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Fracking-Fueled Land Grab Cheats North Dakota Tribes Out of $1 Billion, Suits Allege

The rush to get access to oil on tribal lands is part of the oil industry's larger push to secure drilling rights across the United States.

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Kyle Baker is a tribe member, geologist and former environment official for minerals and energy for the tribe. He said that his family struck deals to lease its acreage on and near the reservation for as much as $700 per acre around the same time as the Black Rock deal.

"Companies will come and find your weaknesses and then drive themselves in," Baker said on a recent wintery morning in his living room overlooking Lake Sakakawea. "Our laws, our setup wasn't ready for it."

Companies and the U.S. government have long known that the Ft. Berthold reservation lay in the heart of the oil-rich Williston Basin, a reserve thought by some to contain as much as 20 billion barrels of oil. But previous efforts to lease and drill on the Indian lands stalled in the 1970s, and again in the late 1990s, thwarted by a dense bureaucracy and a tangle of laws governing leasing on reservations.

Only after the advent of modern fracking — and after Congress passed a handful of laws to ease corporate access to the Ft Berthold reservation — did companies begin to invest seriously in drilling there.

Today it's estimated that the three tribes and individual Native American landholders are receiving some $50 to $80 million a year from the drilling leases and royalties, compared with revenues of about $5 million a year before the boom began in about 2006.

But that money has brought allegations of sweetheart arrangements that have left a few tribal members with disproportionate profits from oil development.

In 2011 a team of elders audited the tribal council's activities. They found widespread financial inconsistencies that they said indicated systemic misconduct. "We saw millions of dollars going out and hardly anything coming back" to the Three Affiliated Tribes, said Tony Foote a forensic auditor who chaired the team. "We're not just talking about cash. It's rooms, food, travel, donations, and there's only a handful of people that can get all this stuff."

Hall, the tribes' current chairman, had previously held that post from 1998 until 2006. He didn't deny that there had been corruption, but he said that since he came back into office in 2010 he has focused on reform and on making sure that the oil revenues benefit the broader tribal community. He said he has formed tribal entities to directly control a pipeline and refinery project, set up a $100 million trust fund for the tribes, and begun to sign lease agreements that are more favorable to the Native Americans on the reservation. He also demoted Wilkinson, who is now an administrative officer at the casino, not its CEO.

"I was called back because people were concerned about sweetheart deals, so we have totally changed the dynamic," he said.

 

 

Abrahm Lustgarten is a former staff writer and contributor for Fortune, and has written for Salon, Esquire, the Washington Post and the New York Times.
 
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