North Dakota Fracking: Part 1

 /  Jan. 4, 2016, 7:22 p.m.


oil rig

The following story was made possible through the Gate Reporting Grant: an annual stipend supported by the Institute of Politics and awarded to writers pursuing complex and long-form investigative stories. In 2015, the grant was awarded to Dake Kang and Sean Maher. The following is the first part of their investigation into fracking in North Dakota.

INTRODUCTION

April 4, 1951, western North Dakota. A towering derrick stood sentry over the rolling plains. The silence was shattered by a detonation, which does instantly what four months of drilling could not: break through the thick North Dakota shale to reach the oil beneath.

Photos were splashed across papers and publications. With some twenty billion barrels of oil waiting underground, the Bakken Formation, as it soon came to be called, turned out to be one of the largest deposits of oil ever discovered in the United States.. This wellspring of prosperity, however, proved short-lived. Despite the vast amount of oil, technical difficulties made extraction prohibitively expensive. This changed in the early ‘80s, as the Iranian revolution drove the price of oil sky high. Production boomed again, only to go bust when reality pulled prices back down to earth.

In the past decade, a third oil boom, the largest to date, has developed in North Dakota. Beginning in 2006, new pressure to develop America’s domestic petroleum reserves, along with a new oil extraction technique called “fracking,” brought the oil industry back to North Dakota in force. The rural town of Williston transformed into a metropolis overnight, as workers from across the country flocked to the oil fields, lured by shockingly high salaries.

OPPORTUNITY

Millionaires were minted by the thousands. Populations doubled, then tripled. Unemployment fell to just 3%—the lowest in the nation—and the state government boasted a multi-billion dollar surplus. On top of that, the boom got going just as the Great Recession ripped through the economy, with unemployment peaking at 10 percent nationwide. Four neighboring counties at the core of the Bakken Formation—Montreal, Williams, Dunn, and McKenzie—quickly gained a reputation as one of the few places in the country where job seekers could find success; headlines like “North Dakota, a place to go for employment” or “North Dakota Went Boom” were splashed across the pages of the New York Times.

David Van Assche heeded these headlines.  After graduating from from the University of Washington with an accounting degree during the depths of the financial crisis, he struggled to find work in his field. After six months of a fruitless job search, he heard about North Dakota, and set out for Williston with no work or permanent housing. Less than twenty-four hours later, he had a job. Less than a year later, he started his own mailing and business services company.

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David Van Assche, Founder, Mailbox Solutions Plus

“Thanksgiving Day 2011 I travelled to Williston, [and] spent the night at the Walmart parking lot,” says Van Assche. As people from all over the United States flocked to North Dakota, housing became a rare commodity. “[People] were living in an RV, or in someone’s garage, or in someone’s yard, literally camping in the middle of winter.”

Housing wasn’t the only shortage Williston faced in hosting newcomers—convenience stores and supermarkets struggled to scale up quickly enough to meet the new demand. Walmart, for example, had hour-long lines: “There’s literally empty shelves, and there’s pallets stacked in the middle of the aisleway, because there’s no-one to stock the shelves . . . you’d literally have to cut open the Saran wrap off of a pallet to get what you need. That’s what it was like, it was just crazy,” Van Assche says.

With oil prices topping $100 a barrel, drilling proceeded at breakneck speed, as companies attempted to get as much oil out of the ground as they could. Rigs went up across the state, companies cropped up by the hundreds to supply the well-drillers, and workers went home with eighty-hour overtime paychecks amounting to well over six figures.

By 2014, the boom had reached a fever pitch. Business Insider called Williston “the most expensive place in America to rent an entry-level apartment,” beating out New York and San Francisco. Seven hundred-square foot apartments went for over $2000 a month. Men outnumbered women twelve to one. For almost a decade, the good times just kept rolling.

Then came the crash.  

THE CRASH

On June 20th, 2014, the price of a barrel of Brent crude oil stood at $114.81.

Six months later, it was $47.99—a 60 percent drop.

The sudden dive in oil prices sent Iran and Venezuela into crisis and fueled rumors of a conspiracy by the US and Saudi Arabia to ruin their mutual geopolitical enemies.  

Reduced gas prices are expected to save the typical American household about $750 this year.  As oil prices tanked, motorists cheered, but North Dakotans are less giddy.

“The question is the same: What does $41 oil mean for North Dakota?” asks Ron Ness, president of the North Dakota Petroleum Council. We’re sitting in his classically plush, dark-tone office, with pictures of Ness and his family pheasant hunting in the Dakota wilderness hung on the walls, and a large portrait of Theodore Roosevelt surveying the scene. Ness, at first smiling and chatting about sunflowers and the rugged Dakotan outdoors, is quick to sober up as he describes how what at first seemed like a temporary drop in prices is threatening to turn into a full blown industry crisis.

ron ness

Ron Ness, President of the North Dakota Petroleum Council

“We started looking at this in December—we had 186 rigs going, everything was going maximum, full throttle,” said Ness. “We said if this lasts six months, this is serious. We started saying six months to fifteen months, but now people are saying this could be two, three, four years.”

As of November 2015, two thirds of those rigs have vanished, leaving sixty-four standing. According to Ness, many companies—not only the oil companies themselves, but the companies providing auxiliary services, such as clean-up, maintenance, and construction, are in serious trouble.

“Absolutely, some of these companies are overleveraged,” Ness said. “Will they be able to sell off part of their assets in order to buy down their debt? . . . Can you find the capital out there to service your debt? Can you produce enough oil to produce a reasonable return to pay off your bills?”

Companies have already started to fold. Samson Resources and American Eagle Energy declared bankruptcy in October, but are struggling to find buyers for their lands in the Bakken. With the industry’s long term prospects looking dire, investors and banks are starting to get jittery.

As Ness puts it, “A lot of the banks are starting to get less . . . smiley.”

North Dakota’s woes are compounded by the fact that oil is a substitutable commodity with many providers on the global market.  It makes little difference whether a barrel’s from the Gulf of Mexico or the Persian Gulf—fueling an international oil industry race to the bottom. Prices are likely to take further hits as operators maximize production from existing wells to stay afloat, and as Iranian oil returns to a flooded world market. To make things worse, the Bakken’s remote location means producers here get 7 to 11 percent less than prices on the global market.

“It just seems the world is awash in oil, and every time you turn around more oil is discovered . . . So far, OPEC hasn’t flinched, Russia hasn’t flinched, US shale production hasn’t flinched,” says Ness. “Even if I’m not making what I want to make this month, I’m better off making half or a two thirds, because you have to keep the money coming in, and that’s what going on with oil production right now.”

It’s an open question who’s going to be the first to drop out—but one thing is for sure: eventually, someone will.

“Somebody’s gonna not be able to continue to produce because of cost,” Ness said.

On the streets of Williston, too, the boom days are over. Gone are the massive traffic jams, the two hour waits at Applebee’s, the stampedes at Walmart. The Fox Run RV park on the outskirts of Williston used to be crammed to the brim, with a waiting list; now one out of every five lots lies fallow, and a camper goes for half the price it once did.

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Fox Run RV Park, Williston, ND

During the heydey, oil companies booked entire hotels for their staff (even at $300 a night, rooms routinely sold out) but today, signs outside hastily constructed accommodations lining the interstate advertise slashed rates, and newly constructed subdivisions try to move unsold units.

But for many Williston natives, times aren’t all that bad. If anything, the end of the boom was a relief, a much needed break from the crowds that used to swamp the city.

“I call ‘em transient people, you know?” says David Van Assche, who arrived in Williston at the boom’s heyday in 2011. “They’re the people who worked here—a real common thing you’d hear of was three weeks on, one week off . . . they’d work seven days a week, twelve or fourteen or fifteen hours a day, and they’d fly home for a week or two, and come back. Most of those people are gone.”  

Most of the jobs that drew workers from across America had to do with well drilling, and mainly required physical strength and the fortitude to endure long hours with little rest. Now that companies have slowed or stopped expansion to concentrate on production, the jobs that remain require greater technical training, and employers are more selective about new hires.

When we caught Van Assche working into the evening at the construction site of his fourth store, he was unshakably upbeat.

“Today, yeah, it’s a lot slower. But by no means would I consider the economy here dead,” Van Assche says. “It’s not breakneck pace, it’s now a pace that you can do good business. You’re not stuck so much—how can we keep up, we can’t get staff?—that kind of problem . . . now we can start to grow our business the way they should have been, not just trying to hold on and fly by the seat of your pants.”

Van Assche got his start with $5000 and an opportunity everyone else had missed: the post office had a waitlist of over a thousand people looking for PO boxes. After finding out the nearest UPS store was 120 miles away, Van Assche quit his job, rented a room, and put out radio ads. Three years, four stores, and eighteen employees later, he’s planning to pivot to printing and advertising consulting, as hotels, restaurants, and bars try to carve a niche in this increasingly competitive market.

“Just like any business, you have to stay flexible to your changing conditions,” as Van Assche put it crisply.

THE WELDER

“It’s a much more difficult job market,” says Jeremiah Barr, who moved to Williston in January 2015, just as oil prices were crashing. “I’ve got eighteen years in metal fabrication and welding, I put in my resume and can’t find a job.”

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Jeremiah Barr, Welder

Barr moved to Williston from Alabama following the oil boom, figuring his experience as a welder meant he could stroll to an oil field and find work immediately. Instead, he took on a job with a general construction company, as jobs in the fields were drying up. Even the construction company struggled as the city government, facing declining revenues, started to withdraw contracts.

“I was hired as a superintendent just before a hiring freeze,” says Barr, “so the people I was supposed to be managing never got hired.”

It wasn’t the kind of job he was looking for. Dreaming of “thirty-five, forty dollars an hour, $100,000 a year,” Barr came to North Dakota determined to stay for a few years and save up enough to open his own company back home. Calling himself “pretty stubborn,” Barr stuck it out regardless.

“There’s still a lot of money to be made up here, people charge so much money for services, mechanic shops are backed up, I mean, you can bring a pair of scissors and cut hair here and make money.” says Barr. “People that are here have good jobs, but the good jobs are getting harder to find.”

In an ironic twist, Barr finally gave up looking for work in the oil fields and instead took a job welding wind turbines. He’s making $2500 a week plus benefits and travel—nearly as much as oil workers did during the boom days.

It’s one sign of a much bigger story. America may finally be on the brink of the long heralded shift from fossil fuels to renewable energy. Coal power costs 6.6 cents per kilowatt hour. Wind power, once prohibitively expensive, now costs about 3.7 cents per kilowatt hour—and that’s without subsidies.

“If they board up the town tomorrow, someone’s still gotta board up the town,” Barr said, a smile playing at his lips.

The Human Toll

Three years ago, Jason was on a work site when his head clouded and his thoughts ran off in rapid, nonsensical jags: a series of numbers, a half-remembered recipe. Then, his legs gave way and he hit the ground.  He had been decked by hydrogen sulfide, (H2S), an extremely toxic gas. Often found along with deposits of crude oil, hydrogen sulfide is colorless, making detection difficult. In large concentrations, its scent is often  compared to rotten eggs,—but even in small concentrations, where it is functionally odorless, H2S can cause permanent nerve damage.

At more than 20 parts per million, H2S causes brain damage; at more than 100 parts per million, it starts to kill. At 700 parts per million or more, H2S will drop a person with one to two breaths and kill in minutes. At 1000 parts per million: instant death.

“You drown [from] the fluid in your lungs,” as one safety instructor put it.

Only after his near-fatal brush with H2S was Jason given an H2S monitor to wear. He didn’t receive safety training until years later.

Being an oil worker isn’t called “the most dangerous job in America” for nothing: H2S poisoning is only one of many ways to die in an oil fields. One dramatic killer is rig blow-outs: when a rig hits a pocket of pressurized gases and safety measures fail, debris and oil can shoot violently out of the well.  Pressurized oil and metal projectiles can be deadly for workers on the surface—but if ignited, ejected oil can transform the rig into a massive inferno.  Even under normal circumstances, the fumes present during the operation of a well make fires a constant threat. The portable heaters workers bring to  warm their work areas during the frigid North Dakota winters have ignited these fumes, causing injuries and destruction.

While explaining his work in the fields, Jason pulls out the certification cards he still carries in his wallet months after moving to the concrete industry.  These cards certify that he passed courses on H2S safety and on personal protective equipment (PPE).

Though he often found these courses boring, Jason said he was glad someone paid for him to take them. It was in these classes he discovered  that some of the compounds he had been exposed to on job sites—and thought nothing of getting on his hands and clothing— were in fact toxic or carcinogenic.   

“If I were teaching you, the first thing I would tell you is ‘Hey, by the way, there’s a gas out here that can kill you if don’t pay attention.’ Now I got your attention, don’t I?” This remark was related to the Gate by the director of safety training for an auxillary services company, which provides training, heavy machinery, drilling pipe, and other equipment necessary to operate drilling rigs, as he drove us around to see some of the services his company provides, pointing out with pride the precautions his company's employees were taking as they went about their work

Most of the people we talked to emphasized that safety has improved since the early days of the boom. In those days, itinerant workers might show up in Williston one evening and start working the next day. Demand for workers was so high that almost anyone could walk in and get a job immediately. Many found it difficult to cope with the exhausting physical labor and 16-hour days common on the oil fields, and turnover was high.  

Under these conditions, training was done on the fly.

“Back in the day, say 2006, this is how things were done: ‘Hey, welcome to my company. Here, throw this on. If it makes noise, run like hell,” the auxiliary services safety director remarked. “Safety was such a minimal thing, it was all about making money. So it’d be like, ‘Hey there’s a dead body, yeah, kick it out of the way so that we can keep working.’”

Things changed as the industry matured, he says, and companies focus much more on training now.

“[By] 2009, 2011, the industry [started to] sustain itself, right? So then you had to have regulations. And then, with the regulations comes safety, equipment, assets; because now people realize, ‘Oh, if I keep my people alive longer, I’m gonna have a better business.’ So now I gotta really put time and effort into training. So that’s what it is—they didn’t train people before. So people were totally ignorant about it, unless people like me taught ‘em.”

Now, workers who go through his companies training must undergo  a 3-day orientation process.“Things have changed big time,” he says.

As the boomtimes fade into memory, another change has taken place: companies have begun to reexamine the number of personnel they require and restrict hiring. According to Jason, this was done by increasing the safety standards on-site. First, oil companies instituted random drug tests. Then, they began to dismiss workers for safety infractions which would have previously been ignored or written up without consequence. Yet, this increased focus on safety hasn’t stopped  accidents from taking place. In a five-month period beginning October 2014, eight oil workers died in a spate of accidents across North Dakota.

Some of this danger is inherent to the industry. During our tour of an oil rig, we watched a rig hand as he ascended to his post on the ‘monkeyboard’, high on the rig structure.  As the traveling block, a crane integral to the rig lifts a drill pipe weighing “five to six hundred pounds” upright, the righand pulls them onto a rack where they’ll stand until it’s time for the traveling block to drive them into the ground.  The drill pipes are what turn the bit that drills the well, as well as to pump drilling “mud” into the hole. Our guide summed the dangers inherent to this job: “You got a lot of metal moving around, so if you don’t pay attention, you can get in some trouble up there.”

Regulators have faced difficulties both in mandating changes on the oil fields and in holding companies responsible for violations and accidents. One example was reported by the Center for Investigative Reporting: in September 2011, employees of Carlson Well Service were on-site at a well owned by Oasis Petroleum North America. They had been hired to increase production from the well.

A floorhand at the well had noticed the well “talking,” or showing signs of being under pressure, but Loren Baltrusch, the supervisor hired by Mitchell's Oil Field Service to operate the well, allowed the Carlson crew, which  was not trained to work on wells under pressure, to continue. The day before, Baltrusch had pumped brine into the well to prevent gases from escaping, though not enough to fully “kill” the well.

A short while later, workers at a nearby rig witnessed the Oasis rig bursting into flame.  One member of the Carlson crew, Brian Wegner,died while attempting to climb down from the rig. Two others, Ray Hardy and Michael Twinn, would later die from their wounds.

There were no Oasis employees on-site:everyone involved in the inferno was directly employed by a subcontractor., Legally, this absolved Oasis from responsibility for the accident. The OSHA investigation focused primarily on Carlson Well Service, which was fined $84,000 (later reduced to $63,000) for failing to install a blowout preventer, provide flameproof clothing, or install an escape line onto the rig.

Because these companies are largely able to insulate themselves from liability, they have a limited incentive to ensure worker safety. OSHA proposed regulations for the oil and gas industry in 1983, but they were never implemented. As a result, there are no specific federal workplace standards for the oil industry (unlike construction, retail, and other fields). Since OSHA has no specific standards, it regulates the oil industry under the “general duty clause,” which requires employers to provide a safe workplace. Since they lack independent expertise, regulators often adopt the standards written by the American Petroleum Institute—an industry group. This puts the group with the most to lose from strong regulations in charge of drawing up the rules, a clear example of a conflict of interest.

Worker safety is just one area in which North Dakota regulators have struggled to keep up with the expansion of the oil industry. In the next section of this piece, we’ll look at some of the ways regulators, officials, and legislators have attempted to manage the oil and natural gas industry—and the catastrophic consequences that have occurred when these efforts fell short.

The images featured in this article were taken by the authors. 


Dake Kang and Sean Maher


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