This report is part of a joint project by the Center for Public Integrity and InsideClimate News
BISMARCK, N.D. — North Dakota’s Heritage Center makes for a jarring sight in this Midwestern prairie capital. The newly-expanded museum consists of four interlocking cubes of stone, steel and glass, a gleaming architectural statement poking out of the otherwise drab Capitol grounds. Each cube features a gallery devoted to an era of North Dakota’s history, but the state’s present is everywhere.
The legislature approved the dramatic $52 million expansion in 2009, but required the museum to come up with $12 million of that to supplement state money, and more than half has come from energy companies — including a $1.8 million gift from Continental Resources Inc. that put its name on one of the galleries. The gifts have “given us a chance to do some things that we’ve never really had a chance to do,” said Merl Paaverud, director of the State Historical Society.
Oil development has transformed this state to the point where it’s hard to find a place or person that hasn’t been touched by the boom. Energy companies have drilled more than 8,000 wells into western North Dakota’s rugged prairie since the beginning of 2010, quadrupling the state’s oil production. From July 2011 through June 2013, the state collected $4 billion in oil taxes, and is expecting a $1 billion surplus for the current biennium, not including an oil-funded sovereign wealth fund that will approach a balance of $3 billion. North Dakota is in the uncommon position of facing a labor shortage, spurring a state-run campaign to attract workers, paid for in part by Hess Corp.
In addition to the tax revenue they’ve brought, the oil companies have showered the state with additional money — new millions for universities, museums, hospitals and other charitable causes. They’ve also given hundreds of thousands to politicians, making the sector the largest single source of those contributions. The oil industry is the top contributor to Gov. Jack Dalrymple, according to the National Institute on Money in State Politics, and gave money in all but 10 of the 75 legislative races held in 2012.
“I don’t think most people know how pervasive the influence of the oil industry is in the Capitol,” said Jim Fuglie, a former state tourism director and former head of the state Democratic-Nonpartisan League Party. “Nothing this big has happened since homestead days. This is a game changer for North Dakota.”
Put another way, the state’s modern history has been rewritten by the energy industry in just four short years. And while few want to argue with the prosperity — the cascading cash, the budget surplus, the new hospital wing, the abundant jobs — the clout and swagger of the oil companies, arguably the most powerful force in modern politics, has unsettled the traditionally amicable and moderate politics of this state of just 725,000 people. Whether through campaign cash, charitable donations or larger contributions to the economy, the industry has gained a level of influence that’s hard to overstate. Each significant attempt to tighten regulatory oversight or restrict some of the industry’s more wasteful practices in the last legislative session either failed or passed only after being stripped of its core. Any talk about clamping down on the pace of drilling has been quickly snuffed out.
The results have been making headlines for a couple of years now: oil field spills by the thousands, billowing clouds of dust kicked up by an endless stream of trucks pounding on deteriorating roads, radioactive waste left to degrade in vacant buildings, skyrocketing crime rates and housing costs and methamphetamine abuse and prostitutes in a land where few outsiders wished to venture just a few years back. Many landowners and local officials in the state’s western oil fields — political conservatives for the most part — see an industry allowed to operate where and when it pleases, at any given speed, and to pollute with virtual impunity. Drillers wastefully burn off nearly a third of the natural gas that’s produced with the oil without paying royalties or taxes because they haven’t installed the pipelines and processing plants to capture it. As recently as 2009, there were just 451 oil field spills statewide, but last year there were at least 1,782. Just a fraction result in punishment: authorities issued 15 fines for spills in 2013, mostly for incidents from previous years.
State officials caution that aggressive regulation would slow development and jeopardize, well, everything. They also highlight a handful of recently adopted rules, part of an effort to adjust an antiquated regulatory system to the modern technologies and massive scale of the oil industry. The state has indeed adopted many new regulations to cover drilling, but just who wrote them and how much difference they’ll make is up for debate. The Industrial Commission, which oversees drilling, recently announced a set of rules to limit flaring, the practice of burning natural gas at the well site. The rules should start reducing the amount of gas drillers waste, but they are based on a set of proposals that regulators solicited from the oil companies themselves.
Since retiring five years ago, Fuglie, the former tourism director, has maintained a political blog, and he characterizes state leaders as so giddy with new riches that they’ve ignored the boom’s destructive effects.
“We’ve been so poor for so long, then all of a sudden, we won the goddamn lottery,” he said. “You know what happens to lottery winners who aren’t prepared to spend a lot of money. You read about them three years later. They’re in court, or they’re in bankruptcy, or they’re divorced, or their kids committed murder or took drugs. That’s the way we are.”
All or nothing
Don Morrison is one of North Dakota’s most prominent environmentalists, but he’s hardly a treehugger. He is the executive director of the Dakota Resource Council, a grassroots group of mostly farmers and ranchers that tries to protect land for its members, many of whom have leased mineral rights to energy companies and are supportive of drilling as long as it’s done responsibly. Unlike in other states, there’s been no organized movement here to fight hydraulic fracturing, or fracking, the high pressure injection of water, chemicals and sand into the earth to shatter the rock and release oil and gas. Towns here have not tried to ban the practice, as they have in Colorado, Pennsylvania and even Texas. Residents are largely supportive of the oil industry — an industry-sponsored poll found that 83 percent of respondents support oil development. Advocates like Morrison have mostly asked for smaller-bore measures — increasing the distance between homes and wells or tightening the rules on flaring — but even these proposals have sometimes drawn strident reactions from politicians.
In December, Attorney General Wayne Stenehjem, a Republican who sits on the three-member Industrial Commission, proposed placing buffer zones of up to two miles around 18 “extraordinary” sites — scenic buttes and state or national parks — within which any proposals to drill would undergo a public comment period for individuals or public agencies to weigh in on details of the development.
Backers noted that the proposal did not ban drilling anywhere, but would merely solicit public input to help mitigate impacts. But opponents of the proposal attacked. State Rep. Roscoe Streyle, a Republican from Minot, which is not in the oil fields, wrote a commentary for the Bismarck Tribune in which he called the proposal “a direct attack against the free market capitalist system and … very anti-oil development,” before going on to write that the state “should be thanking the industry every day and working with it, not against it.” Harold Hamm, CEO of Continental Resources, warned that the company’s commitment to the state depended on the outcome of the proposal. In comments submitted to the Industrial Commission, the North Dakota Petroleum Council, the industry’s lobbying group, said the process could allow “radical environmentalists … to delay or obstruct development.” The council asked that the commission “further define” the comment process on public lands and remove it altogether from private property. In March, the commission did pretty much exactly that, approving a comment process only for public lands, covering about 600,000 acres, or half the original area.
After the vote, Stenehjem mentioned that he had recently seen the movie Gravity, in which the main character spends most of the film stranded in space, alone. “Now I know how Sandra Bullock felt,” he said.
Clay Jenkinson, a columnist for The Bismarck Tribune, wrote that he was “deeply saddened to see the Industrial Commission throw its immense weight (as usual) behind the dynamics of wholesale development.” The following month, in comments to a local chamber of commerce, Lt. Gov. Drew Wrigley reportedly mocked Jenkinson’s critiques, saying, “You don’t have a God-given right to never see a well head going up and down.”
In an interview, Wrigley said he’s a friend of Jenkinson’s and that his comments were taken out of context. “I was joking,” he said. “It wasn’t a serious pointed comment at Clay.”
The rhetoric around the “extraordinary places” proposal contributed to an atmosphere in which dissent is discouraged, Morrison said, an uncharacteristic mood for a state that has long maintained an odd mix of conservative and progressive politics. “There is a set line that everybody has to toe, which is the oil companies are the ticket to the future and don’t say anything bad about them.” Morrison is thin and bald, with black rimmed glasses and a neatly trimmed white mustache, and he has a tendency to giggle when he gets excited. “Our state leaders set up a conversation that, it was all or nothing. There was absolutely no room for anyone in the middle, none. And that was just weird.”
Morrison was speaking from his office on the basement floor of a small brick building on the western edge of Bismarck, above the Missouri River. On the wall of the waiting room hung a framed drawing of Theodore Roosevelt’s face with a quote: “Here is your country. Cherish these natural wonders, cherish the natural resources, cherish the history and romance as a sacred heritage, for your children and your children’s children. Do not let selfish men or greedy interests skin your country of its beauty, its riches or its romance.”
Roosevelt lived his ranching days in western North Dakota, in an area now surrounded by oil activity, and many of the area’s residents embody his conservationist spirit, even while maintaining mostly conservative political views. Corporate interests have long held sway in the state, but there’s also a populist tradition dating back to the 19th century (North Dakota has the only state-run bank in the country) that seems to have waned in recent years.
In the mid 1970s, at the height of a coal mining boom that tripled the state’s production, then-Gov. Art Link, a Democrat, pushed through a set of extraction taxes and tough reclamation laws to cover coal production. Morrison, who was working for the lieutenant governor at the time, said there was robust debate about how best to exploit the resources, but that nothing of the sort was tolerated in recent years. “If any politician dared to say, well maybe we should make the oil companies do such and such, he was immediately branded as a radical and weirdo, and not a legitimate part of the conversation.”