last year, with another $200 on the way this summer. There's talk of constructing a new grocery store in Browning to create jobs and compete with the existing IGA store. And the Blackfeet Tribal Business Council is even considering using some of the money to buy back fractionated trust lands on the reservation.

With promise like that, how can the oil bid lose?

"We were $20 million in debt a couple years ago as a tribe," Day Chief says. "We're out of debt now, and that's just from the oil deals we're doing. It's good to be out of debt."

The situation playing out on the Blackfeet Reservation in many ways reflects the flurry of oil and natural gas activity near Sidney just a few years ago. Between 2000 and 2006, Montana's oil production leapt from 16 million barrels a year to 33 million. Multi-national corporations like ConocoPhillips and Halliburton flocked to northeastern Montana to drill wells alongside local energy companies, offering jobs and millions of dollars in royalties primarily to Richland County. The word "boom" has since been tossed around frequently in relation to development near Montana's border with North Dakota, where the Bakken Shale Formation promises an estimated 3 to 4.3 billion barrels of recoverable oil, according to the U.S. Geological Survey (USGS).

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