He was deemed “less friendly” to the oil industry compared to the previous administration, but new Three Affiliated Tribes Chairman Mark Fox tells Petroleum News Bakken that description is far from accurate.
In a press conference on Oct. 15, North Dakota Department of Mineral Resources, DMR, Director Lynn Helms said industry leaders were “deeply concerned” about the November tribal election because he said both candidates indicated “that slowing down (production on the reservation) and many other things are in the works.”
When Fox, the tribe’s former tax commissioner, was sworn in as chairman on Nov. 5 after winning the election by a slim 146-vote margin over Damon Williams, an in-house tribal attorney, he took the reins of a reservation which accounts for about a third of the state’s daily oil production. But he’s confident in the tribe’s ability to work with the oil and gas industry as well as state regulatory bodies to guarantee a longer future of development.
“We’ll get long term commitments out of them as well as they will from the tribe, and together if we do this properly … we’re going to show the federal agencies and the public that we can get this done and move forward in a responsible way,” Fox told Petroleum News Bakken.
Operators will be ‘elated’
Fox plans to initiate task force meetings between all the interested parties to identify all the issues facing oil development on the reservation. He believes most of the industry will be “very content and elated” when everyone comes to the table to understand the various concerns. From the tribe’s perspective, there must be a more diligent effort to protect the land it cherishes.
“We’ll move forward, but responsibly,” Fox said. “We must stop contaminating and impacting the environment in a negative way.”
He fears that the consequences of not addressing the environmental problems will involve federal or outside agencies coming in and shutting down production. Fox feels the previous administration relied too heavily on the federal and state governments to regulate oil development on the reservation so he will work toward greater coordination instead of handing over control. He said he’s no stranger to North Dakota’s governmental leaders, having a history of working with Gov. Jack Dalrymple, and that he’s “a familiar face” to many legislators due to building relationships during the last two Legislative sessions. But in response to a question about whether he wants a tribal version of the state’s Industrial Commission, including a pipeline authority and its own gas capture regulatory plans, Fox said the tribe is likely to take on those responsibilities.
“We do have an interest in ramping up and further asserting our regulatory authority within the boundaries of our reservation because that is our right,” Fox said. “We can share resources but at the same time we’ll be ramping up what the tribe is capable of doing as well, too. It will be a constant partnership where we’re all getting stronger and that’s how you adjust the needs better.”
The oil industry has struggled in the past with conflicting tribal and state policies and a lack of due process on tribal resolutions, making regulatory guidelines very uncertain. So the idea of a central depository for policies and resolutions is appealing to the industry.
“Our big issue is that we really need to have a clear path forward with jurisdiction,” North Dakota Petroleum Council President Ron Ness told Petroleum News Bakken. “It’s been helter-skelter by various committees and never a coordinated task, so if he can step back and reassess the whole landscape of how to move the regulatory process forward and work hand in hand with the state, I think you end up with a better system in the end.”
Finding solutions to flaring
The Fort Berthold Indian Reservation, FBIR, is home to 25 drilling rigs and more than 1,300 active wells producing more than 377,000 barrels of oil per day of the state’s 1.2 million barrels, according to the latest data available from DMR. The reservation, which spans a million acres, has potential for another 2,000 wells in the future. These figures equate to the tribal treasury receiving about $25 million in oil tax revenue each month and the tribes’ annual budget has increased from $20 million to $520 million. But since obtaining easements on tribal land has been challenging, midstream companies have been unable to fully develop a pipeline network to transport oil and gas production, resulting in some of the highest flaring percentages in the state. Wells on FBIR have historically accounted for more than 30 percent of North Dakota’s flaring. However in September, which is the latest data available, flaring on tribal lands made a drop from 35 percent to 29 percent due to operators delaying well completions in order to accommodate the state’s goal of flaring no more than 26 percent of natural gas by Oct. 1. On Jan. 1, the gas capture target will require operators to flare no more than 23 percent. Achieving that goal on the reservation will be no small task, but Fox believes he has the solutions - it’s just a matter of implementing them. Fox sits on an Indian Country and Energy Infrastructure work group that combines tribal leadership throughout the nation to consider responsible ways to handle energy development. His role has included seeking out technology advancements for greater energy efficiency, including those that capture natural gas to power well sites or to compress the gas for sale.
“We think that technology is in place right now and almost immediately we’re going to bring that technology in and start utilizing that flared gas instead of just burning it into the air causing contamination,” Fox said.
He is concerned about the lack of pipelines, and does plan to consider ways to enhance the midstream options on the reservation but the tribe wants to ensure it is reasonably compensated and positioned before moving forward.
“I don’t think it’s fair for anyone to assume that the tribe should get less or accept unreasonable offerings or terms to get that done,” Fox said.
Proposed gas capture plan gets another look
In early August, the tribe outlined a proposed gas capture plan to manage flared gas. It differed from the state’s plan in that the tribe would require operators to pay a percentage of royalties for any flared gas instead of the state’s plan to restrict production. The tribe termed its plan a “mandated royalty system” rather than the state’s “penalty program.” As Petroleum News Bakken previously reported, the tribe believes its approach does not burden operators with additional oversight, but rather “achieves the most important goal; ensuring that flared gas will be measured and royalties paid.”
“The Tribe’s gas royalty revenues should not be adversely affected by an operator’s failure to honor the Tribe’s Sovereign Right,” the plan said.
While Fox attended the meetings that initiated the proposal, he said the tribe is reassessing the plan and will potentially fuse it into other ideas to capture natural gas. Fox said the tribe is looking to invest in building a gas processing facility and developing its own midstream company on the reservation. The tribe already has Missouri River Resources, a tribally chartered company that develops oil and gas resources for the Three Affiliated Tribes, which Fox says is a way to take tribal resources and revenue to obtain higher returns.
“Rather than just sit back and collect royalties and a few taxes, we get involved in the development phase, and then that greatly increases the revenue we get out of a barrel of oil,” he said.
An oil refinery capable of processing up to 20,000 barrels of Bakken crude per day has also been in the works on the reservation for more than a decade and Fox plans to revise those plans and determine what needs to be built and how it will be managed. The tribe broke ground on the project in May 2013 on land about two miles west of Makoti in southwest Ward County.
“Even though we know we’re building it and we’re doing some things to prepare for that with the berm, other dirt work and other things that have been done, those will all fit in with what I’ll call our revised plan for development,” Fox told the Associated Press.
Blazing a new trail
Just as the state is actively analyzing the changing tax revenue numbers from declining oil prices, the tribe is also adjusting its figures since a $25 drop in a barrel of oil can have a heavy impact on how it deals with the oil boom.
“I have my fingers crossed that the barrel of oil price will go up,” Fox said. “It definitely directly and negatively impacts our tribe when the world market comes into play.”
Following an administration tainted by investigations into shady business dealings by the previous chairman, Fox looks forward to blazing a new trail for the tribal nation.
“It’s challenging, but I’m looking forward to it. I think what you’re going to see is a little bit different from the previous administration,” Fox said. “You’re going to have a hardworking chairman who is constantly willing to sit down … working closely with industry, getting us all on the same page and then combining our efforts to get something done.”
