April 10, 2008

NOTE: Images in this archived article have been removed.

What happens when an oil field as big as any in the Middle East is discovered in the desolate border towns of Montana and North Dakota?

The story started out in a Montana newspaper, then grew into a minor legend: An unnamed rancher out in the state’s far east, a sparsely populated town along the North Dakota border, received his first royalty check for crude oil pumped out of his pastureland. Oil is the big news in this area, which the locals call MonDak; on both sides of the border, new wells can mean life-changing money for the families who own some of the toughest, driest farm and ranch land in the country.

So the story goes that the farmer opened the envelope and looked at the check, the first quarterly installment. He read the amount, read it a second time, then he sent the check back. He must have thought the damn fools had put the decimal point in the wrong place—$1.1 million, an unfathomable fortune, just couldn’t be right.

The tale circulated this fall in and around Sidney, a town of 5,000 people that anchors a huge swath of eastern Montana’s gold and slate-gray hills. Sidney is not part of the Montana where movie stars buy trophy ranches: temperatures swing from minus 40 degrees in the winter to 110 in the summer, and no one would confuse recreation with the battle to squeeze a living out of the land.

The town also happens to sit at the epicenter of the biggest inland oil discovery in the United States in 50 years. Two miles below the surface lies a stratum of oil known as the Bakken formation, holding an epic haul of crude—some surveys suggest up to 200 billion barrels, a near-Saudi-sized reserve. And since the end of 2000, when new drilling technology and rising prices combined to unleash the find, Montana and North Dakota have become the underground rock stars of American oil, among the few states recording production increases. With oil prices soaring above $100 a barrel, it’s like giant vaults of cash opened beneath the MonDak soil.

In late November, despite cutting winds and near-horizontal snow, Sidney and its hinterlands are a hive of activity. Oil-tanker trucks patrol the narrow highways and gravel farm roads day and night. The cafés, casinos, and bars are full of guys wearing coveralls emblazoned with oil-company logos, most prominently those of “Team” Halliburton and that notorious company’s rival Schlumberger, the outfit BusinessWeek calls “the stealth oil giant.” Ubiquitous “help wanted” signs testify to the most open job market anyone around here can remember—if you can work, you’re working in oil. A genuine boom is in full swing.

This has all happened relatively quietly, perhaps because MonDak is so remote. But locals will tell you that the Bakken formation has torn the area’s social fabric in a big way. Oil spawns more jobs than the thin population can fill, paying wages higher than local businesses can afford to pay their employees. Landowners collect royalties on oil pumped out of their property, rearranging the economic fundamentals of a place where, traditionally, nothing comes easy. It has also created subtle tensions between those making big oil bucks and those not profiting from the boom.

John Mercer, a rail of a man with a trim white beard and the jovial bass voice of a small-town radio host, lives and works on the huge homestead his grandfather carved out on the banks of the Yellowstone River back in 1906. He took over the place in the 1970s when his father suffered a heart attack, and expected to stay just a couple of years to stave off a forced sale. He discovered he liked farming, and the challenges of working land that might get only 12 inches of rain in a wet year. His professional life revolved around alfalfa, beef prices, and irrigation, and afforded him time to pursue some modest passions, like hunting and playing country guitar.

In the last few years, though, drilling outfits have punched 11 oil wells in the Mercers’ pasture. Previous oil booms around Sidney passed them by; they’re still making sense of their newfound luck.

“This has been a lot like winning the lottery,” says John, “except [my wife] Kathy and I absolutely never go to a casino for the gambling—only the food and drink. Some say we already are big-time gamblers, because we’re farmers playing the commodities market and the weather and the other unknowns, but it hasn’t really felt that way.”

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John Mercer, a farmer turned oil-field owner, with his wife Kathy.

After breakfast at the M&M Café, a Formica-and-vinyl diner where the waitress knows the regulars by name and every significant local event materializes as a colored-paper flyer on the bulletin board by the door, the Mercers and I drive out onto their stunning domain of dryland pastures and irrigated fields. We rattle over iron cattle guards—someone has stuffed a dead coyote into one—and down twisting roads topped with dusty red gravel. Deep inside the property, a new drilling site, where a specialized crew will pound down through two miles of earth to hit the Bakken layer, heaves into view.

It was a completely different feel out here three years ago,” John says as we cruise past leafless trees and scrub. “When a drilling rig moves in—it’s massive. When a rig moves out—massive. A crew moves in— massive. And there’s a whole service industry that comes along with an oil operation, with its own demands.”

“Most farmers are not prepared for the well-schooled, hard-bargaining representatives they’ll face from the oil companies, but they and their heirs will live with the ramifications of that contract for generations to come.”

On a different well just a few miles away, a “frac” crew is at work. Since the oil is sealed up in rock, the formation must be “fractured” before it can be pumped out. John explains that after drilling, the crews shoot a mixture of water, chemicals, and sand into the ground at a pressure of 8,000 pounds per square inch to blow the formation open, freeing the oil.

We pull off to the side of the road. “This is the monster,” he says, gesturing out the passenger-side window. About 10 semi trucks sit side by side on a flat, man-made platform of dirt. A row of rectangular tanks, the size and shape of shipping containers, line one side of the site, holding the injection mixture. Black hoses link the whole thing together. The humans involved, men in blue jumpsuits and white hard hats, clamber around on this apparatus, dwarfed.

John tells me that oil operations bring their own complications to a farmer’s life—the trucks tear up the dirt roads, and neighbors complain about “dust pneumonia” afflicting livestock. And while he feels his family negotiated a good deal, he advises caution.

The Mercers politely decline to discuss just how much oil they’re sitting on, but John does offer a word of advice for anyone in a similar situation: Get a lawyer. “This is a multimillion-dollar reverse example of ‘caveat emptor,’” he says. “Most farmers and ranchers are used to dealing with their neighbors on trust. That does not prepare them for dealing with the well-schooled, hard-bargaining representatives they’ll face from the oil companies. It is not just the immediate terms they will have to live with, but they and their heirs will live with the ramifications of that contract for generations to come.”

So far, the Mercers have no complaints. They say the boom makes Sidney a more interesting place to live. They share revenue from seven of the 11 wells (land-ownership and mineral-rights details can get very complicated) with their far-flung family. Still, they remain working farmers at heart.

“The big change for us,” John says, “is that we no longer have the daily concern about overdrawing our checking account. Everyone in my family had approached this boom without any grand expectations. But we do hear more Jed Clampett jokes and did have to learn guitar and banjo versions of The Beverly Hillbillies [theme song].”

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Just beyond Sidney’s old downtown core, a barebones industrial park—collision-repair shops, farm-supply outfits, pyramids of circular hay bales—runs out to the edge of town. Sidney Millworks, a custom-furniture and interiors firm, occupies a boxy red-and-white warehouse. Until just a few years ago, jobs here were among the town’s most coveted, offering decent wages and opportunities to travel, build skills, and move up.

“We had people who started out sweeping floors who became project managers,” says the owner, Dolph Harris, sitting beneath the fluorescent lights in his office. “We have health benefits. We rarely start people out at minimum wage. We have a retirement program.” Good stuff—under the old paradigm.

“Then oil hit,” he says. “There’s no way in God’s world that we can go out and offer anything remotely like what the oil companies offer. What they’ve done is, they’ve decimated the territory.”

Harris used to have around 50 employees; he lost about 30 to oil jobs, and isn’t even close to filling the gap. Sales have fallen right along with manpower. Harris says he’s scraping by on subcontractors and fighting visa hassles to bring in legal foreign workers. He says he doesn’t blame his former employees for jumping ship—not when they can go from $12 an hour to $50. “On some level, it’s embarrassing to sit on your barstool next to some guy and hear how he’s making $50 an hour while you’re making a fraction of that,” Harris says. “He’s asking you what your problem is.”

Harris finds the oil boom hollow. “The Yellowstone Mercantile celebrated its hundredth anniversary a couple of years ago,” he says, referring to a once-venerable department store that now sits vacant on Sidney’s main street. “Now it’s gone. It’s like Grandpa died, and you can’t get him back. How does that happen in a boomtown? Money isn’t filtering through to those local businesses, so what’s the future?”

Not every Sidney businessperson shares this pessimism, though most find the boom challenging. The same day I visit the Millworks, a fierce storm brings the least picturesque snow I have ever seen, a thin, biting, grainy dust. Just off Central Avenue, the main drag, I find Rory Carda shoveling the sidewalk in front of Kentucky Fried Chicken. Most fast-food joints would stick some teenage underling with this duty, but Carda, who has owned the KFC for 10 years, lately finds himself handling a lot more than snow detail. He works seven days a week, even though he has slashed the restaurant’s hours and menu, because he can’t find enough employees.

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The Sidney KFC is struggling to fill positions.

“We’re down to just a handful of people,” he says. “I had to pull the buffet, which is a big thing for KFCs. In the past, we’d wait for the oil jobs to fill up, then hire the people who were still looking for work. Now that’s not really possible.”

This is a variation on a theme I keep hearing: MonDak is flooded with oil jobs, which attract a floating population of well-paid migrants. People commute hundreds of miles to work the oil field, without setting down permanent roots. Meanwhile, the local labor pool gets sucked dry, putting enormous pressure on employers. High school grads can step into $100,000-a-year gigs. The Sidney McDonald’s started a retirement program to compete.

It’s a problem; for some, it’s also an opportunity. “Our sales are up, which is the amazing thing,” Carda says. “I thought when I took the buffet out, I was basically cutting my own legs off. But no—in the evenings, we’re busy. Guys who work 12 hours a day don’t have time to cook. It’s been a fun ride, in some ways.”

A fun ride, in some ways. That about sums up how Sidney feels about oil: excitement undercut by doubt. On Central Avenue, not far from the empty Yellowstone Mercantile building, the town’s only movie house also stands shuttered and dark, next to a vacant lot left behind when a classic hotel burned to the ground years ago. Central Avenue is often jammed up with oil trucks, but aside from a half-dozen busy bars and a few well-trafficked convenience stores, there are few indicators that business is booming.

Meanwhile, some less visible, less traditional businesses hitch themselves to oil and thrive. Four years ago, Wendy Haugen, a 52-year-old Canadian, teamed up with a partner to start a drug-testing business. They each threw in $500. Now their operation, Checkers, rakes in $40,000 a month, primarily because drug testing is mandatory for all oil crews.

“We go out to the sites, wherever they are, even if they’re in Timbuktu,” Haugen says. “Testing has completely changed the atmosphere of the oil business. When we first started, we’d go out on a random check and see five or six guys suddenly disappear. Now that might only happen every once in a while.”

Can you build a city on fried chicken and random drug tests? That might sound flippant, but it gets at the anxiety gnawing at Sidney and other MonDak towns: the sense that no matter how good oil seems, it doesn’t create the bonds that make a place work long-term—and that when the end comes, it could be ugly.

Dolph Harris sees the transitory lives of this boom’s migrating workers and deeper changes—people spend oil wages online instead of downtown, watch DVDs instead going to the movies—and he wonders what legacy those trends will leave. “The only thing they have to build a lifestyle on is money,” he says. “They’re not engaged in the real community. An oil company buys a whole fleet of new vehicles, but they don’t buy from the local guys. They do sell off their own vehicles here, which floods the local market and hurts the local guys. This boom has changed us from what we were to what we are. The question is: What are we going to end up as?”

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MonDak was one of the last parts of the continental United States settled by white homesteaders, and remains nearly blank on population-density maps. By day, a long drive between its hardscrabble farm towns feels like an expedition into an American version of the savannah. By night, it’s more like an Apollo mission. During my hour-long drive from Sidney to its North Dakota counterpart, Williston—the other town benefiting from the MonDak boom—mini-tornados of dusty snow sweep over the surface of the highway. Just over the border, I pull off on a road behind a decomposing farmhouse, two oil wells to my left, one to my right. Whoever owns that parcel may not want to live on it anymore, I think, but I bet they’re glad to have it.

A few miles down the highway, I come to the confluence of the Missouri and Yellowstone Rivers, a place Lewis and Clark visited in roughly similar climactic conditions; their journals record water freezing in chunks on their oars. Down a dirt road leading away from the riverbank stands Fort Buford, where Sitting Bull surrendered to the U.S. Army. It makes for a scene of desolation: a few drab old buildings scattered in a winter-barren field, fogged in by low-lying clouds.

Williston is a city of 12,000 about 20 miles over the Montana border into North Dakota. The city’s population peaked in 1960, and has been dropping ever since. Across the state, a low birthrate and enormous proportion of residents over 85—the most in the nation—speak to a mass exodus of youth. And the city is now coping with the same shortage of non-oil-drilling labor that faces Sidney. But the boom might just save Williston—and other slowly dying North Dakota towns—from oblivion. Everything here is in flux. Oil offers a chance to stem the tide.

Holand Neubauer is part of that trend. After he gets off his shift with a frac crew, we grab dinner at an all-you-can-eat buffet near his house. Neubauer grew up in North Dakota; his dad worked in the oil fields during an earlier boom. “Growing up, it seemed like everyone we knew was involved in oil in some way,” says the 25-year-old. “It was the economy I grew up in. But it died off, and people left town—either to other oil jobs, or going back to school, or just going on a new route in life.”

“There’s no way we can go out and offer anything remotely like what the oil companies offer. What they’ve done is, they’ve decimated the territory.”

Neubauer went to college for criminal justice and business, but he won’t be launching a career as a cop or a salesman any time soon. “Things are popping again,” he says. “I had never, ever thought I would be working in an oil field. I can honestly say I had no interest in it whatsoever.” Now he supervises a frac crew, waking up at 4 a.m. to blast sand into the ground.

In most ways, Neubauer seems like your average post-college guy; he and his roommate share a semi-clean house with two gorgeous purebred hunting dogs. After dinner, we head back to his place and watch Anchorman. Unlike most mid-20-somethings, though, he feels as if he’s found his career for life: a chance to learn, move up the corporate food chain, and, maybe, travel. He’s making good money and even having fun—two things that, before the boom, Williston didn’t exactly serve up on a platter to its young.

“For my age and with my experience, to be where I am is pretty amazing,” he says. “I’m extremely fortunate. And from here, it’s just up and up. The technology is always changing. There’s always something new to master.”

Meanwhile, despite the sinister environmental, economic, and political baggage, oil brings the wider world—and its wealth—to MonDak. Neubauer has watched oil make his town a more livable, prosperous place. The day-care center his mother runs is packed.

He gets to meet guys from all over the country. And he has a tough and demanding job with enough risk and adventure to keep his interest. Indeed, guys like Neubauer and towns like Williston and Sidney will benefit from the boom, some to the tune of millions. At least as long as the party lasts.

Author Zach Dundas is a Montana native and former staff writer for The Missoula Independent and Willamette Week. He lives in Portland, Oregon.

Photos: Brian Paumier

Tags: Building Community, Fossil Fuels, Oil