Eastern Montana Officials, Agencies Discuss Oil And Gas Impacts

Sidney Mayor Bret Smelser discusses the impacts of oil and gas development on the Eastern Montana town. Sun Times photos by Darryl L. Flowers
By Darryl L. Flowers
Note: Due to the length of this story and a tight deadline, it will be presented in two parts. Part two will appear next week.

The Sapphire Room at Lewistown’s Yogo Inn was filled on Monday as officials, as well as interested individuals, gathered to hear a diverse group of speakers who are in the thick of oil and gas development discuss the impact the oil boom has had on their schools, cities and counties.

The first speaker was Sydney Mayor Bret Smelser. Sydney has borne the brunt of oil and gas development in Montana, and more recently has been the focus of media attention with the murder of Sherry Arnold. Smelser opened by thanking everyone for the “thoughts and prayers for our community on the death of Sharon Arnold.”

The Sydney Mayor got down to the numbers, pointing out that in 2007 a Republican controlled Montana Legislature passed HB798, a Bill that would have split oil and gas royalties between incorporated cities and towns, the Native American Tribes and the counties.  The bill would also have set up a $10 million “kitty.” According to Smelser, the Bill was vetoed by Governor Brian Schweitzer. “If that Bill had passed,” said Smelser. “Sydney would not be in the trouble it’s in today.”

The Mayor added that, over the next five years, Sydney is expected to experience a $50 million shortfall in it’s budget. Topping the list of items to be dealt with is a $15 million wastewater lagoon the town needs to develop.

During a question and answer period, Smelser was asked if impact fees might be a solution to the problem of budgetary pressures.  But, according to Smelser, impact fees are very limited as to what they can be used for. “They are limited to water, sewer, fire, police and roads,” answered Smelser.  He added that impact fees can be a bureaucratic nightmare. “Sydney has hired two consultants to work on developing our impact fees.”

Smelser, who also serves on the Board of Oil and Gas Conservation, reported that he and other members of the board pushed to bring Montana’s “setback” rules into accord with those in North Dakota. “In Montana, the setback was 660 feet. In North Dakota, it is 200 feet. We were losing out on an extra ten percent of potential recovery, and that meant we were losing out on ten percent of the royalties.” The “setback” is the separation distance an oil exploration company has to maintain from a property line when drilling.

When it comes to the water used in oil and gas drilling, Smelser commented, “Williston is making a fortune selling water to the oil companies.” He said that suppliers could sell water to the oil companies for ten times the rate sold to the local community. Sydney, according to the Mayor, is selling 200,000 gallons per day, at a rate of 40 cents per gallon, compared to the normal rate of 10 cents.

An audience member asked if Sydney had an ordinance prohibiting campers in alleys and driveways. The campers are the only form of housing available to many of the oil field workers. “We have an ordinance against it,” answered Smelser, “but we have turned a blind eye to the problem because we need the workers.”

Next up was Jay Gunderson, a geologist with the Montana Bureau of Mining and Geology.  Gunderson went into details explaining the history – geologically speaking – of the “Heath oil and gas play.” Heath is the name of the formation, or shale member, of the Big Snowy Group that is the focus of exploration in Fergus, Musselshell and Petroleum Counties in Central Montana.  Unique to the area, according to Gunderson, are actual outcroppings of the Heath formation… above ground deposits that allow for a naked eye examination of the oil bearing rock.

“A half barrel of oil per ton of rock is present in portions of the formation,” Gunderson stated, “with an average of 10.5% Total Organic Content.”  The geologist added that a portion of the Heath play fit within the “oil window,” meaning that over the millions of years the section reached a temperature between 140 degrees Fahrenheit and 250 degrees.  When the temperature surpasses 250 degrees, the conditions do not favor oil production, but will cook the oil into gas.

The region of Central Montana, Gunderson stated, has a long history of oil production, dating to 1919 and the Devil’s Basin field.  Currently, the Heath is estimated to contain 3,000,000 barrels of oil per square mile, the geologist reported.

The amount reported of IP, or Initial Potential, reported in Heath wells covers a wide range, with some wells reporting an IP as low as one barrel of oil per day, yet one well, the Rock Happy turned in an IP of 271 barrels per day. Putting that into dollars, Gunderson explained that the net cash flow per well can vary from $-3,000,000 for a well to  $8,000,000… in the black.

In the crowd were about four who, throughout the day, made statements that took issue with oil and gas exploration in Montana. One of those was posed to Gunderson when he was asked about the potential effects of “fracking” on the aquifer that serves central Montana, known as the “Mission Canyon”.  Gunderson explained that, in the areas where the aquifer is near the Heath formation, the aquifer has a salinity great than sea water, and therefore the water is not suitable for consumption. He added that the fissures created by the “fracking” process are limited to about 200 feet in the upward direction from the lateral bore, and even less in the downward direction.

Next on the roster was a group of three from Lewistown: Kevin Myhre, City Manager of Lewistown; Ken Ronish, Fergus County Commissioner and Joe Eckhardt, President of the Lewistown Chamber of Commerce.

After a series of comments from the three, the floor was opened for questions.

One lady in the audience, speaking to the small group that appeared to oppose energy development in the region, asked, “A group of people seem dead-set against oil… what can they do to stop oil [exploration] moving closer to Lewistown?”

Lewistown City Manager Myrhe replied, “… They can be a thorn in the side of the oil companies… the oil companies work through a permitting process, there is not much these groups can do to stop oil and gas.”

One of those who had challenged oil and gas exploration in the region said, “Oil and gas will destroy life in Central Montana.” Fergus County Commissioner Ronish replied, “It’s a property rights issue.”

Next up was Paul Finnicum, Chairman of the Culbertson School Board. Finnicum, on the front lines of the effects of energy exploration, described a scenario far different than that  reported in the media. “We see oil company supervisors in the bars… they are there to insure, every night, that their workers do not drive drunk from the bars. The companies do drug testing and background checks.”

Continuing, Finnicum said that the impact on the schools has been stressful for the staff. He added that Culbertson has 700 residents – 400 in “man camps.” “Oil companies donate weekly to the food banks, and the companies sponsored anself defense course for women. One hundred women took the training with oil workers volunteering to be ‘dummies’ for the course. Oil workers also coach our local sports teams.”

The next presentation came from a trio out of Richland County: Leslie Messler, Executive Director Richland County Economic Development, Don Steppler, Richland County Commissioner  and Wade VanEvery, Executive Director Sydney Chamber of Commerce. Messler opened with mentioning that recently shipments of propane had been moved from trucks to rail, therefore decreasing the burden on roads in the area. She then reported that Richland County had a workforce of 6,600. Of that number, 6,400 were currently working, resulting in an unemployment rate for the county of 3%.

Messler went on to say that there were 49 oil companies operating in Richland County, paying an average wage of $40 per hour with an average weekly paycheck of $1,577 per week, or $82,000 per year. She stated that her office had asked local grocers, in Sydney and Fairview, how the oil boom had impacted their sales. On average, she said, sales for the grocers had grown 85% over the last two years.

Roads are an issue, according to Messler, but the road problems began before the oil boom as farm vehicles grew heavier, she said.

But the primary issue facing the county, according to Messler, is affordable housing. A home that sold for $75,000 in 2000 will now fetch $275,000. Richland County has added seven new subdivisions, an increase of 324 housing units, Messler said. There are three new motels, with 200 rooms, in the county – all of them are full.


Author: montanaoilreport

After my first job at a newspaper -- delivering papers for the Jackson (TN) Sun, ink was in my veins. Since the 1970's I've worked in every area of the Printing and Publishing industry, with most of that time spent in the pressroom. In 2008 I moved to Montana and purchased the Sun Times of Fairfield (fairfieldsuntimes.com). In 2011 I realized that most media outlets were either ignoring, or attacking, the growing oil and gas industry in Montana, so I started the Montana Oil Report as the source of information on this important industry.

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