Oil development spreads good and bad unevenly

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DUNN COUNTY -Landmen are like seagulls -when they're unusually flocked, a storm is brewing.

Dunn County with its crowd of mineral-researching landmen at the courthouse is in the midst of an oil storm. Like any storm, it'll leave some better and some worse off in its path.

Oil is that way.

While North Dakota's tax coffers, oil well owners and the oil industry reap a gush of dollars, the small county governments and the majority of rural landowners do not.

Drilling is fierce in Dunn County right now. Likewise in Mountrail County.

They are not the only counties in the midst of the oil storm.

But unlike Bowman and Billings counties, for example, where roads and other services are settling into place, Dunn and Mountrail are under new and extreme pressure because of intense drilling into the Bakken formation. The formation is a rich reserve, but very deep and only in recent years has technology developed to tap into it.

The rush is on now.

A decade ago the number of oil rigs in the state hovered from zero to 10. Today there are 54.

Ruth Zacher, whose family lives on a farm just outside Parshall, in Mountrail County, sees that rush from her living room window.

A new well is going in right across the road. A natural gas pipeline will be trenched out right alongside the farm yard.

Trucks move around constantly to the rigs and six well sites that dot the Zachers' farm, busy producing the upside for others, the downside for them.

The formerly black starry nights are lit with eerie orange gas flares up and down the Shell Creek valley.

"Everything is changing around me," Zacher said.

She used to love the quiet farm country where they live. She'd run miles down empty country roads, her kids, too, for cross country training. Now, the roads are an industrial network. There is always noise, always dust, always truck wheels spraying gravel, coming up fast over blind hills.

Loud and frightening as it is, it's their life out there.

"My husband (Chris) lives and breathes farming. What are we going to do, leave, and rip his heart out?" Zacher said. "But what's happened out here tears my heart out."

The Zachers are at the epicenter of Bakken drilling right now.

Eight miles to the northwest, John Warberg, a longtime friend of the Zachers, says he can feel their pain.

"It's the luck, or 'unluck' of the draw," he said.

Warberg has one well on his land and he's getting royalty payments, but he says the checks are only a small part of the whole picture.

"If you're not happy, what the hell good is it?" he wonders.

Warberg and Zacher drive around their rural neighborhood, with new wells in or going in every direction.

At the wheel of his pickup, Warberg points out a new Mountrail County sport, "lath hunting." The orange-tipped stakes in the ground are clues locals use to try to figure out what's going on, because they mean something like a new well road, or an oil site's been surveyed.

"If I lived here, I would consider it bad," Warberg said, looking at the activity around Zachers' place. "For me, because it's not like this, it's just a change."

The Zachers are one example of the personal cost many pay for oil development.

They also are an example of how removed the benefit of oil development has become from the people who live on the land.

Dunn County Commissioner Cliff Ferebee estimates that as high as 70 percent of the mineral ownership in his county is severed from the surface ownership like it is for the Zachers.

Over the generations, some sold the minerals under their land outright. Others retained the mineral rights and sold the surface acres. In many cases, the mineral estate has been split several times among successive heirs who either left, or never did live in the state.

Ferebee's point is that oil development provides relatively little financial benefit to county residents, while they deal with its downside.

Dunn County has its hands full right now.

It gets a small share of a production tax on every barrel of oil, though the Legislature capped the total it can get at approximately $2.2 million a year in a formula based on population.

The cap was increased in the 2007 Legislature and oil counties on average will get 25 percent more funding, said Vicky Steiner, director of the Oil and Gas Producing Counties Association.

The county got a little more than $1 million in 2007 and won't get to $2 million this year, even though 14 rigs are set up around the county and miles of gravel roads are getting badly beat up.

It's figured that each of the 14 rigs, with service traffic included, puts about 75 pickups, trucks and semis on the roads. That doesn't count traffic to wells already drilled or being completed with work over rigs.

The county has about $7 million worth of road and bridge work to do, figures auditor Reinhard Hauk. "Instead, we'll spend $2.5 million to try to stay ahead of the game."

The county will put out in the range of $1 million to buy new road equipment. Commissioner Bob Kleeman said every time the county sends out a blade to smooth washboards caused by oil traffic, it has to skip roads elsewhere in the county.

"Because we're backing up oil, these people are neglected," he said.

Kleeman said the roads aren't destroyed, but the county needs moisture to keep the roads from disintegrating into dust. And it needs money.

Both are short.

Commission chairman Ray Kadrmas said he'd like to see the legislative cap removed so the county can get a tax share for every barrel of oil produced in Dunn County, now spiking upward of 230,000 barrels a month.

"Our impact is spiking, too," he said.

Steiner said the Legislature recognizes the imbalance and a new study to look at the old tax distribution formula in light of 20 years of inflation for such things as road gravel should help bring more equity into the equation.

The commissioners realize the Dunn County road system was designed and mostly built 50 years ago.

Hauk said the upside for the county is that now is the opportunity to do some innovative things. "It's a challenge to these guys (the commissioners) where to put the money," he said.

Ferebee said it's not fair that small counties like Dunn County struggle to keep their heads above water while the state collects the majority of the oil tax revenue.

Mountrail County Commissioner David Hynek said the county can try and coordinate road work with oil companies, but their plans change overnight.

"No way can we commit our limited resources in advance. I will not squander those dollars," he told a meeting of road and legislative officials last week.

For all the impact of traffic on roads and buses in need of repair because stuff just jiggles loose, oil development hasn't meant new students for Parshall, said school superintendent Steve Cascaden.

Oil workers commute, or sleep in trailers at the rig sites, or in a mobile home court in Killdeer in Dunn County, and drive home at the end of the week.

The Parshall school is receiving a share of oil tax, plus it gets a hefty royalty check -$31,000 last month - from some mineral acres the district kept after selling the surface acres years ago.

Cascaden said the money will go toward repairs and other improvements long over due.

"It helps us a lot," he said.

The look and feel of Dunn County is changing, same as Mountrail County.

Kleeman said it's odd to see orange gas flares at night all along Highway 22 from Killdeer clear to the Little Missouri River valley.

"I don't know if that's what they had planned for a road that's a Scenic Highway," he said.

(Reach reporter Lauren Donovan at 888-303-5511 or lauren@westriv.com.)

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