Q and A with MHA Nation Chairman

The Bakken formation has helped North Dakota become the second-highest oil-producing state in the United States. With nearly 1.2 million barrels produced each day, the state trails only Texas in U.S. production.

About one-third of North Dakota's production comes from the Fort Berthold Indian Reservation, home to the Mandan, Hidatsa and Arikara Nation, or the Three Affiliated Tribes.

In November, Mark Fox, who was the tax director for the Three Affiliated Tribes, became the tribe's new leader, succeeding longtime chairman Tex Hall, who lost in the primary after a report detailing alleged improper business practices relating to the oil and gas industry.

Fox now will lead the tribe of more than 10,000 people, more than 4,000 of who live on the nearly million-acre reservation.

By one estimate, oil and gas exploration has infused more than $1 billion into the tribal economy over the past six years, helping to build new infrastructure and provide payments to tribal members to cover costs associated with education, household expenses and other needs on the once impoverished reservation.

But the drilling also has raised concerns among tribe members, primarily over the lasting environmental effects of oil and gas development on the land and the societal issues that come with large influxes of cash - including from illegal drugs, human trafficking and other crime.

Fox, who previously was a tribal councilman, campaigned on a platform of prioritizing self-sufficiency and sovereignty. He's a supporter of exploration and development, but he says it needs to be done responsibly and with all parties sitting at the table.

Rather than relying solely on oil royalties and taxes, Fox wants the tribe to become an active player in the industry, and he recently met with North Dakota Gov. Jack Dalrymple to discuss how the two can partner on oil-related issues.

Fox recently spoke with the EXPLORER about his plans for oil and gas exploration on the reservation.

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The Bakken formation has helped North Dakota become the second-highest oil-producing state in the United States. With nearly 1.2 million barrels produced each day, the state trails only Texas in U.S. production.

About one-third of North Dakota's production comes from the Fort Berthold Indian Reservation, home to the Mandan, Hidatsa and Arikara Nation, or the Three Affiliated Tribes.

In November, Mark Fox, who was the tax director for the Three Affiliated Tribes, became the tribe's new leader, succeeding longtime chairman Tex Hall, who lost in the primary after a report detailing alleged improper business practices relating to the oil and gas industry.

Fox now will lead the tribe of more than 10,000 people, more than 4,000 of who live on the nearly million-acre reservation.

By one estimate, oil and gas exploration has infused more than $1 billion into the tribal economy over the past six years, helping to build new infrastructure and provide payments to tribal members to cover costs associated with education, household expenses and other needs on the once impoverished reservation.

But the drilling also has raised concerns among tribe members, primarily over the lasting environmental effects of oil and gas development on the land and the societal issues that come with large influxes of cash - including from illegal drugs, human trafficking and other crime.

Fox, who previously was a tribal councilman, campaigned on a platform of prioritizing self-sufficiency and sovereignty. He's a supporter of exploration and development, but he says it needs to be done responsibly and with all parties sitting at the table.

Rather than relying solely on oil royalties and taxes, Fox wants the tribe to become an active player in the industry, and he recently met with North Dakota Gov. Jack Dalrymple to discuss how the two can partner on oil-related issues.

Fox recently spoke with the EXPLORER about his plans for oil and gas exploration on the reservation.

EXPLORER: What are your plans as chairman for production and exploration?

FOX: It's two-fold.

One is to continue to support development and do things necessary to support development. For example, making sure water is available for drilling and looking into what we can do about flaring and being more efficient and things of that nature.

The second thing I want to indicate - the other part of the fold - is getting assurances that we get to what I refer to as "responsible development." That we get assurances that the way we do and the way we conduct our oil and gas development is done in such a way that we are protecting our environment and assuring that our children have a place to live 25 to 30 years from now. Those are the two focuses.

EXPLORER: What do you envision with regard to environmental regulations?

FOX: The regulations all depend on what is necessary to protect our environment and reduce contamination and spills and negative effects. We will look at what we may have to do to strengthen - you can call it tightening, but I'd rather call it strengthening - and that comes as a result of sitting down with industry and partnering up and saying, "How is this going to impact you?"

No, I'm not trying to deter development or impede it. I just want us to sit down and partner and figure out better ways to get it done.

EXPLORER: Can you tell me where negotiations stand on the ONEOK pipeline on the reservation?

FOX: I'm just now getting into it myself. It's the first couple of weeks on the job ...

I do intend to sit down with them to continue negotiations - some negotiations have occurred with our previous chair and administration - but we're going to go ahead and sit down with them and see where we need to go to see how we complete it.

Right now, we're really assessing the whole situation and we'll move forward.

EXPLORER: You've spoken elsewhere about the economic benefit to natural gas. Can you elaborate on that?

FOX: We all know that gas has got value, but we have the situation where we're burning it off right now with all the flaring and things of that nature. I think, number one, we facilitate getting it into midstream so it can go to market. And number two, we can also look at situations of working with the industry and working with technology to reduce flaring by finding ways to utilize that gas as power at the wellhead … and compressing it and getting it to market. So we can show the industry they'll make money instead of burning it and not have to worry about getting everyone into midstream. We can go right to the wellhead and take advantage of that.

EXPLORER: The tribe is building its own refinery, Thunder Butte Petroleum Services Refinery. Can you tell me about that? Has construction begun?

FOX: We've done some preliminary construction on site development, site work and things of that nature, but those things would have to be done regardless.

What we're doing right now is, we're sitting down with the Thunder Butte management and the developers and trying to figure out if we're going to make some changes.

It's apparent that we are going to do some modifications to the plans over the last few years, and how we approach it and exactly what products we're going to do. We're looking at machine lining and maybe cutting a little bit of the cost of development a little bit. Also, focusing on transload as well, so we're still moving forward.

EXPLORER: Why do you think it's important for the tribe to have its own refinery?

FOX: Because No. 1, it's the value. Instead of just sitting back, with our oil that's underneath our land - our own oil - instead of just getting royalties and a few taxes, we're going to take the product from out of the ground, we're going to add value, develop it and create a product, send it to market.

The overall benefit of that is the value of that oil coming from out of the ground is going to get tenfold, because we're actually going to develop it and take it to market as a developed product rather than just getting royalties. It's a way of bringing in more revenue.

EXPLORER: Any idea on when the refinery will be complete?

FOX: I couldn't exactly say that, but I'm hopeful we will be in stage one full operation within two years. I sure hope so.

EXPLORER: Are you concerned about the ongoing slowdown in shale production? How is the ongoing price war with OPEC going to affect your plans and the future of the tribe?

FOX: Very much concerned. What's happening to the world market, primarily because of OPEC influence, is very concerning to us. We are being directly affected, and we are anticipating losses to tax and royalty revenue of at least 30 percent from what we expected to see this fiscal year, if the price does not rebound soon.

We are currently working hard to revise our tribal budget and planned expenditures and investments on behalf of our people.

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