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Land Thievery Redux: Bakken Oil Leases and Money Mismanagement

All About the Money

This fracked oil boom is, after all, about money. Money that provides compensation to tribal members for leases and royalties—and money, in a way, which makes everyone feel better. There are tribal millionaires, there are oil barons, there are tribal leaders who are oil barons, and the state of North Dakota is looking pretty robust in its economic plan. Not everyone is doing so well, however, as not every tribal member has mineral rights. And those who do may have been cheated out of hundreds of millions of dollars in royalties by a complex scheme.

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“Some of our tribal members leased land for $34 an acre,” environmentalist and Ft. Berthold member Kandi Mossett explains. Ramona Two Shields and Mary Louise Defender filed a lawsuit in late 2012, alleging that an unscrupulous set of decisions had been made in a complex web entangling casino managers, tribal leaders, BIA and agency representatives, along with oil interests. The legal brief reads like something from the Pelican Brief, a Julia Roberts and Denzel Washington movie. Though the case was dismissed on a technicality, some interesting stories came out of it. Like the one about the 42,500 acres of tribal land that was leased at below-market value by the BIA, and with approval of the Council, worked through some middlemen associated with the casino and Fort Berthold Development Commission, and some fellows named Spencer Williams and Rick Woodward, and other defendants in the oil and gas industry. The Two Shield suit alleges that the BIA, influenced by a variety of factors, mismanaged grossly the potential revenues from the oil leasing on the reservation, resulting in millions of dollars of loss to tribal members. Another set of corruption charges was leveled at the Tribal Council, in particular the recently defeated Tex Hall. A report released in mid September included 100 pages of legal analysis and 200 pages of exhibit documents.

“The report,” according to the Bismarck Tribune, “lays out a timeline that alleges just days after being elected in 2010, Hall used his office to demand $1.2 million from Spotted Hawk Development, an oil and gas company, before he would sign off on the company’s development plan. It also alleges he used his office to secure more than $580,000 in payments for water-hauling to a man who has since been implicated in a separate murder-for-hire scheme. The report further alleges he unfairly competed with other tribal oil service companies.”

The problems, however, are deep, and more than a little intergenerational, and multi-jurisdictional, and Tex Red Tipped Arrow Hall did not make this whole story, nor did he create all the problems. A few years ago Hall pointed out how the tribe has had to struggle just for a pittance.

“The state has a $1 billion budget surplus and created a $1.2 billon trust fund for infrastructure needs,” he testified at a federal hearing. “The MHA Nation has roads that need fixing now. Our tax revenues should not go to a state investment account. In 2011, the state collected more than $60 million in taxes from energy development on the reservation, but spent less than $2 million for infrastructure on the reservation.”

Flash Forward

It’s September 3, at the Great Plains Tribal Chairman’s Association, and I’ve had the pleasure of speaking on a panel with four oil and gas guys. Things are looking pretty good for the industry, after all. The BIA has a table at which they are busy flagging down possible lessees with a bright green pamphlet called “Frequently Asked Questions for Indian Mineral Owners,” and a price list for what is available and when it might get paid out. It’s sort of an upbeat occasion for the Bureau, after all that mismanagement uncovered in the Cobell (Indian Trust) case. This time the Bureau feels it will manage the money well, although that little problem the Two Shield case discusses may remain a concern. The Ft. Berthold Tribe has celebrated a banner production year, despite a record number of spills, incidents and dirty radioactive frack filter “socks” found discarded in municipal waste, roadsides, and even on one allottee’s land.

“Some kids found and were playing with them, radioactive frack socks,” Mossett says.

Indeed, Hall celebrated Earth Day with a Sovereignty by the Barrel Oil Sale and Extravaganza in New Town, an event announced with great fanfare in the Denver papers, as well in a full page ad in the Denver March Powwow program.

“We’ll all say it was good while it lasted,” is a haunting testimony I heard in northern Alberta from a woman who lives on a small reserve that is swimming in oil spills today. “It was good while it lasted.”

At my friends Jessica and Marty’s place we are going into the sweat lodge. I am interested in getting any extra toxins off my body from the oil industry—mental, physical or spiritual. I arrive at their house. Today, an oil rig and flare stare at them, 300 yards from their front door. The Eye of Sauron glares at us as we leave our car and head to the shelter of the lodge. I shudder, and then cache myself inside. I swear I heard the well breathing.

Marty and Jessica are building an earth lodge and moving their children there, along with their horses, and their future. Somehow, the oil projections for production in the Bakken seem pretty short term, in the face of an earth lodge. That is to say, that Bakken oil is about equivalent to a year’s consumption by the U.S., and well capacity is diminishing. That costs money.

On May 27, Bloomberg news reported that “shale debt has almost doubled over the last four years, while revenue has gained just 5.6 percent.”

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York City–based asset manager. That might be a bit of a problem when it’s time to pay up for the damages.

Elsewhere, citizens in Colorado have enacted moratoriums on fracking in seven municipalities, New York and California are deep into battles over fracking, Nova Scotia has just banned fracking, counties in England announced a ban in early September, and there are a lot of questions being asked worldwide. A lot of faucets are catching on fire. North Dakota has not asked many questions. It might be time. It might also be time to ask some questions in Mandan, Hidatsa and Arikara territory.