The recent bankruptcy of a Tulsa, Okla., energy trading company that lost more than $3.2 billion speculating on crude-oil prices has forced the shutdown of some oil wells in the Williston Basin of Montana and North Dakota.

SEMGroup LP, one of the largest buyers of crude oil from the Williston Basin, filed for Chapter 11 bankruptcy protection in Delaware on June 22, and the aftermath is hitting oil and gas, propane and asphalt companies across the West. The Bakken field in the Williston Basin is considered the hottest oil and gas play in North America.

Robert Harms, an attorney in Bismarck, N.D., said some of his independent producer clients are at great risk.

"This is a big deal. That's a major-league concern if you invest $5 (million) or $6 million in a Bakken well and sell the crude and don't get paid," Harms said. "Some of our members are at risk of losing millions of dollars from their wells."

Harms is president of the Northern Alliance of Independent Producers, representing nearly 60 producers in Montana, North Dakota and South Dakota. If the producers don't get paid, he said, there is a chance that the mineral rights holders and the state governments won't get their royalty checks. Harms said SEM paid the June royalty payments to the state of North Dakota, but the July payment isn't due for three weeks.

Northern Alliance members are deciding whether to try to collect their bills individually or as a group in the bankruptcy court, he said.

Meanwhile, Jim Bailey of Billings, Mont., spent the past two days in meetings trying to figure out how to save a major project worth $500,000. His company, Hardrives Construction Inc., won a contract with the National Park Service to surface roads in the Great Basin National Park on the Nevada-Utah border. The work is supposed to begin in two weeks, but Bailey can't find the asphalt, at least not at affordable prices.

He was going to buy the asphalt from SEM Materials in Salt Lake City.

"Now they can't supply us, so we're scrambling to get chipping oil from another vendor and of course they're playing the market," Bailey said. "Now that SEM is out of the picture, the price of emulsion has increased 40 to 50 percent."

Bailey said he may have to pass the Ely, Nev., job on to another company because he can't pass on his increased costs.

"The National Park Service is saying, 'That's a fixed-price contract. Have fun,'" he said.

And that's not Bailey's only headache flowing from SEM's bankruptcy.

SEM Material LP purchased the former Koch Materials asphalt plant east of Laurel, Mont. That plant was supplying the base product that another one of Bailey's companies uses. JB Industrial of Billings makes the seal coat used to top off parking lots. Escalating asphalt prices pushed the price up sharply a week ago.

Now, instead of trucking the base from Laurel, 20 miles away, Bailey has to send his drivers 550 miles to Salt Lake City. Also, regional competitors who don't use SEM and haven't had their supply lines interrupted are moving in on JB Industrial's customers.

"We're trying to protect our customer base. We have people who are jumping ship already," he said.

Even before the SEM bankruptcy, the U.S. was short of asphalt and prices were rising sharply, so companies all across the West are hunting for affordable asphalt.

SEMGroup has dozens of subsidiaries dealing in crude oil, natural gas, propane, refined petroleum products and asphalt in the U.S., Canada, Mexico, Wales, Switzerland and Vietnam. On Thursday, the company asked the bankruptcy judge in Wilmington, Del., to approve bridge financing to keep the company running. The judge asked for more documents and will resume the hearing Monday.

The U.S. Securities and Exchange Commission has opened an investigation into some of SEM's affiliate companies.

The CHS Inc. refinery in Laurel issued a news release about the SEM situation, saying that it will continue to provide propane and asphalt to customers.

CHS spokeswoman Lani Jordan in St. Paul, Minn., said the Laurel refinery produces less asphalt and more gas and diesel now that the coker project is completed. She said companies across several Western states are calling the Laurel refinery to try to buy asphalt, so CHS will try to maximize its output.

"We can't supply all of those people, so we have focused our ability to supply asphalt to customers in the home region of Montana and into the Dakotas," Jordan said.

The Montana Board of Oil and Gas met in Sidney, Mont., on Wednesday and Thursday, but the SEM bankruptcy never came up because nobody knew about it, according to board chair Linda Nelson of Medicine Lake, Mont.

Montana Petroleum Association executive director Dave Galt in Helena, Mont., also was unaware of the SEM situation early Thursday until he called some members.

"It is going to be a significant issue with our upstream (producer) members," Galt said.

(Jan Falstad is a reporter for the Billings Gazette and can be reached at jfalstad@;billingsgazette.com or 406-657-1306.)