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 second part of their investigation into fracking in North Dakota. The first installment can be found here and the second here.
A Second Windfall
Williston, the boomtown at the center of the Bakken oil boom, was once a small city like any other on the Great Plains. It had an American Legion post, a 4H club, and a yearly 4th of July parade. But like many rural communities, it was shrinking, as young people left in droves for the big city, chasing opportunities that didn’t exist back home.
Fracking in the Bakkens changed all that.
Williston still has its Legion post and 4H club and 4th of July parade, but residents agree that many other aspects of life in the city are nearly unrecognizable. When oil companies came back to North Dakota in the late 2000s, the money was a shock to the economy. Tax revenues poured into state coffers, and new residents arrived from across the country seeking work in the oil fields, straining public resources and private businesses alike.
Two urgent problems arose: What to do with the oil revenue, and how to deal with the massive changes created by the oil industry itself?
Native North Dakotans could now find-high paying work in their hometowns. The influx of tax revenues meant newly-paved highways and recreation centers, and billions of dollars set aside for the future. On top of the tax money, the petroleum industry has also made large charitable contributions in the state, endowing universities, museums, hospitals, and other institutions.
The great seal of North Dakota at the North Dakota State Legislature.
However, the economic promise of the boom has also fanned fears that oil companies might pack up and leave, taking jobs and money with them.
This isn’t a groundless concern: North Dakota saw another oil play in the late 1970s, driven by the OPEC oil embargo, the Iranian Revolution, and the Iran-Iraq war, all of which slashed oil supply and sent crude prices to an all-time high. America found itself desperate for new sources of hydrocarbons. Suddenly, the Bakkens went from being marginal oil lands to a potential bonanza.
Oil companies piled in, but their new wells came online just as the 1980s oil glut hit and crude prices came crashing down. Banks that had speculated on the play were forced to shut down. Practically overnight, companies shuttered and jobs disappeared, leaving towns like Williston to continue their long slow decline.
After the 1980’s boom went bust, bumper stickers appeared on trucks across North Dakota’s oil country: “PLEASE GOD, Just Give Me One More Oil Boom. I Promise Not to Blow It Next Time.”
Today one is more likely to see “Rockin’ the Bakken” or this wry reflection: “Lord, Thank You For The Oil Boom... Now, Please Help Me Survive It!”.
Where oil money goes
The memory of past booms and busts have shaped North Dakotans’ thinking towards the state’s recent prosperity. Many of the politicians and public figures we spoke with pointed to the need for the state to maintain good relations with the oil industry to keep money flowing. As we reported in part 2 of this series, this has driven a deference to the requests of industry lobbyists, leading to a regulatory environment described by its proponents as business friendly and by its detractors as lax, or even reckless.
North Dakota State Senator Tim Mathern (D-Fargo) holds the latter view. We met Senator Mathern in the lobby of the La Quinta Inn in Bismarck after he left the capitol building for the day. The hotel is clean and brightly lit, decorated to be both tasteful and unremarkable. Senator Mathern had an easy rapport with the desk staff and arranged for us to use an empty conference room. He sat across from us at the conference table that filled most of the room, and, in a deep and methodical voice that still carries the cadences of the Western North Dakota ranch on which he grew up, laid out his philosophy of public service.
For a Democrat like him, it’s plain and simple: He wants more government spending and more government services.
Senator Mathern represents Fargo, a city in the eastern half of the state. Unlike the western side of the state, which is dominated by agriculture and the oil industry, the larger cities of the east depend on universities and tech companies for revenue, including one of the largest Microsoft campuses in the US. These cities would undoubtedly benefit from more spending on infrastructure, education, and public services.
But despite the huge influx of oil money, that isn’t happening.
Instead, most of the tax revenues from oil companies are being saved up, in trusts such as the $2.4 billion Legacy Fund, which can’t be touched until 2017. This surplus may seem enviable to states facing serious budget shortfalls, but Senator Mathern sees a cost. Instead of using oil revenue for the development of North Dakota, these funds are lending it at interest to municipalities outside the state, which are paying for infrastructure projects and human services with borrowed money.
He attributes this policy partially to a desire to ensure that there will be money left over after the oil boom is over, but also to a hope among the state’s voters and lawmakers: that North Dakota might someday have no need for taxation.
“It’s a way of destroying a democracy,” Mathern says. Once citizens no longer participate in the funding of their government, he argues, they will lose interest in participating in democracy, in “having tough debates about where to spend money”.
Senator Mathern has clearly staked his own position on that question. He would like to see North Dakotans become “the best educated citizenry in the country,” helped by institutions like tuition free community colleges, universal pre-K education for children, and a robust method of funding university research. He would like to see the state do more to address poverty and public health crises.
So far, the oil boom has done little to realize these goals. Senator Mathern argues that even the new spending the government approved by the government has been shortsighted. He claims, for instance, that many of the new roads and bypasses built to accommodate tanker trucks and construction vehicles have been designed to last only seven to fifteen years. Senator Mathern proposes doubling the investment in these roads to ensure they will last long after the oil boom.
A billboard along a highway in North Dakota
This is not a widespread concern. The design specs outlined in road contracts can’t be seen on the ground, and when newly paved highways replace rutted gravel roads, it seems “really exciting and positive.” But with roads designed for only a fifteen year lifespan, Senator Mathern dreads a future in which “we’ll have highways in this state [that],when the oil is gone, the state and the political subdivisions will not be able to maintain. There won’t be the resources to do it, and they’ll be busted, they’ll be broken, and that’s unfortunate.”
However, despite the conservative nature of the Republican-dominated government, the increased demands on infrastructure are so drastic that even during the economic uncertainty driven by falling oil prices, the state legislature has approved measures to shore up North Dakota’s infrastructure - starting with a $1.1 billion “surge” in spending.
“Some say $1.1 billion is a lot of money to put into roads, streets, sewer, water towers and homes,” the Washington Times quoted Senate Majority Leader Rich Wardner as saying. “But the fact is that until you have this infrastructure in place for people to live, you cannot find providers that will move to these areas to work.”
This investment comes even as shrinking oil revenues have blasted a $1 billion hole in North Dakota’s two year budget. State Senator Kelly Armstrong credits the state’s ability to undertake new spending to exactly the frugal policies Mathern criticized.
“There’s an exceptional amount of nervousness, but I think strong policies over the last several years from the statewide perspective will allow us to weather it better than most. I mean, if it lasts six, seven years, even if it’s temporary, everyone in North Dakota will feel the austerity. That’s why we’re budgeting cautiously,” Armstrong said. “Nervous? Yes. Concerned? Yes. Prepared for it? Hopefully, yes.”
But although this massive rainy day fund might save the budget, it was far from the only change the Bakkens boom introduced to the government of North Dakota. The boom also brought lobbyists.
“The energy industry has many wonderful functions for legislators”, according to Senator Mathern, one frequent offer is, “Oh, come out and golf at the world famous Bully Pulpit golf course in Medora!’ The Bully Pulpit is a luxe course in North Dakota’s scenic Badlands area, with green fees of up to 95 dollars a pop.
Coming from a Democrat in deep-red North Dakota, Mathern’s comments might be seen as across-the-aisle sniping. But in fact, a well-established and well-known lobbying culture has long been part of the state’s political scene.
While such cozy relations between lobbyists and lawmakers inside the Beltway might be seen as sleazy, corrupt, and part of backroom wheeling and dealing, in North Dakota, many argue that permissive lobbyist laws are part and parcel of the state’s general political openness. As Republican Representative Kathy Hawken put it to the Center For Public Integrity, “You have more direct access to your representatives in this state than anyplace else.”
She has a point. State legislators regularly post their personal phone numbers online. Throughout the process of reporting this article, we found it easy to chat with officials. Representatives and senators answered their own phones and correspondence, and we could stroll into government offices and ask for information with no obstructions whatsoever. The small populations of rural districts means that North Dakotan citizens may know their representatives personally, or know someone else who does.
This accessibility has a flipside. Because politics are so open and informal, lobbyists have more chances to influence representatives. Many, like Senator Mathern, think they’re succeeding. For her part, Representative Hawken claims they ultimately have little bearing on decision-making. Legislators often don’t have staff and work part-time, Hawken says, so lobbyists are a good source of information, but nothing more. “I have never been pressured by a lobbyist … I’ve been asked to consider it strongly, but I have never been made to feel like I would be in trouble if I didn’t go along with their bill,” she said.
Still, Hawken conceded there are legislators whose first priority each day is to find a lobbyist to take them to dinner. Lobbyists are required to report whenever they spend over $60 on one individual at one time. But otherwise, the law is “fairly wide open” as to what lobbyists can do, according to a former Democratic party chairman. This creates a blind spot of potential favors, and, it must be said, in North Dakota a person can dine very well on less than $60.
“A lot of legislators and public officials say that doesn’t influence their decision making,” Senator Mathern says. “It’s just not true. It does influence their decision making. We had a bill… to reduce the taxes in our oil fields. The bill was introduced beyond the deadline for bill introduction, the bill was passed, and oil taxes were reduced by $4 billion over this next decade.”
Indeed, in April of 2015, as it became clear that low oil prices were here to stay, Governor Jack Dalrymple signed a bill that cut taxes on the oil industry by more than $5 billion.
The huge amount of political money and easy access of lobbyists to politicians all combines to give the petroleum industry unprecedented influence in the state. Their deep pockets have let them wield an outsized influence in campaign finance in the state, as we explored in Part 2 of this series. In a comment to Public Integrity, Jim Fuglie, former head of the North Dakota Democratic-Nonpartisan League Party, summed up the recent change in North Dakota’s politics:
“Nothing this big has happened since homestead days. This is a game changer for North Dakota.”
The oil industry’s clout can also be seen in the failure of attempts to regulate oil production, to reign in the influence of the industry, or even to limit wasteful practices. In many cases these bills are either defeated outright or stripped of their regulatory power.
Fugile doesn’t mince words when he describes the threat he feels this represents for the state: “We’ve been so poor for so long, then all of a sudden, we won the goddamn lottery. You know what happens to lottery winners... you read about them three years later. They’re in court, or they’re in bankruptcy, or they’re divorced... that’s the way we are.”
But it’s not only the bottomless coffers and large staffs of oil companies that grant them influence. The size of North Dakota means that officials often wear multiple hats, some of which appear to pose a conflict of interest.
Overlap between the oil industry and government
One public official we interviewed wore two hats As the director of the North Dakota Oil and Gas Research Program, Brent Brannan advises companies applying for state research grants for projects related to oil extraction. At the same time, as an executive for Aurora Energy, he oversees a firm that purchases mineral rights from landowners, then repackages and sells them to oil companies.
This is not unusual: Senator Connie Triplett (D-Grand Forks) pointed out that because the legislature only meets for eighty days in odd numbered years, legislators who aren’t retired return to regular work when the assembly is not in session. There are no restrictions on what industries they may work in, and no laws to prevent legislators entering the private sector after leaving office. This opens the door to legislators being granted cushy sinecures by oil companies in exchange for legislative support, an issue that has appeared on the national stage.
Attempts to prevent conflicts of interest have had no more success than lobbying reform. Presently, the North Dakota Industrial Commission (NDIC) is tasked with both regulating and promoting oil development, two duties Senator Triplett feels are at odds. She introduced Senate Bill 2366, which would have limited the NDIC’s role to regulating the oil industry. This bill was defeated, as was an amended version that left the duties of the NDIC unchanged, but simply removed the word “promote” from its mission statement.
This all points to another major factor in Bakken policy-making: North Dakota’s frontier, entrepreneurial political culture.
Most state capitol buildings boast a grandiose neoclassical style: alabaster columns and soaring domes that echo elements of the national capitol. In sharp contrast, the North Dakota capitol building in Bismarck is an unadorned granite art deco skyscraper that would blend into the business districts of many American cities.
The interior is sumptuous but understated, dark wood and stone instead of the elaborate gilded molding and murals sometimes seen in state capitols. Bronze reliefs on the walls depict the settlement of the state and its industries, showing miners, farmers, and ranchers in heroic postures while engaged in their work.
It’s a fitting image, as the legislative assembly that meets in this building is made up of ranchers and workers as well as lawyers and professional politicians. This legacy has honed the cherished self-image of the state. “North Dakotans are hardworking,” goes a cliche we often heard, and the work ethic of its citizens was often cited as a reason for the state's prosperity in the midst of the recession. North Dakotans consider themselves honest, serious-minded, and possessing that quality described as “horsesense.” They pride themselves on meeting challenges head on. These qualities are essential to building a life on the plains, where improvident planning could ruin a farmer, and where a reputation for shady dealing could alienate the neighbors that one might depend on in long winters.
These notions about the state were echoed in national politics, as national political figures held up North Dakota as an example of the benefits of reduced regulation, the one place in the country where there were more jobs than job seekers, a shining beacon of laissez-faire economics and small government. To them, the state’s newfound wealth was a just reward earned by hard work and entrepreneurial spirit.
During his 2012 presidential campaign, Mitt Romney campaigned in the state, criticizing the Obama administration’s attempts to federally regulate fracking, and failure to support the Keystone XL pipeline. Speaking on behalf of Romney’s Energy Independence plan for America, Senator John Hoeven (R-ND), summed up this narrative of the boom:
“More than a decade ago, we in North Dakota worked to forge a pro-growth business climate that encouraged private-sector investment and the development of innovative technologies in all of our major industries, including energy. Today, we are producing more energy with better technology and better environmental stewardship; we also have the lowest unemployment rate and the fastest growing economy in the nation.”
Meanwhile, this narrative has driven national policy. Speaking on behalf of lifting of the oil export ban, and allowing US companies to sell American crude overseas, Paul Ryan said this move would have the effect of “1000 Keystone XL pipelines”, creating “up to a million jobs.”
This is not all hot air. Although its cities host a wide variety of industries, the overwhelming majority of the state is farmland. Even after the oil boom, agriculture remains the largest industry. Some North Dakotans reside on land settled by their family in the 18th century. Others are the first generation to farm a plot, but the overwhelming majority are owned by families rather than corporate interests. This was formerly a matter of law. Only recently have corporate dairy and hog farms been allowed to operate in the state.
This agrarian tradition has shaped the character of the state and its citizens. The responsibilities involved in running an independent farm are great, and so are its freedoms. This has fostered a long tradition of citizen participation in government and has served liberal causes as well as conservative ones. According to Senator Triplett, many small rural towns in North Dakota, which would be governed by the county in other states, have incorporated as cities to allow North Dakotans to have a voice in the way their communities are run.
A committee meeting at the North Dakota State Legislature
During the 19th century, the Progressive movement was active in the state, and farmers, chafing at the control that mill and elevator operators in cities like Minneapolis exerted over the price of grain and the livelihoods of ordinary farmers, agitated to build a state-owned Mill and Elevator Company. Still in operation today, it processes a substantial portion of North Dakota’s massive grain harvest, and helps to ensure that small farms can compete with international agricultural conglomerates.
This spirit of local preservation extends to other industries. During the coal boom of the early 1970s, then-Governor Art Link declared in a speech that, although North Dakota had no intentions of hoarding its energy resources, he didn’t want the state “to become a sacrifice area in order to run television sets and air conditioners on the east and west coasts.” He enunciated a policy of “cautious, orderly development,” a marked contrast to the breakneck speed of the Bakken development. In this famous speech, entitled “When the Landscape is Quiet Again,” he presented a resolute vision for the state’s distant future:
“When the draglines, the blasting rigs, the power shovels and the huge gondolas cease to rip and roar , and when the last bulldozer has pushed the last spoil pile into place, and the last patch of barren earth has been seeded to grass or grain, let those who follow and repopulate the land be able to say“Our grandparents did their job well. This land is as good as, and, in some cases, better than, before.” Only if they can say this will we be worthy of the rich heritage of our land and its resources.”
It was a call to arms that continues to resonate for citizens whose lives were deeply intertwined with the land. This speech was quoted to us by environmental activists, and an excerpt from it is printed and framed in North Dakota Industrial Commission representative Alison Ritter’s office.
But however strongly North Dakotans might feel about the importance of the land, the pace of this latest boom has meant that environmental concerns have taken a backseat to the pragmatic demands of breakneck development. The regulatory apparatuses of government, created before petroleum companies arrived, were ill adapted to deal with some of the challenges brought by the Bakken boom.
Things slipped through the cracks. Radioactive fracking “filter socks” were found illegally disposed of in dumpsters, or sun-baked in open fields. Fracking brine and crude oil were spilled throughout the state. Many spills were minor, contained by the environmental protection equipment installed on well sites, but a few were major, contaminating large areas of land, or snaking their way into waterways. The influx of new jobs and new workers brought much needed cash, but it also brought social problems and crime on a scale not seen before in rural North Dakota. The boomtown traffic of the oil field took its toll in the form of a dramatic increase in traffic deaths.
Increased governmental intervention could not have eliminated many of these ills, and reasonable people may differ as to whether it would even have helped. But there is no doubt that there are problems generated by the boom which the laissez faire approach taken by the government of North Dakota has not yet addressed. In the next section of this article, we’ll examine some of the consequences the boom has had for the environment and citizens of North Dakota, and what the landscape might look like when it is quiet once again.
The images featured in this article were taken by the authors.