ND tribes fear shutdown will shut off oil revenue

There are no pump jacks nodding in the steady silence of White Shield, N.D., no flares hissing or illuminating the prairie night. But that doesn't mean the state's oil fortunes on the Fort Berthold Indian Reservation haven't improved life for 32-year-old Leonard Hosie.

Hosie, a tribal member, grew up on these golden plains about an hour north of Bismarck. White Shield is just one of the communities of the Mandan, Hidatsa and Arikara Nation (also known as the Three Affiliated Tribes or the MHA Nation), which for many years was home to some of the state's poorest residents.

But that all changed when the tribe struck oil, with most of the machinery landing in other towns on the reservation. The vast Bakken Formation, which stretches from Canada to Montana, includes the MHA Nation's land, and new techniques — known as fracking — have allowed the tribe to generate vital revenue.

"It's a big change because there was a lot of poverty before," said Hosie. "So it's good, and I just feel very lucky and appreciate what I have."

But in the midst of the government shutdown, signs of a slowdown are starting to surface, and now tribal members worry that their recent progress could be stilled. Hosie, who runs a small business catering to the needs of oil companies, recently learned a scheduled construction job with the Arrow Midstream energy company had been canceled. According to him, the company was still waiting to receive its permit to drill on the reservation.

"It's bad for business, because you have people you want to hang onto and put to work, but you can't because there are no jobs," he said. "I'm pretty sure other (tribally owned) companies are in the same boat."

A lapse in appropriations means oil development on federal lands like the Fort Berthold Reservation is directly affected. That's because all Indian minerals and lands are held in trust by the U.S. Department of the Interior, a task delegated to a slew of government agencies, including the Bureau of Indian Affairs (BIA), but also the Bureau of Land Management (BLM).

When the government budget stalemate began Oct. 1, the BLM furloughed roughly 94 percent of its staff and announced it would not process any new permit applications to drill on federal lands.

For Hosie and others, this threatens an oil boom that has benefited them massively — even as environmentalists and others decry fracking for its ecological impact. Since the start of the boom, the number of Indian-owned companies, offering a range of services from trucking and welding to consulting and building roads, has soared. Hosie said his business had been so good, he'd been able to employ as many as 80 tribal members as roustabouts, welders and heavy equipment operators. A typical starting wage for welders, he said, is around $85 an hour — a fortune in an area previously known for crippling poverty.

Yet the government shutdown threatens that and, some say, worsens an already distinct disadvantage that impeded the reservation from rushing in to tap the riches of the Bakken.

Since the 1970s, when a previous boom hit the state, companies knew that Fort Berthold was a prime area for exploration, with a reserve believed to contain as much as 20 billion barrels of oil, according to the BIA. Yet firms had been reluctant over the years to drill on tribal land, hindered by the cumbersome and costly layers of bureaucracy that govern mineral leasing on reservations.

Five years into the boom, according to Tex Hall, chairman of the MHA Nation, a streamlined permit process was introduced, and things slowly started to improve for his 12,000-member tribe. The latest figures released by the North Dakota Department of Mineral Resources reported 23 drilling rigs operating on the reservation, pumping out nearly 300,000 barrels of oil per day last July and August. The number of issued drilling permits had reached 271, leading to about 12 percent of the state's oil production.

But Hall is concerned Fort Berthold will now be left behind again as the shutdown bites. He said it could have crippling consequences for the reservation as permits once again become delayed. "The longer the shutdown goes, our leases are in jeopardy," he said. "Our concern is that the federal government could just pull the plug on us."

Recently, he learned that companies were considering moving their rigs to sites located off the reservation should the wait for new permits persist due to a government default. Like his clients, Hall is thinking about the worst case scenario.

"With the government in default, that means our possible wells could get furloughed because there's no budget," he said. "When it comes to having boots on the ground, there won't be the federal staff to keep us in compliance."

Meanwhile, tribal mineral rights owners wonder whether their federal royalty checks will continue to keep coming, although there was no sign of problems in the latest disbursement of Oct. 15.

The irony is that the MHA Nation has tried to use the oil boom to break free from its long-standing reliance on the federal government. In May the tribe broke ground on a $450 million oil refinery on the reservation, the first to be constructed in the U.S. since 1976. It's part of a grand plan to create jobs, turn a profit and pave the way to a sustainable way of life once the oil revenues are gone.

"This is our land, our reservation that we're trying to protect. We've been saying that all along," Hall said. "It's ironic this shutdown has put a spotlight on the federal government that it's simply not capable."

The distrust of the federal government on Fort Berthold has a long and storied past. The tribe has endured broken treaties, lost lands and even further turmoil when the Army Corps of Engineers flooded more than 150,000 acres of the remaining reservation when it dammed the Missouri River in 1953.

There's also a series of lawsuits filed by tribal members alleging that the BIA approved low-ball sales of drilling rights at the expense of tribal landowners. The lawsuits also claim that shady deals with outside vendors were being scrutinized, raising questions about internal corruption and whether senior tribal officials were involved.

With more than $14 million in oil revenues distributed to the MHA Nation in December 2012 alone, however, the common inquiry among tribal members is: where does the money go? Despite recent economic gains, a severe housing shortage still exists on the reservation. And crime is on the rise, taxing the tribal police force, already stretched thin.

A People's Fund has been created to ensure that tribal members get funds from a trust valued at more than $30 million. But so far, there's been no such payout. 

Back in White Shield, Leonard Hosie isn't waiting for the tribe or the federal government to take action. A father of four young children, he spent a rainy Monday on the phone with oil company representatives — not to enhance his business prospects, but to drum up donations to repair his community parks.

For every company that likes his pitch, Hosie says he'll send a packet including photos he took of a basketball court so cracked and overgrown with weeds that it has become a dumping ground for unwanted objects like used mattresses. 

"The playgrounds here are outdated and unsanitary," Hosie said, eyeing a future when the oil may all be gone. "Now that I have children, I'm just trying to make a change and to keep our youth going, because one day they'll be here taking care of us when we’re older."