In North Dakota: A Great Divide Over Oil Riches

Just like everybody else around here, Fred Evans spent his life coaxing a good enough living out of the earth. He grew wheat, ran cattle and, during a couple of short-lived bursts of activity, worked on the drill rigs searching for oil across the northern prairie.

But unlike his neighbors, Mr. Evans was convinced that the area would someday be home to an epic oil boom. For years he would approach others in the area offering to buy or lease the rights to drill on their land, often delivering his pitch at a time of need. More than a few, to their enduring regret, agreed.

So it was with pure jubilation that Mr. Evans, who hides a businessman’s sensibility under a broad-brimmed cowboy hat and a stable of folksy aphorisms, watched one of the rumbling pump jacks on his property pulling up the oil that has made him a rich man.

“It’s like music,” he said, raising his voice over the noise. “Ka-ching, ka-ching, ka-ching.”

Sure enough, money is flowing by the barrelful into Mountrail County, transforming a tiny community once proudly situated in the middle of nowhere into an unexpected oasis of prosperity at the heart of the nation’s biggest oil play.

No other county in the state has had a bigger jump in the number of households earning more than $100,000, which spiked to 21 percent from 6 percent during the last decade, according to an analysis of census data. But much like the crude below, the benefits have spread unevenly, often as a result of decisions made long ago.

As some residents find themselves cashing oil royalty checks worth tens of thousands of dollars a month or more, many of their neighbors are resigned to receiving almost nothing from the wells that pepper the landscape and even their own land — aside from the headaches that go with living in a boomtown.

Marlene Gunderson, who works alongside her husband and daughter at the county courthouse researching the ownership history of every acre of property for oil companies, stumbles across the names of neighbors who are receiving huge checks for mineral interests, though she has none herself.

“That’s just the way life goes,” she mused. “Some people get. Some don’t.”

As with any major boom — from real estate to tech stocks to natural resources — the sudden split between the winners and the witnesses has been painful. But this is happening in a small town, where proximity and familiarity make a sudden reordering all the more difficult.

“It’s not all good,” said Leslie Anderson, who is among the lucky locals who sometimes make more from a single month of oil payments than he used to earn in a year of farming. “There are lots of families fighting that got along before.”

After more than five years of oil-driven growth, Mountrail County, which a decade ago had shrunk to less than half its peak size before the Great Depression, registered an official population of 7,673 in the 2010 census, though local leaders believe there are thousands more.

With the unemployment rate at only 1.3 percent, local sons and daughters are no longer leaving to find work.

And as the rest of the nation watched incomes drop or stagnate, in Mountrail County median income rose more than 50 percent in the last decade, the fifth-highest gain in the nation. Residents earned on average an additional $20,000, adjusted for inflation, according to an analysis of census data by Andrew A. Beveridge, a demographer at Queens College in New York.

At one of the local banks in Stanley, the county seat, deposits have increased to $135 million from $43 million before the boom. But the new wealth is not always easy to spot.

Residents say a culture of modest living means they don’t know for sure which of their neighbors are making money off oil, though they have suspicions.

“I’m seeing people that have never owned a new vehicle in their life driving a new car,” said Wade Enget, a local lawyer, who estimated that about half the residents are receiving oil money. “People who never took a day off are going on vacation.”

The main driver is the payments that residents receive for leasing mineral rights. In 2009, the most recent year statistics are available, the signing bonuses and the royalties paid for the oil extracted from private land totaled about $1 billion statewide, according to an industry-financed study by North Dakota State University.

Though many of those checks go out of state — to the far-flung descendants of homesteaders or to companies that bought mineral rights — more than half stay in North Dakota, helping double the number of state residents earning more than $1 million a year. And the checks are likely to continue, said Lynn D. Helms, director of the state’s Department of Mineral Resources, citing estimates that the average well will pay about $10 million in royalties over three decades.

Living in a simple trailer home, Lenin Dibble reveals few signs that he has suddenly become a wealthy man. A retired farmer and rancher, Mr. Dibble receives royalty checks of as much as $80,000 a month for his small share of mineral rights. To explain his frugal lifestyle, he pulled out a letter from his father, yellowed from the passage of half a century.

“When you get a few dollars in your pocket never advertise it,” he read. “And hold a conference before spending any of it.”

And as he finished, Mr. Dibble insisted he does not need any of the oil money, which he has been saving for his adult children, because Social Security and payments for leasing out his farmland were enough. What he and others in town notice more than the newfound money are the problems: locking the door to his house, taking the keys out of his car and seeing a quiet community where everyone knew everyone overrun by the bustle of strangers.

“I wish it had never happened,” he said.

Because land and the rights to whatever lies beneath it can be sold separately in North Dakota, only about one in five royalty checks goes to the owner of the land where the oil is being extracted. Though some residents never acquired mineral rights when they bought property, the payday has been most distressing for those living on longtime family estates where the mineral rights were sold off, often for a tiny fraction of their current value.

“There are only two reasons people sold,” said Roger Cymbaluk, a prominent real estate broker in nearby Williston. “One, they didn’t know what they were worth; two, they were desperate.”

Some used mineral rights in lieu of cash to settle debts during hard times — trading some acres to banks to satisfy a mortgage. Others sold them to savvier industry veterans after oil was first discovered six decades ago, which is why an outsize portion of the royalty checks for North Dakota oil head each month to Texas.

Stanley Wright, who used to sell farm equipment in Stanley, described how he took a substantial loss — and suffered the wrath of his wife — when he allowed two farmers to pay him with mineral acres. Now that the gamble has paid off decades later, he wrestles with guilt over his windfall. His eyes well up and his hands start to shake as he insists he never took advantage of anyone. “Minerals in those days weren’t worth anything,” he said.

In recent decades, people have been more reluctant to sell, though offers keep coming. For those landowners who do not own the mineral rights, the usual compensation has been a few thousand dollars for the disruption of hosting an oil rig. Even with the dust, noise and traffic, the most frustrating part is watching the wells on his property earning money for other people, said Mark Ellis, a farmer and rancher.

“It’s more interesting when you’re getting a piece of it,” he said.

Living just down the road from where the skeleton of a one-room schoolhouse still stands, Mr. Evans, 73, is unapologetic, if vague, about his success, which he said resulted from decades of groundwork.

Now he is described variously by neighbors as the richest man and the biggest crook in Mountrail County. Some of them recounted visits during which Mr. Evans tried to offer them deals they believed were designed to take advantage of their ignorance or misfortune. Several noted that even his sisters took him to court in a dispute over family mineral rights.

Mr. Evans, who calls himself “a Podunk from farm country,” brushes it all aside. “I’m definitely not a fortune teller,” he said. “But I just knew this thing would take off. I’ve been wrong other times, but I felt it.”

New York Times