Montana Town Accommodates Black Gold Rush

First appeared in Associated Press

Sidney isn't the first small town in the West to get run over by a gold rush, in this case black gold — more than 16 million barrels of crude being pumped every month from the massive Bakken oil field beneath eastern Montana and western North Dakota.

But Sidney's new-found prosperity doesn't dull the sting of the recent kidnapping and apparent murder of a local teacher, Sherry Arnold. Authorities allege the 43-year-old Arnold was snatched from a Sidney street by two men among the thousands from across the country descending on the small towns of the Northern Plains in search of a slice of the boom's multi-billion-dollar payoff.

"It's turned this little town upside down," said Ron Whited, Arnold's father, who lives on a ranch 25 miles outside of town. "There's evil in the world, and it just happened to touch down in Sidney, Montana, on Jan. 7." 

Arnold's disappearance has brought into sharp focus the changes now overwhelming the 5,000 residents of Sidney. And for many it means an abrupt end to the days of unlocked doors and reflexive trust that residents of the self-proclaimed "Sunrise City" say they once enjoyed.

Sidney's past still can be seen in the overall-wearing farmers passing in and out of Johnson Hardware along Main Street, in the smoke that rises from the Sidney Sugars plant at the edge of town during sugar beet season.

But the streets are now jammed with semis, the police chief says he will need up to seven more officers, the hotels are overflowing and the schools stretched to capacity. And it's just begun: The Bakken boom is projected to last another 10 to 20 years with tens of thousands more wells drilled, state regulators say.

"The things we've always taken for granted we can't take for granted anymore. Like Sherry," said lifetime resident Leann Pelvit. The former school bus driver took Arnold to school when she was a student. Three of Pelvit's four children later had Arnold as their math teacher.

Even as the two suspects in the case await trial, Whited and others in this historically agricultural community don't blame the explosive changes wrought by the boom for his daughter's disappearance.

Scores of industry workers joined in the massive search for Arnold that turned up only a single running shoe. A "couple bad apples," as one local farmer put it, do not represent the many newcomers who arrived for well-paying jobs.

Oil production in the Bakken dates back decades but ignited into a boom a few years ago when horizontal drilling techniques coupled with hydraulic fracturing, or "fracking," made it easier to pull oil from a geologic formation that holds an estimated 4.3 billion barrels of oil.

Most drilling so far has been in North Dakota, where there were 3,500 wells at the end of 201, with rigs sinking 150 more each month. As oil prices stay above $100 a barrel and production increases, companies are pushing into Sidney and surrounding areas of Richland County, near the confluence of the Missouri and Yellowstone rivers.

When Gary Hancock arrived in Sidney last week with his daughter's boyfriend, Richard Rayborn, after a marathon 30-hour drive from Magee, Miss., they spent their first night in Hancock's Chevrolet pickup with the engine running to fight off the single-digit temperatures.

They were following Hancock's son-in-law, who arrived in the Bakken last year to work for a drilling company. Hancock left behind a wife and two daughters for the opportunity to multiply his wages from his previous job, hauling chickens for the food company Sanderson Farms.

"You'd do good to make $500 a week" at home, Hancock, 47, said through his open window as Rayborn slept in the passenger seat. "Up here, you can make $500 a day." Many others show up without a job hoping to get hired on the spot. That includes the suspects in Arnold's disappearance, 22-year-old Michael Spell and 47-year-old Lester Van Waters Jr., of Parachute, Colo., according to court documents and interviews with Spell's friends and family.

The prosecutor in the case alleges that Spell confessed to grabbing Arnold as she was running along Sidney's "truck route" near the sugar refinery.

Spell told investigators Waters choked her to death before the pair buried her body in a field outside Williston, N.D., the epicenter of the boom.

Her body has not been found.

Ron and Sharon Whited still refer to their daughter, who was married with two children, as "bright eyes," a nickname she picked up in elementary school. In her absence, the Whiteds said they've been bolstered by an outpouring of support from friends and the solace offered by the pastor at their church, Trinity Lutheran.

Sidney Schools Superintendent Dan Farr, who was trained as a school counselor and worked with Arnold for 13 years, said the continued mystery of her whereabouts has provoked a particular form of grieving called "ambiguous loss" that robs family and friends of closure because there is no body to bury.

For the school district, the loss of a beloved teacher is set against a backdrop of skyrocketing enrollment from workers who moved to Sidney with family in tow. Over the next two to three years, Farr said, Sidney's population could double if proposed new subdivisions, RV parks and "man camps" for workers are built. Student numbers are projected to climb more than 60 percent.

Sidney Mayor Bret Smelser is pushing for more oil revenues to be returned to towns and cities hardest hit by the boom. For now, much of that money goes to counties, which Smelser said denies him of resources for his community.

A glimpse of Sidney's future can be seen in the experience of Williston and surrounding Williams County, N.D., where more than 9,000 beds have been permitted for man camps, sprawling compounds of trailers or mobile homes that companies temporarily erect in open fields for worker housing. Williams County Sheriff Scott Busching said that calls to his department have risen sharply during the last three years, forcing him to double patrol deputies from 10 to 20.

That includes spikes in traffic accidents and aggravated assaults linked to bar fights. In response, many local residents are arming themselves against potential danger. Concealed weapon permit applications in Williams County soared from 156 in 2010 to 550 last year, the sheriff said. Arnold's disappearance has further accelerated the trend, with 126 new applications coming in January alone.

Montana authorities are seeing similar trends emerge. Sidney Police Chief Frank DiFonzo said the added stress on his force has made his officers more reactive than proactive, with little time for once-routine criminal investigations.

DiFonzo, Sidney's chief since 1981, said the increased workload appears to reflect the sheer number of new arrivals, rather than an increase in particular crimes. And though the oil industry is what's bringing those workers, DiFonzo said it would be no different if they were seeking sugar beets or gold.

"I'm going to give them the benefit of the doubt that they're coming here to work," he said. "But it's made the residents who live here very nervous."?

Oil Industry Exploding in North Dakota

The Wall Street Journal

State Is Riding High as Firms Develop Better Ways to Tap Huge Bakken Shale Deposit, Raising Hopes for U.S. Production

Harold Hamm, chief of Continental Resources, one of the biggest producers at the Bakken Shale in western North Dakota. He is pictured in April at an oil rig near Watford City, N.D

KILLDEER, N.D.—A massive oil reserve buried two miles underground has put North Dakota at the center of a revolution in the U.S. oil industry, a shift that has radically altered the fortunes of this remote area.

The Bakken Shale deposit has been known and even tapped on occasion for decades. But technological improvements in the past two years have taken what was once a small, marginally profitable field and turned it into one of the fastest-growing oil-producing areas in the U.S.

The Bakken Shale had helped North Dakota oil production double in the past three years, surging to 80 million barrels in 2009—tiny relative to the more than seven billion barrels consumed by the U.S. every year, but enough to vault the state past Oklahoma and Louisiana to become the country's fourth-biggest oil producer, after Texas, Alaska and California. If current projections hold, North Dakota's oil production could pass Alaska's by the end of the decade.

"Most people felt like they could kind of write off the oil industry in the U.S., and that's just a long way from the truth," said Harold Hamm, chairman and chief executive of Continental Resources Inc., one of the biggest Bakken producers. "The fact of the matter is that a lot of people quit looking for oil." Continental reported Thursday that its North Dakota oil production doubled in 2009 and would continue to grow rapidly this year.



The Bakken Shale could contain up to 4.3 billion barrels of recoverable oil, according to the U.S. Geological Survey. That would make it the biggest oil field discovered in the contiguous U.S. in more than 40 years—and many in the industry believe the amount of recoverable oil could be even greater as new technology allows companies to tap more of it.

U.S. oil production has fallen by nearly 50% since its peak in the 1970s. Even with the Bakken Shale, U.S. oil production isn't expected to ever return to 1970s levels, and even the most optimistic projections of production from the North Dakota field don't account for more than a small fraction of total U.S. oil demand. But new production from the Bakken Shale, combined with other big oil discoveries in California and the Gulf of Mexico, helped U.S. oil production rise last year for the first time since 1991, according to U.S. government figures.

Production has grown so rapidly here, 100 miles south of the Canadian border, that companies had to build a rail line to transport their oil to market, since there wasn't a big enough pipeline in the state to handle the oil. Companies have scrambled to find labor in a state with fewer than a million people, and to keep drilling rigs running when the wind chill pushes temperatures to 50 degrees below zero. Booming Bakken oil production has helped North Dakota escape the worst of the economic downturn. The state's unemployment rate was 4.3% in December—more than five percentage points below the national level—and the state government projects a surplus for the current budget cycle.

The impact has been especially notable in the oil-producing western part of the state, making millionaires of local ranchers who sell access to oil beneath their properties. Oil-field workers have flooded the western city of Williston, leaving it with a chronic shortage of hotel rooms and making housing scarce. In Dickinson, three hours to the south, a labor shortage has the local McDonald's offering $300 signing bonuses. And here in nearby Killdeer, a town of 700 people that lies in the heart of oil country, oil workers jockey with locals for lunchtime tables at the Buckskin Bar & Grill, which serves burgers made from locally raised buffalo.

"Who expected oil? It's just, 'oh, gee whiz, oil!'" said Pam Reckard, 66 years old, as she waited for lunch at the Buckskin on a recent Thursday.

companies had to build a rail line to transport their oil to market, since there wasn't a big enough pipeline in the state to handle the oil. Companies have scrambled to find labor in a state with fewer than a million people

Ms. Reckard and her husband, Ben, said many locals, having seen past booms and busts, are taking a cautious approach to the region's newfound oil wealth. The Reckards are still driving their 1990 Dodge pickup despite having two successful oil wells drilled on their 1,120-acre ranch, which Mr. Reckard's family has owned since 1915. But they have noticed the changes. "There are a lot of people that were not from North Dakota," Ms. Reckard said.

The industry hopes the Bakken's significance could extend far beyond North Dakota. The Bakken formation stretches into Montana and across the U.S. border into Saskatchewan. Other oil-bearing shale formations exist in Colorado, Texas, California and other states.

"It's a true game-changer," said Jim Volker, chairman and CEO of Whiting Petroleum Corp. a Bakken oil producer. "We still think there's a significant amount of oil reserves in the United States left to be discovered."

The field also could have global implications. Besides small producers such as Continental and Whiting, the Bakken has drawn companies like Marathon Oil Corp. that hope to use what they learn in North Dakota to produce oil and gas overseas. "It's been a great laboratory for us," said Dave Roberts, who heads exploration and production for Marathon.

Oil companies have known about the formation, and the oil trapped in it, since at least the 1950s. But they couldn't get more than a trickle of oil from the dense, nonporous rock.

That began to change in the early 2000s, when companies in Texas began using new drilling techniques in a similar formation near Fort Worth known as the Barnett Shale. They would drill down thousands of feet and then turn and go horizontally through the gas-bearing rock—allowing a single well to reach more gas. Then they would blast huge volumes of water down the well to crack open the rocks and free the gas trapped inside.

Several companies, including Houston-based EOG Resources Inc., thought the same techniques could work on oil formations. But oil molecules are larger than gas molecules, and they didn't flow as easily through the cracks. EOG's first several wells in North Dakota were failures.

"The first three or four wells, it was not clear that there would be a viable economic solution," EOG Chairman and CEO Mark Papa said. "But we just felt like, well, it's worth investing $20 to $40 million in this because if it works there's a huge upside."

By 2006, EOG was making money on wells drilled in a small corner of the Bakken that was particularly well-suited to oil production.

The real shift has come in the past two years as companies honed drilling techniques, leading to bigger wells, faster drilling and lower costs. Marathon, for example, last year took an average of 24 days to drill a well, down from 56 days in 2006.

That has opened up new areas that weren't previously worth drilling in and made wells profitable at prices as low as $50 a barrel, down from $80 three years ago, according to analyst Mike Jacobs of investment firm Tudor Pickering Holt & Co.