James Ferragut, Published November 02 2013
Ferragut: Plunder in Bakken accelerates
I have a good perspective on what’s happening up in the Bakken oil boom. I’ve had clients in western North Dakota for years. I routinely visit Dickinson, Williston, Minot, Killdeer and New Town. Last week, I was cold-weather camping in the Badlands. I’ve taken the opportunity to taste, feel and smell life on a well site when I visited my daughter Lauren at her work. She was lead geologist on well sites owned by Hess Oil for three years.
Consider the underbelly of the Bakken. Five years ago, I saw bumper stickers saying, “We’re Rockin’ the Bakken”; and on biggest, newest, badass trucks stickers proclaimed, “We’d Be Walkin’ If It Weren’t for the Bakken.” But there could be bumper stickers no one would want on their vehicles. They might say, “We’re Beatin’ by the Bakken” or “Foiled by Oil.”
(In an effort to protect people and places, names and locations are changed, but facts are unaltered.)
Two summers ago, I chaperoned teenagers on a Badlands trip. We visited the Knife River Indian Museum, Lynch Flint Quarry. We hiked, rode horseback, visited the Killdeer Battlefield, climbed to the top of Medicine Hole Peak and swam in Medora. Everywhere the majesty of the Badlands reigned supreme. The vistas were pristine, awe-inspiring, unblemished – unaware then that the oil monster was lurking.
Last week, it was evident the monster had claimed another geological victim. Being blown around on roads by semis traveling at light speed was a precursor to a bigger show. At dusk, a Hollywood, dreamlike version of Armageddon assaulted our eyes. Without warning, we were surrounded by the golden, eerie, acetylene glow of gas flares, near and distant. A droning derrick drill violated the once church-like silence of our campsite. The artificial glow of white light from a well site, a half mile above and behind us, eclipsed the canopy of stars.
It wasn’t until dawn that we saw the magnitude of the plunder. Spectacular buttes and valleys that define the geology of the Badlands had been defiled by a plateau-leveling, newly scrapped road – 40 feet wide and a half-mile long, leading to 22 well sites. We’d ridden horses on the same trail 18 months ago.
I’d heard stories about ranchers who own mineral rights and landowners who don’t. But I hadn’t experienced the effects on the daily life and spirit of people I knew. A state park owns 1,000 acres near our campsite, but the surrounding 3,000 acres are privately owned, ranched and managed by a family I’ll call “the Smiths.”
The mineral rights (read oil) are where the money is, and rarely are owned by the surface owner. In the case of the Smiths, alternating sections of land along either side of the railroad tracks are owned by the railroad. By the luck of the draw, the Smiths missed out on the mineral rights on the land they have nurtured for more than a century.
The Smiths were approached by Conoco-Phillips and told that the company intended to contract for three wells on their land. That was revised to 13 wells, and ultimately 22 wells were contracted. For their trouble and for the “minor scarring” of the buttes and the use of the land, the Smiths will be paid $1,000 per well, per year. Oh, and as an added bonus, Conoco-Phillips is giving them an annual road-easement payment of $500.
Let’s put perspective on the Smiths’ $22,500 annual compensation for the rape (I mean “use”) of their land:
Based on today’s $106 price per barrel, the estimated market value of oil pumped out of the Bakken is
$100 million per day. It’s estimated that $20 million in royalty payments (mineral rights) are paid out every day. The total estimated market value of oil being pumped out of the Bakken each month is $3 billion. (Source: American Enterprise Institute, Oct. 15.) Do the math. How fairly are landowners treated?
It’s the cruel calculus of the Darwinian economic model that drives every first-world country.
I’m not worried about the Smiths because faith, family, perseverance, strength and pride are in their DNA. I do worry about Conoco-Phillips, Halliburton, Hess Oil and the rest of the oil monsters. I don’t know how the bastards sleep at night.
Ferragut is a Fargo-based marketing consultant.