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Midstream firms build to meet Eagle Ford condensate production

HOUSTON — With an $860 million deal announced this week, Buckeye Partners is betting on condensate.

Condensate, a type of light crude oil, has been flowing in increasing quantities from the Eagle Ford Shale in South Texas as technological advances boost production there.

And with more condensate flowing from the region — as well as the possibility that lightly refined condensate may be exempt from a U.S. ban on most crude oil exports — many midstream companies are looking at potential profit in getting the light oil from the South Texas wells to market.

From 2009 to 2012, annual U.S. production of condensate from wells grew by 54 percent, from 178 million barrels to 274 million barrels, according to U.S. Energy Information Administration. By many estimates, the Eagle Ford  region accounts for the majority of that production.

On Tuesday, Houston-based Buckeye Partners L.P. announced it would enter the heated market by paying $860 million for an 80 percent interest in Texas facilities owned by Trafigura AG. The deal includes gathering facilities in the Eagle Ford, as well as processing plants and a marine terminal in Corpus Christi.

Buckeye has been active in markets including Chicago, New York and the Caribbean.

Buckeye and Trafigura will  run the assets  as a joint venture and will contribute at least another $240 million to build new storage and seaborne shipping capacity in the near future, the companies announced.

Trafigura AG is a subsidiary of Netherlands-based commodities trader Trafigura Beheer BV.

Under the new agreement, Trafigura will buy oil and condensate produced in the Eagle Ford before sending it  to other markets using the joint venture’s infrastructure, said spokeswoman Marisol Espinosa.

The deal includes two condensate splitting units Trafigura already is building. Splitters  break condensate into component parts including naphtha, kerosene and diesel. The units will be able to handle a combined 50,000 barrels per day of the light oil when completed in 2015.

In a Wednesday morning conference call with investors, Buckeye Partners executives said the partnership is considering building another splitter.

Other midstream interests also are building splitters to accommodate the increasing amount of condensate flowing from the Eagle Ford.

“The outlook is pretty favorable,” said Lysle Brinker, a research director at analyst firm IHS . “A lot of companies are looking at doing this.”

Kinder Morgan Energy Partners’ $360 million splitter project at its Galena Park terminal on the Houston Ship Channel, also slated for completion in 2015,  will have a daily capacity of 100,000 barrels .

“Midstream is moving into processing,” said John Auers, executive vice president with Turner Mason and Co. “These large midstream companies are investing and the Gulf Coast is the place to be.”

Besides deriving condensate components, running it through a splitter can clear the way for its export.

A law that arose from oil shortages in the 1970s bans most crude oil exports from the United States, but recent regulatory activity has allowed some export of lightly processed condensate with a license.

Trafigura has applied for such  a license, Espinosa said.

If regulators approve, the new Trafigura-Buckeye venture could export condensate through its five ship berths at the Corpus Christi facility terminal.

In a presentation to investors, Buckeye said that the market probably will favor splitting condensate it into its parts before sending it abroad. But Buckeye also stressed that it would remain flexible.



Texas Proposes Tougher Rules On Fracking Wastewater After Earthquakes Surge

The agency that regulates oil and gas activity in Texas is considering new, tougher regulations governing the practice of injecting leftover water used to frack natural gas wells deep into the ground — a process which is believed to be responsible for an increase in human-caused earthquakes across the state.

The Texas Railroad Commission’s new proposed regulations on wastewater injection wells were heard by members of the Texas House of Representatives’ Subcommittee on Seismic Activity on Monday, following complaints that earthquakes have become more frequent over the last several years. Dr. Craig Pearson, the Railroad Commission’s new seismologist, told the subcommittee that the regulations would help make sure injected wastewater doesn’t migrate onto inactive fault lines and cause man-made quakes.

“Because we’re now dealing with induced seismicity, the worry is not only about water moving up [to our groundwater] but out to dormant faults,” Pearson said, noting that current regulations are only designed to protect from groundwater contamination.

The controversial technique of hydraulic fracturing, otherwise known as “fracking,” uses a great deal more water than conventional drilling. To stimulate natural gas wells, companies inject high-pressure water and chemicals miles-deep into subsurface rock which effectively cracks or “fractures” it, making the gas easier to extract.

The leftover wastewater used to frack the well is disposed of by injecting it deep underground, and scientists increasingly believe that this is causing man-made earthquakes — not only in Texas, but across the country. The large amount of water injected into the ground can change the state of stress on existing fault lines to the point of failure, scientists believe, causing earthquakes.

As it is now, Pearson said most of the earthquakes occurring in Texas are too small to be felt. But some scientists have warned that seismic activity stands to get stronger and more dangerous as fracking increases, and more wastewater propagates along fault lines underground.

If Texas’proposed rules on wastewater disposal wells are approved, companies seeking to operate them would have to include United States Geological Survey records of seismic events that have occurred around proposed well sites in their permit applications. The commission estimated that this would cost companies an additional $300, which the rules describe as “negligible.”

Additionally, the commission would be allowed to suspend or terminate any wastewater disposal operator’s permit if it finds that fluids have been leeching past where they’re supposed to be. It would also be allowed to terminate an operator’s permit if the operator is found to be responsible for earthquakes. The rules would not require that permits be suspended for fluid-leeching violations or earthquakes; instead, they would just give the commission the authority to do so if it wanted to.

The commission would also be allowed to require more frequent monitoring of fluids and pressure from certain companies, and to request additional information from the application to prove that fluids won’t spread across fault lines.

So far, environmentalists have applauded the rules as a good start, but have expressed concerns that they don’t go far enough.

“It’s kinda like when you’re in a 12-step program,” Cyrus Reed with the Sierra Club told Terrence Henry at StateImpact NPR. “You know, the first thing you need to do admit that you have a problem. And I think the Railroad Commission has done that by proposing these rules.”

Indeed, the Railroad Commission has come a long way from January, when commission Chairman Barry Smitherman refused to acknowledge that the quakes were linked to any part of the fracking process. “It’s not linked to fracking,” he told local reporters after a meeting of concerned citizens. “If we find a link then we need to take a hard look at all these injection wells in this area. Reexamine them … Perhaps there something that we’re not aware of underground.”

The Texas commission is taking public comment on the proposed rules until next month.


Is Foam About To Transform The Oil Recovery Business?

The best way to get oil out of the ground may be to pump in foam.

Scientists pumped foam into an experimental rig that mimicked the flow paths deep underground and found the foam was more effective than more commonly used materials, such as water and gas.

Oil rarely sits in a pool underground waiting to be pumped out to energy-hungry surface dwellers. Often, it lives in formations of rock and sand and hides in small cracks and crevices that have proved devilishly difficult to tap. Drillers pump various substances downhole to loosen and either push or carry oil to the surface.

Sibani Lisa Biswal, associate professor of chemical and biomolecular engineering at Rice University, created the experimental formations—they look something like children’s ant farms—to see how well foam stacks up against other materials in removing as much oil as possible.

The formations are not much bigger than a postage stamp and include wide channels, and large and small cracks. By pushing various fluids, including foam, into test formations, the researchers can visualize the ways by which foam is able to remove oil from hard-to-reach places.

They can also measure the fluid’s pressure gradient to see how it changes as it navigates the landscape.

Paths of less resistance

The findings are strongly in foam’s favor. Foam dislodged all but 25.1 percent of oil from low-permeability regions after four minutes of pushing it through a test rig, versus 53 percent for water and gas and 98.3 percent for water flooding. This demonstrated efficient use of injected fluid with foam to recover oil.

The less-viscous fluids appear to displace oil in high-permeability regions while blowing right by the smaller cracks that retain their treasure. But foam offers mobility control, which means a higher resistance to flow near large pores.

“The foam’s lamellae (the borders between individual bubbles) add extra resistance to the flow,” Biswal says. “Water and gas don’t have that ability, so it’s easy for them to find paths of least resistance and move straight through. Because foam acts like a more viscous fluid, it’s better able to plug high-permeable regions and penetrate into less-permeable regions.”

Foam tends to dry out as it progresses through the model, says graduate student Charles Conn, lead author of the paper that is published in the journal Lab on a Chip. “The bubbles don’t actually break. It’s more that the liquid drains away and leaves them behind.”

Drying has two effects: It slows the progress of the foam even further and allows surfactant from the lamellae to drain into low-permeability zones, where it forces oil out. Foam may also cut the sheer amount of material that may have to be sent downhole.

One of the challenges will always be to get the foam to the underground formation intact. “It’s nice to know that foam can do these things, but if you can’t generate foam in the reservoir, then it’s not going to be useful,” Conn says. “If you lose the foam, it collapses into slugs of gas and liquid. You really want foam that can regenerate as it moves through the pores.”

Biswal says her lab plans to test foam on core samples that more closely mimic the environment underground.

George Hirasaki, professor emeritus of chemical and biomolecular engineering and Kun Ma, a Rice alumnus, are coauthors of the paper.

The Department of Energy, the Abu Dhabi National Oil Co., the Abu Dhabi Oil R&D Sub-Committee, the Abu Dhabi Co. for Onshore Oil Operations, the Zakum Development Co., the Abu Dhabi Marine Operating Co. and the Petroleum Institute of the United Arab Emirates supported the research.




Energy Investing 101: Identifying the Top Independent Oil & Gas Stocks

Three to five years ago, investing in the American shale boom was pretty easy. You could print out a list of energy companies, pin them to a wall, then throw darts blindfolded, and the companies you landed on would likely trounce the S&P 500. Today, though, it’s not as simple, and investors who want to make good decisions in this space will need to do some more digging.

Here’s the nice part: Understanding an oil and gas producer isn’t that difficult. There are, of course, the financial metrics we all know and love as well as stock valuations, but there are some more specific keys you should consider when looking specifically at independent oil & gas producers. Let’s take a deeper dive into this industry to find out how you can make better basic investing decisions in the independent oil & gas space.

Who are we talking about, here?
Unlike integrated oil and gas companies, independents exclusively produce oil and gas, That means no downstream assets like refiners or retail arms. In some ways, it makes them much easier to understand, because you don’t have to sift through multiple business segments to identify the primary driver of profitability for the company. 

The thing is, hundreds of independents are publicly listed on major U.S. exchanges. They can vary in size from having a market capitalization of only a couple million dollars all the way up to ConcoPhillips (NYSE: COP  ) , which today is valued close to $100 billion. Unlike other groups within the energy space like Big Oil and offshore rigs, there are simply too many companies to list them all, or even pick a dozen or so without missing out on some great investing opportunities. 

Five key points to consider
In all honesty, there is a bunch of noise that can distract you when trying to identify what is important. So many investors today are worried if companies are in the top shale producing regions, but what good does knowing which shale plays are the best if a company has holdings in a poor part of that formation that barely produces anything? At the same time, there are other companies that don’t even operate in shale that can be just as lucrative investments. If you are looking to buy companies on a truly long-term, buy-and-hold strategy, then you need to focus on other keys that are much more important than geography.

To help filter out the noise, here are five key points you should dig into when you are doing your homework. To mention every company would be a little exhausting, so instead — to give you a little leg up on your research — I will supply three leaders and three laggards for each of the five points below that have a market capitalizations of more than $500 million.

1. Production potential: Go beyond just proved reserves
One of the major misconceptions about the term “proved reserves” is that many assume its the amount of oil in a reservoir. Actually, it is the amount of oil & gas in that reservoir that a company estimates can be extracted with a reasonable rate of return based on prices set by the Securities and Exchange Commission. This means the total proved reserves for a particular formation can change as prices vary, or if technology makes it cheaper to access that formation. Here is a great visual explanation of this from the U.S. Energy Information Administration.

Source: U.S. Energy Information Admininstration.

To get a better understanding of how much resource potential a company has, it’s better to look at what is known as the 3P resources. This means proved, probable, and possible resources. This data gives a little more clarity to how much oil and gas a company can extract if prices were to change, or if technology improves. Not every company provides this information, but if they do, it can be found in its 10-K.

Another thing to consider when looking at reserves — and production — is how much of those reserves are in oil, gas, or natural gas liquids. Generally speaking, companies that have higher reserves and production in oil will generally have higher profit margins, because oil has a greater value on the market, but this isn’t always the case.

2. Reserves to production ratio
The total amount of oil and gas that a company can access isn’t that valuable of information if not taken in context, though. That is where the reserves to production ratio comes into play. The reserves to production ratio is the total amount of reserves a company has on its books divided by its total production, which is typically measured in years. 

This is a very crude metric because it assumes two things that are highly unlikely: First, that current proved reserves will remain constant, which also implies that oil and gas prices will remain constant and no new technology will make more oil in place attainable, and second, that production will remain constant over this entire period. Any oil and gas produce worth their salt will look to both increase reserves and production, so the reserve-to-production ratio is only a snapshot of the current situation. If you want to get a little more involved you can do some quick calculations to compare production to 3P reserves or technically recoverable resources as well.

Company Reserve to Production Ratio % of Reserves That Are Oil/Liquids
Antero Resources  35.8 years 1%
PDC Energy   29.6 years 41%
Continental Resources  21.8 years 66%
SM Energy 6.7 years 37%
Kosmos Energy  5.9 years 96%
W&T Offshore 5.6 years 56%

Source: S&P Capital IQ, author’s calculations.

3. Reserve replacement costs
One important factor to note is that not all reserves are created equal. Certain sources of oil are simply more expensive to access than others, and the ability to access these sources as cheaply as possible can be a major determinant of the future profitability of a producer. We can evaluate this by looking at reserve replacement costs, which is defined as the amount spent on exploration, development, and acquisitions (net of divestitures) divided by the total amount of reserve revisions, extensions, new finds, and acquisitions.

According to the most recent annual survey from Ernst & Young, the average reserve replacement cost in the industry was $20.30 per barrel of oil equivalent. As you can see in the table below, these costs can be heavily influenced by whether a company is bringing on reserves of oil or gas.

Company Reserve Replacement Costs % of Reserve Additions That Was Oil/Liquids
Antero Resources $3.84 0%
Cabot Oil & Gas  $4.56 1%
Range Resources  $4.97 24%
Newfield Exploration $34.47 100%
Pioneer Natural Resources $128.19 76%
Encana  $129.28 100%

Source: Ernst & Young.

4. Production costs vs. production mix
Not only does a company need to be able to secure its future on the cheap, but investors like us want to find the great operators that are able to produce oil and gas today at a decent price. This is where production costs come into play. Production costs are very similar to operational expenses on an income statement, but without depletion and amortization expenses, since they are a non-cash expense. Most companies will report their production costs on a per barrel of oil equivalent or per thousand cubic feet of gas equivalent for its total production. 

Here’s the catch when looking at these costs, though: The value for oil is considerably higher than that of natural gas. Looking at a survey of independent oil and gas producers, the production cost per barrel compared to the percentage of production that is oil looks a little something like this:

Source: Ernst & Young, Company 10-Ks and 40-Fs, and S&P Capital IQ, author’s calculations.

Therefore, a company that produces a higher amount of oil can be forgiven for having higher production costs, but not too much. So, when you are looking at production costs, be sure to take it into context with the production mix. The companies in the table below are rated and presented based on their production costs per barrel, and the percentage of their production that was liquids.

Company Produciton Costs Per Barrel Equivalent % Production That Was Oil/Liquids
EQT Corp $2.07 <1%
Rosetta Resources  $8.05 61%
Goodrich Petroleum $5.44 27%
Breitburn Energy Partners  $23.71 55%
ConocoPhillips $24.56 54%
Legacy Reserves $29.67 65%

Source: Ernst & Young, S&P Capital IQ, and Company 10-Ks and 40-Fs, author’s calculations.

5. Operational cash flow coverage of capital expenditures
This last metric is becoming more and more important as the shale boom isn’t the fresh new thing it once was. Many of the companies in this space have grown production by massive amounts in the past couple of years, but very few have generated the operational cash flow to cover their capital expenses and have been forced to raise capital through debt and equity issuances or through asset sales. According to the U.S. Energy Information Administration, capital expenditures at oil and gas producers currently outpaces operational cash flow by about $110 billion, and that number will likely rise if oil prices remain stagnant.

Source: U.S. Energy Information Administration.

Don’t let anyone convince you otherwise — this is an unsustainable path for companies and should make investors worry about the value of their shares. If this trend continues, companies will be forced to continually issue new debt at higher and higher interest rates, issue value-diluting shares, or be forced to sell off assets that would likely be a part of a longer term future.

For an individual investor, this doesn’t have to be the case, because we can pick the companies that are a much more solid footing when it comes to cash generation. This is a very easy thing to look for: Simply look at a company’s cash flow — on an annualized basis to remove any seasonal swings — and divide that by the company’s annual capital expenditures. Any figure greater than 1 is a very good sign, because it is covering all of its expenses with something left over for other needs such as future plans, paying off debt, or even giving a little back to shareholders.

Company Operational Cash Flow Coverage of Capital Expenditures (%)
Kosmos Energy 169.9%
Legacy Reserves 123.7%
Marathon Oil 118.3%
Diamondback Energy 16.6%
Parsley Energy 8.8%
Magnum Hunter Resources  7.2%

Source: S&P Capital IQ, author’s calculations.

What a Fool believes
The oil and gas industry has been a lucrative one for more than a century now, and even though we are making great strides in developing alternative energy, we will likely need oil and gas for decades into the future. Oil and gas producers can be incredibly lucrative investments to play this trend, and having a better understanding of this industry will help you make better stock choices. Looking into these five things won’t guarantee you will find the perfect stock for your portfolio, but it should help you separate some of the wheat from the chaff when it comes to independent oil & gas companies. Because unless we see another boom like we have over the past few years, it will take more than a dartboard to make a good investment. 

Other subjects in the Energy Investing 101 series

Integrated oil & gas, aka Big Oil

Offshore rigs

Oil & gas royalty trusts

Do you know this energy tax “loophole”?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you’ll learn about the simple strategy to take advantage of a little-known IRS rule.




Bakken Oil Boom Brings Growing Pains to Small Montana Town

At the edge of a farmer’s wheat field outside the prairie town of Bainville, Montana, Justin and Mandy Tolbert’s 36-foot camper sat in a rented lot. For more than 20 months, the Tolberts lived in the camper with their six children, ages 5 to 12, and Justin’s adult cousin.

At night, a jumble of pillows and cushions on the floor served as sleeping space. In August, when temperatures approached 100°F, the camper cooked. In January, the temperature dipped to -20°F, freezing the pipes and leaving the family without water for days.

“The hardest part [is] winter, when they cannot get outside to play,” Mandy Tolbert said about her children. “It’s not like a house where they can run around.”

The Tolberts are far from poor. Justin makes more than $200,000 a year as an oil pipeline welder in the Bakken oil field. The family owns a two-story home with an in-ground pool in Tulsa, Oklahoma. They drive a $50,000 four-wheel-drive van.

The Tolberts moved here in 2012 as part of a massive migration of workers chasing their fortunes in the Bakken shale, where a revolution in drilling technology led by fracking has pushed United States oil production to a 24-year high.

Like many oil boom families, the Tolberts left home to find a brighter future. They chose to live in rural Montana to avoid the bustle at the center of the oil rush 30 miles away, in Williston, North Dakota.

But the explosive growth that deterred them from Williston is spreading to small Montana border towns such as Bainville, causing severe housing shortages and growing pains.

Although only a small fraction of Bakken wells are in Montana, where oil production peaked in 2006, nearby oil industry development and an influx of workers have maxed out the town’s water system, destroyed roads, and introduced drugs and violent crimes unheard of by generations of farmers and ranchers.

The Lure of Oil Salaries

“If you wish for this oil, be careful what you wish for, because life as you know it is done,” said Ken Norgaard, road department supervisor for Roosevelt County, the vast and sparsely populated county of rolling farmland that includes Bainville.

Map of the Bakken shale formation


County jobs were once coveted for their solid benefits and retirement plan, Norgaard said. Now, he has trouble finding workers. Norgaard advertised a road grader job as far away as Wyoming. In six months, he received two applications.

In the oil field, truck drivers make more than twice what the $17-an-hour county job pays, Norgaard said. The oil industry is also destroying the county’s gravel roads, which were originally built for the earliest cars and small farm equipment. Heavy trucks hauling hundreds of gallons of fracking water have turned the country roads to washboards. When it rains, the gravel washes out and strands school buses.

“I’ve got plenty of equipment; what I need is manpower,” Norgaard said. “I need to get my wages up to where I can compete with the oil patch.”

The K-12 Bainville School faces similar challenges. The influx of oil workers has pushed rent for run-down mobile homes to upwards of $2,500 a month. Teachers, whose salaries start at $33,000, can’t afford housing. At the same time, student enrollment has more than doubled to 165 since 2009.

“We have had to get creative,” said school superintendent Renee Rasmussen, who graduated from the school in 1973, one of a class of ten. In the past few years, Rasmussen said, the school bought 13 homes to house many of its teachers.

Before the oil boom, the school was in danger of closing. Now classes are filled beyond capacity, and girls line up to use one of three bathroom stalls in the elementary school’s bathroom.

“How can we allow the growth to happen, welcome people here, and at the same time remain who we are?”—Renee Rasmussen, school superintendent

One January afternoon, Rasmussen faced a more immediate crisis—finding a way to get the kids home from school. Rasmussen has struggled to hire school bus drivers, even after increasing wages to $24 an hour. She has recruited the school lunch cook and the janitor to drive buses. But on that day, an out-of-town basketball game left Rasmussen scrambling to find an additional driver.

Despite the problems, Rasmussen thinks development has improved the school and Bainville. But she worries that the small town flavor of Bainville, where oil millionaires dress like poor farmers and sometimes forget to cash their oil checks, may be changing.

“The big crisis is this,” Rasmussen said. “How can we allow the growth to happen, welcome people here, and at the same time remain who we are?”

Municipal Budgets Strained

Bainville’s growing pains are likely to get much worse. In May, the United States Geological Survey doubled its 2008 estimate of oil resources in the Bakken and the Three Forks formation, which lies below the Bakken.

In early 2013, Procore Group Inc., of Alberta, Canada, built a rail facility in Bainville to unload the sand used in the hydraulic fracturing process, which will be trucked to wells across the Bakken. A sprawling “man camp” that can house 350 oil workers also has been built, which required the town to double the size of its sewer lagoon. The expansion was paid for by Procore.

Bainville mayor Dennis Portra said there are plans for a hotel, a gas station, and additional residential housing. Portra said Bainville’s population has doubled since 2010 to about 450, and will likely double again in the next couple of years.

Portra is a proponent of oil industry growth. The boom has provided jobs for his three adult children. But he was dismayed in 2013, when Montana Governor Steve Bullock vetoed a bill that would have provided $35 million to municipalities struggling with oil and gas industry development.

Montana towns like Bainville, Portra said, are suffering the effects of the boom, while others are getting rich. The majority of the Bakken wells, and tax revenue, are in North Dakota. For oil drilled in Montana, the state takes 50 percent of tax revenue. Counties and schools across the state receive most of the remainder. Towns and cities share only one-tenth of one percent.

“Why should it come back to the local taxpayer to pony up for schools, roads, water, and police when we are sending millions to the general fund?” Portra asked.

Bullock’s deputy chief of staff Kevin O’Brien said the governor supports increasing funding for towns in the Bakken, but he said the governor vetoed the bill to help balance the state’s budget.

“The governor intimately feels their pain,” O’Brien said.

Crime on the Rise

Among the changes in Bainville, none has locals on edge like the increase in crime. In 2012, two Colorado men looking for work in the oil field allegedly killed a popular math teacher in nearby Sidney, Montana, and buried her body along a highway outside Williston. Soon after, Roosevelt County bought a new file cabinet to store the rush of concealed-weapon applications.

On a recent evening, as Roosevelt County Sheriff’s Deputy Avis Ball patrolled near Bainville, she pointed out a simple cross next to the highway. It’s the spot where in 2012 she found Brian Doyle, a 49-year-old oil worker from Florida, dead and partially buried in the snow. Doyle was run over and abandoned by his friend, who was later convicted of negligent homicide.

“He’d been laying there for a week in the snow,” said Ball, who patrols the eastern edge of the county alone, often an hour from the nearest backup deputy at the far end of the county.

Earlier this year, Ball said, four men beat a man nearly to death in Williston, put him in the trunk of a car, and dropped him off in a field in Roosevelt County. “When I started, I was taking dog calls,” said Ball, who joined the department in 2011. “Since then it has taken off.”

The FBI has warned that Mexican drug cartels are trafficking drugs to the area, targeting the large paychecks of the mostly young men who work in the Bakken. Felony drug arrests in Roosevelt County rose from 4 to 28 from 2008 to 2012, according to Sheriff Freedom Crawford. Crawford said methamphetamine is the biggest drug problem the county faces, followed by illegal painkillers. But a bigger problem, he said, is the increase in alcohol-fueled fistfights. From 2008 to 2012, assault arrests nearly doubled, to 173.

“Historically, we knew who our troublemakers are,” Crawford said. “Now after the oil field hit, we can’t keep up with it. We don’t know who these people are.”

The spike has taxed the county’s tiny 100-year-old jail, which Crawford said has held as many as 40 people, more than double the number it held before the boom. Jail overcrowding led to American Civil Liberties Union scrutiny that pressured Crawford to limit capacity to 17. On a recent afternoon, only one inmate was local, the others from as far away as Florida. Crawford said the county is planning a new 40-bed jail that can be expanded to 60 beds if the oil boom continues.

“If we have no place to live, we are backed into a corner.”—Avis Ball, sheriff’s deputy

But Crawford faces more immediate concerns. In April, Ball’s landlord sold the home where she lived with her four children. She had to be out by the end of May, but Ball, who is a single mother, couldn’t find a home she could afford. Instead, she moved into a motel room, which she hopes is temporary. Her children are living with friends until Ball finds another home.

But Ball doubts she can find a home to rent on her sheriff’s deputy salary, which she said is less than $22 an hour.

“I’m not ready to leave my job here,” Ball said. “I have not met my goals. But if we have no place to live, we are backed into a corner.”

A Changing Way of Life

Many of the changes that frustrate locals don’t make the crime statistics sheet. On an early morning at the Welcome Stop, a two-pump gas station and convenience store in Bainville, a group of locals sat drinking coffee at a round table and talked about hunters trespassing on their land, drunken men wandering the streets at night, and petty theft.

“You used to drive your pickup to town, leave your keys inside and your rifle in the back window. You can’t do that anymore,” said Dan Lambert, a town sewer worker.

“We were very naive. We were not expecting things that happen in other places to happen here.”—Shellie Pacovsky, emergency response technician

Shellie Pacovsky, the town’s senior emergency response technician, said a woman who asked to park her camper on Pacovsky’s property later opened an adult massage parlor with signs and online advertisements. When the woman refused to leave, Pacovsky pushed her car off the property with her John Deere tractor.

“We were very naive,” Pacovsky said. “We were not expecting things that happen in other places to happen here.”

If the boom has stretched the patience of many locals, it has been a boon to the now-millionaire farmers and ranchers who own land where oil has been struck, and to Bainville’s newest residents, who work the wells.

In August, Tony and Tanya Tippett were in danger of losing their house in Georgia over back taxes when Tony’s brother called from this area with stories of hard work and hefty paychecks.

Although Tony’s brother was living in a sleeping bag near a truck stop in Williston, Tony and Tanya decided to join him. Tony now makes $2,000 a week after taxes working for an oil well servicing company. Tanya works behind the counter at the Welcome Stop.

Like many families here, the Tippetts live in a camper. They share it with Tony’s brother and a bulldog, paying $800 a month to park in a campground. Tony said he plans to stay in Bainville for five years, “depending on how much we can stomach the cold.”

Tony commutes to Williston, but he said he would never move his family there. Like the locals, Tony likes the small town atmosphere of Bainville, even if the influx of workers means he is forced to live in a camper. “It’s rougher over there,” he said of Williston.

As for the Tolberts, they are not sure they will ever move back to Tulsa. As long as the work holds out, they plan to stay in Bainville. After making it through a winter of frozen pipes and six kids in a camper, the Tolberts moved into a house in April and bought three sheep for their children.

Justin Tolbert renovated the 1,000-square-foot house, which is owned by a local school bus driver and used to be a small office building, in exchange for several months of rent.

Mandy Tolbert says her children miss sleeping together in one room, but they sometimes visit the old camper, which didn’t sit vacant long. Justin’s friend from Tulsa, who is also a welder, recently moved in with his wife and four children. Like the Tolberts, they plan to stay, if the oil work lasts.




Halliburton Fracking Spill Mystery: What Chemicals Polluted an Ohio Waterway?

On the morning of June 28, a fire broke out at a Halliburton fracking site in Monroe County, Ohio. As flames engulfed the area, trucks began exploding and thousands of gallons of toxic chemicals spilled into a tributary of the Ohio River, which supplies drinking water for millions of residents. More than 70,000 fish died. Nevertheless, it took five days for the Environmental Protection Agency and its Ohio counterpart to get a full list of the chemicals polluting the waterway. “We knew there was something toxic in the water,” says an environmental official who was on the scene. “But we had no way of assessing whether it was a threat to human health or how best to protect the public.”

This episode highlights a glaring gap in fracking safety standards. In Ohio, as in most other states, fracking companies are allowed to withhold some information about the chemical stew they pump into the ground to break up rocks and release trapped natural gas. The oil and gas industry and its allies at the American Legislative exchange Council (ALEC), a pro-business outfit that has played a major role in shaping fracking regulation, argue that the formulas are trade secrets that merit protection. But environmental groups say the lack of transparency makes it difficult to track fracking-related drinking water contamination and can hobble the government response to emergencies, such as the Halliburton spill in Ohio.

Officials from the EPA, the Ohio EPA, and the Ohio Department of Natural Resources (ODNR) arrived on the scene shortly after the fire erupted. Working with an outside firm hired by Statoil, the site’s owner, they immediately began testing water for contaminates. They found a number of toxic chemicals, including ethylene glycol, which can damage kidneys, and phthalates, which are linked to a raft of grave health problems. Soon dead fish began surfacing downstream from the spill. Nathan Johnson, a staff attorney for the non-profit Ohio Environmental Council, describes the scene as “a miles-long trail of death and destruction” with tens of thousands of fish floating belly up.

Statoil and the federal and state officials set up a “unified command” center and began scouring a list of chemicals Halliburton had provided them for a compound that might be triggering the die off. But the company had not disclosed those ingredients that it considered trade secrets.

“We knew there was something toxic in the water. But we had no way of assessing whether it was a threat to human health or how best to protect the public.”

Halliburton was under no obligation to reveal the full roster of chemicals. Under a 2012 Ohio law—which includes key provisions from ALEC’s model bill on fracking fluid disclosure—gas drillers are legally required to reveal some of the chemicals they use, but only 60 days after a fracking job is finished. And they don’t have to disclose proprietary ingredients, except in emergencies.

Even in these cases, only emergency responders and the chief of the ODNR’s oil and gas division, which is known to be cozy with industry, are entitled to the information. And they are barred from sharing it, even with environmental agencies and public health officials. Environmental groups argue this makes it impossible to adequately test for contamination or take other necessary steps to protect public health. “Ohio is playing a dangerous game of hide and seek with first responders and community safety,” says Teresa Mills of the Virginia-based Center for Health, Environment, and Justice.

Within two days of the spill, Halliburton disclosed the proprietary chemicals to firefighters and the oil and gas division chief, but it didn’t give this information to the EPA and its Ohio counterpart until five days after the accident, by which time the chemicals had likely reached or flowed past towns that draw drinking water from the Ohio River. The company says that it turned over the information as soon as it was requested. “We don’t know why USEPA and Ohio EPA didn’t have the information prior to July 3,” Halliburton spokeswoman Susie McMichael tells Mother Jones. “If they had asked us earlier, we would have provided the information, consistent with our standard practice.” The Ohio EPA, on the other hand, maintains that ODNR, emergency workers, and federal and state EPA officials had a representative ask Statoil and Halliburton for a complete list of chemicals just after the spill. Several days later, environmental regulators pressed for the information again and learned that it had already been shared with only ODNR, which according to the EPA report was not deeply involved in the emergency response.

Other key players, including local water authorities, the private company hired to monitor water contamination, and area residents, did not get a full rundown of chemicals, even after the EPA and the Ohio EPA finally received the information.

Ohio state officials maintain that the river water is safe to drink because the fracking chemicals have been so heavily diluted. But environmentalists are skeptical. “Tons of chemicals and brine entered the waterway and killed off thousands fish,” says Johnson of the Ohio Environmental Council. “There’s no way the drinking water utility or anyone else could monitor those chemical and determine whether the levels were safe without knowing what they were. Even today, I don’t think the public can be sure that the water is safe to drink.”



Foreign Firms Investing $800 Million In North Dakota Despite Population Uncertainty

Foreign firms plan to spend more than $800 million in the remote oil towns of North Dakota to build shopping malls, restaurants and homes, even though there’s little evidence that workers and their families will move to the area and stay.

A rapidly growing, highly paid population has produced a shortage in housing and retail space in the area atop the Bakken oil field that with hydraulic fracturing technologies has boosted incomes and employment in the state.

Hoping to capture some of that income, Swiss firm Stropiq is planning a $500 million, 219-acre complex called Williston Crossing, to feature 1 million square feet of retail stores, entertainment, office and hotel space and residential plots. Terry Olin, Stropiq’s co-founder, attended college in North Dakota and spent the past two decades developing real estate in Moscow and St. Petersburg, Russia. Williston Crossing is planned for a March 2015 groundbreaking and April 2017 completion. Stropiq is already developing a 93-unit apartment complex in Williston, with the first building scheduled to open in July.

Another company, Singapore’s Barons Group of Cos., has proposed a $300 million project in Dickinson, about a 2 1/2-hour drive south of Williston. Barons Vista would include a mall, four-star hotel, spa, offices and condos. Barons’ other projects include 36-floor luxury residence towers in Malaysia and five-star resorts on rolling hills in Indonesia and on white sand beaches in the Philippines.

Other, smaller foreign investments in the local economy include a $26 million Fuddruckers restaurant and full-service 102-room hotel in Williston, to be built by a subsidiary of Turkish company Serka Services, itself a subsidiary of Istanbul-based Adali Holding, a longtime construction and services contractor with the U.S. military in Europe and the Middle East. The company plans to open four other Fuddruckers across the state and to franchise the hotel, called The Brooks, throughout the United States.

The permanent population of Williston and six surrounding townships grew by about 20 percent from the 2010 U.S. Census to 2012, according to researchers at North Dakota State University. By 2017, researchers Nancy Hodur and Dean Bangsund say, the population will grow by 61 percent, and including transient residents, by 134 percent. But when asked whether workers’ families will move to the area and stay, Hodur said she was not sure.

“We don’t have any good information on that, and there’s not any out there,” she said. “Everyone has their own theory.”

She’s currently preparing to interview and survey workers to answer such questions about their characteristics.

Married workers, without families in the area, are most likely to send cash back home rather than spend it locally. Workers living in “man camps,” employer housing similar to dorms and lodges, have subsidized meals and housing and earn salaries of $45,000 to $100,000, but their long work hours can leave little time to spend their earnings.

The two large retail complexes would be firsts in the region. As late as last year, the only department store in Williston was a JCPenney, and since the oil boom started, Wal-Mart opened a location in Williston and must pay its workers starting hourly wages around $15 to $16, much higher than other locations nationwide.

SelectUSA, a government foreign investment initiative, said North Dakota has attracted at least 31 publicly announced foreign investment projects since 2003 worth $1.04 billion.



Oklahoma Agrees to Keep Oil Train Shipments Secret

Surging oil production in states like North Dakota has outpaced pipeline capacity, and the energy industry has turned to railroads to transport oil from fields to refineries.

But several high-profile oil-train accidents — including Canada’s explosive Lac-Mégantic 2013 derailment that killed 47, and other accidents in Alberta, Alabama and Virginia — have raised questions about the safety of shipping crude oil on trains.

The federal government has ordered railroads to share more information about some crude oil shipments with state authorities, but Oklahoma officials won’t share that information with regular citizens, The Oklahoman‘s Paul Monies reports:

After an inquiry about the Bakken rail shipment reports, the Oklahoma Department of Environmental Quality said the commission entered into confidentiality agreements with railroads under guidance from the federal Department of Transportation.

Oklahoma is a major oil hub, and train shipments of crude oil traverse the state en route from North-central U.S. oilfields to refineries along Texas’ Gulf Coast. In May, the federal government ordered railroads to share more information with state authorities about crude shipments from North Dakota’s Bakken Shale, which might be more flammable than other types of crude.

Oklahoma’s DEQ said “information relating to terrorism” exempts the information from Oklahoma’s Open Records Act, Monies reports, but other states, including Washington, have made the information public.

In its letter to Washington officials, BNSF Railroad Co. said the information should be shared only on a “need-to-know” basis. The data the railroad provided showed weekly summary information on Bakken oil shipments by county, not detailed train schedules or cargo manifests.

Several other states, including California, New Jersey, Minnesota and Colorado, have chosen to keep the information confidential in accordance with the requests of some railroad companies.




Poverty still exists in the Texas oilfields

GARDENDALE – From the window of her tin-roofed trailer, Judy Vargas can glimpse a miraculous world. It is as close as the dust kicked up by the trucks barreling by but seems as distant as Mars.

As you walk out of her front yard – where the chewed-off leg of an animal, probably a feral hog caught by a prowling bobcat, rots outside – a towering natural gas flare peeks over the southerly view. Across the railroad tracks and Interstate 35, a newly reopened railroad interchange stores acres of pipe and receives shipments of sand from Wisconsin to be used in hydraulic fracturing, or fracking. Next to the terminal is an expanding natural gas processing plant that lies in the heart of the Eagle Ford, a giant shale oil field that here in La Salle County alone produces more than $15 million worth of oil a day, or about one out of every 55 barrels produced in the United States.

This rural patch of thick mesquite in the brush country south of San Antonio had been known for something else. Five miles from here in Cotulla, Lyndon B. Johnson at the age of 20 saw hardship so searing that it would help inspire his war on poverty.

Now, it is the scene of one of the greatest oil booms the country has ever seen. But poverty endures in makeshift, barely governed communities called colonias.

Decades after Johnson took a teaching job here in 1928, the area, like the country, is a startling and incongruous mix of cascading wealth and crushing hardship. And though the boom has helped produce fortunes for some and comfortable lives for many, for others it exists within a rural landscape of unpaved streets without garbage pickup, where few dare to drink the tap water because it tastes and smells like chlorine.

Early one evening in May, Vargas, 28, cooked spaghetti for her three children and her grandmother. Vargas, a high school dropout, had just arrived home from her job as a restaurant cook. She and her grandmother, who works as a maid at a motel, make a total of roughly $1,500 a month, far below the federal poverty level of $2,325 for a family of five. Above their dining table, there was a portrait of the Last Supper and, tucked in a corner of the frame, a picture of Vargas’ uncle, unsmiling in a white uniform and one of at least three incarcerated relatives. The family ate and swatted at flies.

A rising tide

At least in part because of the oil economy, Gardendale is one of the better-off colonias. The Federal Reserve Bank of Dallas found in a report to be released this year that 42 percent of the population of colonias in six Texas border counties – not including La Salle – lived below the poverty line, compared with 14.3 percent nationally. The median annual household income was $29,000. In La Salle County, other studies have shown that 39 percent of children live in poverty.

Texas has reaped tremendous financial benefits from oil and gas. But the poor in the colonias seldom own the leasing rights for the natural resources that lie under the ground they live on. One-third of Texas’ $48 billion in tax revenue last year came directly or indirectly from the oil and gas industry, said Bernard Weinstein of the Maguire Energy Institute at Southern Methodist University in Dallas. Portions of the revenues go into the state’s general fund as well as its so-called rainy day fund, but very little of it is spent on social services and programs to assist the poor.

The front porch of Ms. Vargas's trailer. She and her family live in a semi-rural landscape where the streets are unpaved and dark at night. Gardendale has no mayor or police department.


The front porch of Ms. Vargas’s trailer. She and her family live in a semi-rural landscape where the streets are unpaved and dark at night. Gardendale has no mayor or police department.

So, despite the boom, Texas has some of the highest rates of poverty in the nation and ranks first in the percentage of residents without health insurance.

“Despite the bounty of the Eagle Ford, which is considerable and on the whole clearly positive, it is not a rising tide that lifts all boats,” said Ray Perryman, a leading Texas economist and author based in Waco. He noted that Texas had long had a philosophy of limited government and an aversion to spending on social services, an attitude intensified by the current political environment.

“Texas is not a good place to be poor, and there is little political appetite for change,” he said.

Surrounded by activity

There is disagreement among officials, oil company executives and economists over why poverty persists amid the boom in the Eagle Ford counties.

La Salle County’s top elected official, County Judge Joel Rodriguez Jr., said the boost in property and sales tax revenue from Eagle Ford activities had been offset by increases in county spending on road repairs, law enforcement, fire safety and administrative functions.

Vanessa, daughter of Judy Vargas, runs for the school bus as a truck approaches behind it.<br /><br />
In La Salle County, which includes Gardendale, 39 percent of children live in poverty.


Vanessa, daughter of Judy Vargas, runs for the school bus as a truck approaches behind it. In La Salle County, which includes Gardendale, 39 percent of children live in poverty.

He was critical of the support the oil and gas industry had provided to the poor.

“The oil companies come by for Thanksgiving with turkeys, or they may have a function to have pictures taken to show the world they are socially responsible, and then you’ll never see them again,” Rodriguez said.

But Rodriguez and others were skeptical of those who were unemployed in a region teeming with jobs and new businesses.

“The fact is we are handing out big checks to people, and we are still short on people who want to work,” said Chris Faulkner, chief executive of Breitling Energy, an oil company that operates in La Salle County.

“I would think that if I was living in one of these colonias, I would be running for the opportunity to say, ‘This is my big chance, and I am going to jump on it,’ but they are not doing that.”

In early June, Vargas was at the kitchen table opening a box of cake mix. Her husband, Erick Olivares, 28, lit the charcoals in the rusty barbecue grill outside. The children splashed in a plastic pool. They were having a cookout. Olivares had been released from jail several days earlier.

Vargas laughed more, smiled more than she had in weeks.

“I am very happy,” she said as she cracked the eggs for the strawberry cake. “Why wouldn’t I be? My life is complete.”

Olivares had spent six weeks in jail on charges of marijuana possession. He was optimistic about finding a job but reluctant about working in the oil fields.

“It crossed my mind,” he said. “It pays good, but I don’t want to lose my arms or hands for that kind of money.” Later, he gave another reason: “When you’re a convicted felon, they ain’t going to hire me.”

Vargas quit her job at the steakhouse and returned to a place she had worked before – the motel where her grandmother is a maid. She cleaned rooms and pressed shirts for $9 an hour, and she got a second job as a waitress at another restaurant in Cotulla, earning $5 an hour, plus tips.

Staying optimistic

Vargas dreams her children will have a better life.

“I wouldn’t want my kid to be in no motel and no restaurant, getting paid minimum wage,” she said. One Wednesday evening, Vargas drove her children and her grandmother to the Living Faith Family Worship Church in Cotulla, which she had recently begun attending.

The pastor, Mark Linares, runs a barbecue stand outside his house. Vargas and her family walked in late, as Linares asked the audience to pray for a truck driver whose daughter-in-law was in a coma.

Everyone filed out of the red brick building, where there is a plaque by the front doors. This was the old schoolhouse where Johnson first saw extreme poverty. During the collection, the worshipers had passed around a basket. Vargas contributes when she can. This evening she had nothing to put in.




Russian Hackers Targeting Oil and Gas Companies

SAN FRANCISCO — Russian hackers have been systematically targeting hundreds of Western oil and gas companies, as well as energy investment firms, according to private cybersecurity researchers.

The motive behind the attacks appears to be industrial espionage — a natural conclusion given the importance of Russia’s oil and gas industry, the researchers said.

The manner in which the Russian hackers are targeting the companies also gives them the opportunity to seize control of industrial control systems from afar, in much the same way the United States and Israel were able to use the Stuxnet computer worm in 2009 to take control of an Iranian nuclear facility’s computer systems and destroy a fifth of the country’s uranium supply, the researchers said.

The group was named “Energetic Bear” because the vast majority of its victims were oil and gas companies. And CrowdStrike’s researchers believed the hackers were backed by the Russian government given their apparent resources and sophistication and because the attacks occurred during Moscow working hours.

report released Monday by Symantec, a computer security company based in Mountain View, Calif., detailed similar conclusions and added a new element — the Stuxnet-like remote control capability.

In addition to basic hacking techniques, like sending mass emails containing malicious links or attachments, the group infected websites frequented by energy workers and investors in what is known as a “watering hole attack.”

In this attack, instead of targeting a victim’s computer network directly, hackers infect websites their targets visit often — like an online menu for a Chinese restaurant — with malicious software. Without knowing it, workers visiting that site inadvertently download the so-called malware and help the hackers get inside their computer network.

The Russian hackers were careful to cover their tracks, the researchers said. They hid their malware using encryption techniques that made it difficult to identify their tools and where they came from. In some cases, researchers found evidence that the hackers were probing the core of victims’ machines, the part of the computer known as the BIOS, or basic input/output system. Unlike software, which can be patched and updated, once a computer’s hardware gets infected, it typically becomes unusable.

F-Secure, the Finnish security firm, also told its clients last week about the Russian hacking group, which Symantec has named “Dragonfly.”

In the past six months, researchers say the group has become more aggressive and sophisticated.

The Russian hackers have been breaking into the networks of industrial control software, or I.C.S., makers, inserting so-called Trojans into the software used by many oil and energy firms to allow employees to remotely get access to industrial control systems. So when oil and gas companies downloaded the latest version of the software, they inadvertently downloaded the hackers’ malware as well.

At least three industrial control software developers were affected, according to researchers at Symantec, F-Secure and CrowdStrike. The first was a maker of remote access tools for industrial control systems; the second, a European manufacturer of specialized industrial control devices; and the third, a European company that develops systems to manage wind turbines, natural gas plants and other energy infrastructure. They were not named by the security companies because of confidentiality agreements.

Security researchers estimate that more than 250 companies downloaded the infected software updates.

“These infections not only gave the attackers a beachhead in the targeted organizations’ networks, but also gave them the means to mount sabotage operations against infected I.C.S. computers,” Symantec wrote in its report Monday.

There was no evidence the Russian group intended to use its toehold in some networks to inflict damage, like blowing up an oil rig or power facility, said Kevin Haley, the director of security response at Symantec, in an interview. The apparent motive, Mr. Haley said, was to learn more about energy companies’ operations, strategic plans and technology. “But the potential for sabotage is there,” he added.

More recently, Energetic Bear has been targeting companies in the financial sector, said Adam Meyers, CrowdStrike’s head of threat intelligence. In particular, the group has been attacking, with the watering hole technique, some websites frequented by firms that invest in the energy sector.

Once someone visits an infected site, Mr. Meyers said, attackers will infect their system, scan their device to see if it is worth hacking, and then install sophisticated hacking tools. For devices deemed uninteresting, the attackers simply clean up their tools and move along.

“They are very aggressive,” Mr. Meyers said. “And very careful to cover their tracks.”



Feds say Mexican drug cartels operating in Bakken oil towns

GLENDIVE – Jails in the Bakken area are overbooked and law enforcement is maxed out as drug-related crime surges in Montana and North Dakota oil patch communities.

Deputies, prosecutors and local drug counselors made the case Friday for more federal help during a Glendive meeting with federal drug czar R. Gil Kerlikowske and U.S. Sens. Jon Tester, D-Mont, and Heidi Heitkamp, D-N.D. All agreed that a massive influx of some 20,000 to 30,000 well-paid oilfield workers was bringing new criminal challenges to a region so rural it’s often characterized as frontier.

Heitkamp, who was North Dakota state attorney general for eight years before being elected to the U.S. Senate, said the criminal challenges aren’t necessarily from Bakken workers, but other dangerous, opportunistic criminals attracted to oilfield incomes.

“Anytime you’re going to find illegal drugs, you’re going to find two other things. You’re going to find a lot of cash and you’re going to find a lot of guns,” Heitkamp said. “These are not good people.”

Montana U.S. Attorney Mike Cotter said that in early 2012, FBI and Drug Enforcement Administration and Bureau of Alcohol, Tobacco and Firearms investigators concluded that Mexican drug cartels were trafficking cocaine, heroin and methamphetamine in the Bakken area.

In one case, Mexican drug cartels are suspected of distributing roughly 145 pounds of methamphetamine, and several kilograms of cocaine and heroin in the Bakken.

State, tribal and international borders bisecting the region pose jurisdictional challenges to investigators. Many times, federal agents are the only ones with jurisdiction to cross those borders, Cotter said.

But federal agents are hard to come by, said Dawson County Sheriff Craig Anderson. Local deputies are dealing with suspects who speak Spanish, Chinese, Vietnamese or Russian and no English. Simple tasks like executing a search have become difficult because with language barriers, deputies cannot always be certain consent has been given.

The people Dawson County deputies are arresting these days are not the locals that officers are used to.

“My staff will tell you they’re younger, more violent and more dangerous,” Anderson said.

Deputies investigating a methamphetamine-related murder encountered a suspect who sent his girlfriend to the opposite end of Glendive to fire off a gun and distract police so the suspect could set a car on fire and destroy evidence, Anderson said.

Bookings at the Dawson County jail have risen from 50 a day in 2008 to more than 76 a day this year, Anderson said. The county jail’s 25 beds are full and people who would normally be jailed are now turned loose. At least 15 of the 25 inmates in jail Friday were not locals, Anderson said.

Kerlikowske said more than incarceration is needed to deal with drug-related crime in the United States.

The federal government is putting more resources into prevention and treatment to stem the drug tide, he said, and has ramped up its attention to prescription drugs, the most abused drug category in the United States after marijuana. Prescription drug abuse also thrives in areas where work-related injuries are common. Montana is one of the top 10 states for illicit drug use per capita.

“We know we are not going to arrest our way out of the situation,” Kerlikowske said.

Most of the agencies weighing in on the drug challenge say more manpower is needed, from treatment programs to drug courts and police. But money is also tightening up.

Cotter told the senators that Montana public safety will be risked if law enforcement cuts scheduled for October under federal budget sequestration are realized. The federal Department of Justice budget was cut $1.6 billion in 2013 under a bipartisan agreement in Congress to reduce spending. Another $1.6 billion to $2.2 billion will be cut in federal fiscal year 2014, which begins Oct. 1.

In Montana, DOJ sequestration cuts totaled $672,000 in 2013. All federal justice agencies are under a hiring freeze. Cotter’s office is down five prosecutors. The Montana U.S. Attorney’s Office will see a $941,000 cut in the coming fiscal year.

Cuts are also in store for programs that benefit local law enforcement, he said.

“The decrease in funds will result in a decrease in agents and officers investigating cases, a decrease in cases prosecuted and local and federal levels and a decrease in criminals brought to justice,” Cotter said. “Lives of the folks living in eastern Montana will be negatively affected.”

Tester said he will take comments from Friday’s meeting back to Washington and press Kerlikowske for action.

“As soon as he gets his feet back on the ground, gets his coat and shirt ironed, were going to be talking to him. ‘All right, Gil, what do we do? What is the administration going to do. What are you going to be recommend and how can we help?’ Everybody is short-handed. There’s more demand than there are people to meet it.”

Tester and Heitkamp both said they would be turning to Bakken oil companies to help address the problem.




Man camp zoning violation leads to $30 million in fines

WILLISTON, N.D. — An oil services company and its subsidiary are facing nearly $30 million in fines for a man camp violating zoning regulations in North Dakota’s oil patch.

Western Petroleum LLC and its parent company, Pilot Logistics, are facing fines for violations at a remote man camp.

A conditional use permit for the site was approved for 40 trailers and seven modular units in 2011. But the permits were never renewed.

A recent county compliance inspection found 30 RVs, hookups for 10 more RVs, seven mobile homes and two houses on the premises. Each structure is to be fined $1,000 per day it was in violation of regulations.

Pilot representatives said the fines are egregious.

Man camps are common forms of housing for workers in oil country.



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