Over a barrel 

The boom and bust, the promise and peril, of the Bakken

Three years ago, as Forrest Smith walked around an old oil field on the Fort Peck Reservation, in the remote northeastern corner of Montana, he spoke optimistically about the potential for the Bakken oil boom to reach the reservation and pull the Assiniboine and Sioux tribes out of poverty. Smith, the tribes' minerals director, called the Bakkena geologic, economic and cultural phenomenon exploding on the Northern Plains"a light at the end of the tunnel."

Since then, oil prices have nose-dived from around $100 per barrel to, for a time, less than $30.

I phoned Smith last week. "There was no light at the end of the tunnel," he said.

The tribes have three wells in production today. They're not the kind of horizontally drilled and fracked wells that unlocked the Bakken boom, mostly around Williston, N.D., about an hour's drive east from Poplar, the seat of the Assiniboine and Sioux. Such wells have eluded the tribes, and with today's oil prices, there's no incentive for exploratory drilling that might yield one. Rather, these wells are decades old and the tribes are likely losing money each time the few pump jacks churn, penetrate the earth and draw crude that Shell eventually hauls away.

That was the case over fiscal year 2015, Smith says, when the tribes' wells operated at a loss, compared to the roughly $2 million that flowed to their general fund between the fiscal years of 2010 and 2014.

"Fortunately—or unfortunately, however you want to look at it—what we lacked in oil and gas operations," Smith says, "we made up for in the gambling department."

click to enlarge 1-i12cover.jpg

Susie Perry, the tribes' deputy finance manager, says the portion of the $75 million settlement reached in 2012 with the U.S. government allocated to individual tribal members "contributed to the upswing in our gambling." Gaming revenues from the reservation's three casinos are up about 25 percent, she estimates.

The Bakken oil boom many tribal leaders and members had been hoping for never materialized, despite them having leased more than a quarter of the 2-million-acre reservation to oil companies. And a boom won't arrive any time soon, if ever. Smith describes the mood as "doom and gloom." On a reservation with a tribal unemployment rate of 57 percent, as Chairman Rusty Stafne reported last year, that mood tends to prevail regardless.

Missing the boom, though, largely insulated the tribes from the bust—one that arrived much more quickly than most economists had predicted. Today there isn't a single drilling rig in all of Montana. The growing pains that accompanied the boom around towns such as Sidney and Williston, as well as on the Fort Berthold Reservation at the center of the Bakken in North Dakota, have been replaced by the vacuum of economic contraction.

Daniel Farr is the superintendent of schools in Sidney, less than 10 miles from North Dakota. He paid for college working as a roustabout in the oil fields of Gillette, Wy., and later as a roughneck on a drilling rig in eastern Montana. "The work is crushing," he says. Which is why he calls laboring in the oil patch a "young person's game." And why the school district's hike in enrollment, resulting from the Bakken, has largely been among the children of those young workers, kindergartners through eighth-graders. The elementary student count jumped from 711 during the 2007-08 school year to 945 during 2014-15, a one-third increase.

The 2013 Montana Legislature passed a bill adding a new concept to school-district funding called "concentric circles," designed to share oil and gas revenues among districts heavily impacted by development. In Sidney, Farr says, that meant oil money flowing to the elementary school jumped from $1.6 million for the 2012-13 school year to $7.1 million a year later and $6.2 million a year after that.

  • photo courtesy of Austin Smith

During the boom, the building in which Farr works, where classes hadn't been held, was taken "out of mothballs, so to speak," and currently holds 330 students. The district doled out what it called "impact stipends" of $3,000 to about 100 certified staff to help with the increasing day-to-day costs of living in Sidney. As rents spiked, the district leased affordable mobile housing to some staffers.

And then the global chess game that determines oil prices sent Sidney and its school district spiraling.

"Now that we're in this boom and bust cycle," Farr says, "the total amount of oil and gas money my elementary school district has received through three quarters this year is a little more than $637,000." Rental rates have dropped to the point where the cost of employee housing is now higher than rentals around town, and Farr says he "can't compete with people who couldn't compete with me a year ago." He's grateful the leases expire in August.

But enrollment, at least for now, has remained steady, Farr says. Staffing needs are the same. Students' needs are the same. The money, though, has evaporated.

While the district did much to upgrade facilities and assist staff during the boom, it didn't increase salary schedules, instead choosing to keep them in line with modest increases across the state.

"Had we been foolish and built salary schedules on the assumption that oil and gas was going to be here forever," Farr says, "we would be filing for bankruptcy today."

Instead, what's happening now is something of an orderly restructuring.

Farr says 50 percent of the district's current staff is "on hold," nontenured, waiting in limbo to see how much enrollment drops and whether they'll be leaving the district, too. The school recently surveyed parents of children in first, second and third grades. Farr says about half of them indicated they'll be leaving Sidney by the beginning of the next school year. The other half were undecided. The surveys are ongoing. Needless to say, how the numbers shake out has led to "a lot of anxiousness" among teachers.

"We're hoping by April we'll be able to make some solid decisions on how things are probably going to play out and have all of our demographic work done," Farr says. "It's a matter of being fair to your employees who have served you through a difficult time. I know they're on pins and needles waiting to see where things are going to go."

The district's considering a mill levy request of $400,000, which would be the most it's ever asked of taxpayers. Farr expects to reduce that amount by cutting budgets where he can. "It's just understanding the economy out there for a lot of people," he says.

Meanwhile, Mayor Rick Norby is doing his best to convey that "Sidney, Montana, hasn't dried up and blown away ... It hasn't completely disappeared as most people on the western side of the state believe it has."

click to enlarge The largest saltwater spill poured 70,000 barrels—nearly 3 million gallons— - of saltwater, along with 90 barrels of oil, from a pipeline into and around Blacktail Creek. - PHOTO COURTESY OF NORTH DAKOTA DEPARTMENT OF HEALTH
  • photo courtesy of North Dakota Department of Health
  • The largest saltwater spill poured 70,000 barrels—nearly 3 million gallons—of saltwater, along with 90 barrels of oil, from a pipeline into and around Blacktail Creek.

Norby considers Sidney a bedroom community, rather than the sort of pop-up town with man camps that you see closer to the center of the Bakken in North Dakota and that, now with the bust, have been all but deserted. Still, Sidney's population nearly doubled, from roughly 5,000 to close to 10,000, in a matter of three years during the boom, Norby says. He guesses the count's back down to around 8,000.

"We still have the families living here who chose to be out of the craziness of the Bakken," he says. "They're still here."

But the town's budget swings are telling. The budget climbed to more than $21 million during the peak of the oil boom, about $9 million more than "under normal circumstances," according to Norby. The city cut $700,000 from last year's budget and will likely cut $400,000 more this year as it continues to rightsize.

  • Email
  • Favorite
  • Print

More by Matthew Frank

Today | Wed | Thu | Fri | Sat | Sun | Mon
Artist Lecture: Patrick Zentz, bi/cycle/extrapolated

Artist Lecture: Patrick Zentz, bi/cycle/extrapolated @ Missoula Art Museum

Tue., Oct. 17, 7-8 p.m.

All of today's events | Staff Picks

© 2017 Missoula News/Independent Publishing | Powered by Foundation