Housing project tied to Ponzi scheme to stay closed

ALEXANDER, N.D. – An oilfield housing camp developed by two men accused of defrauding investors in a $62 million Ponzi scheme will likely remain closed.

The Great American Lodge near Alexander, which is owned by North Dakota Developments LLC, closed abruptly in May after the utility company cut power to the facility because of unpaid bills.

The closure occurred days after the U.S. Securities and Exchange Commission filed a civil complaint against North Dakota Developments and its owners, Robert L. Gavin and Daniel J. Hogan, alleging they had defrauded investors since 2012 for Bakken housing projects that were never finished.

The Great American Lodge, which was partially completed, was the only North Dakota Developments project that was operational.

A receiver appointed to protect assets involved in the case said costs to reopen the lodge would be substantial and he doesn’t think it would be financially feasible.

Gary Hansen, the appointed receiver, wrote in a status report filed in U.S. District Court that water was being trucked onto the site every few days at a considerable cost, because of an issue with water lines.

In addition, the facility has outstanding bills totaling more than $900,000 and that total is likely to grow, Hansen wrote. The receiver’s review so far has identified about $175,000 in liquid assets for North Dakota Developments.

The Great American Lodge, which is between Watford City and Alexander, has a building with food services and laundry facilities, 430 housing units available for rent and 70 more units under construction, Hansen wrote.

It housed about 160 people, including 18 employees of the lodge, when it abruptly closed, said Darrell Pullen, who managed the camp until early February.

Some of the displaced residents found housing in the area, but many had to move to Grassy Butte or Williston to find affordable housing and are now having to commute farther to work, Pullen said.

“It’s affected a lot of people,” he said.

Pullen said he hoped the lodge would reopen, and he gets calls every day from people who would like to purchase it.

“We did so much work there, I hate to see it abandoned like it is,” Pullen said.

Hansen also reviewed the other housing projects that were sold to investors:

— Great American Lodge, Culbertson, Mont.: That site was not operational, but has about 132 housing units that are partially complete. North Dakota Developments attempted to get a certificate of occupancy for 44 of the units in the spring of 2015, but failed the required inspection.

— Transhudson, Parshall: The lodge construction site had been inactive for an extended period of time. It was at the ground-leveling phase only with two construction trailers and no buildings on site.

— Great American Lodge – Watford City East: Government officials did not approve the project and construction did not begin at the site.

Oil tankers cars leaking oil after another derailment near North Dakota-Montana border

By Amy Dalrymple and Barry Amundson

Forum News Service

CULBERTSON, Mont. – A train carrying oil derailed in northeast Montana Thursday, hours after the tracks reopened from another train derailment that occurred on Tuesday in the same county.

The westbound train derailed about 6:05 p.m. Mountain Time east of Culbertson, Mont, said BNSF Railway spokesman Matt Jones.

The train contained 106 loaded crude oil tank cars and two buffer cars loaded with sand. Twenty-two cars derailed and two of those remained upright, Jones said.

The other rail cars were still on the track in the rural area near the North Dakota and Montana border.

Roosevelt County Sheriff Jason Frederick, who said he was expecting another long night, said about that two of the cars were verified as leaking oil, but there were no fires as of about 11 p.m. Central Time.

No injuries have been reported. Local firefighters  and law enforcement officers are at the scene as a precaution, Jones said.

Also as a precaution all of the rural ranch homes within a mile radius of the derailment were evacuated, said Frederick.

Also traffic has been rerouted off of U.S. Highway 2, which is only about  50 yards from the derailed oil tankers, said the sheriff.

Frederick said a hazmat crew from BNSF was on a jet and on its way from Fort Worth, Texas,  to the scene of the derailment.  They had not arrived yet at 11 p.m.

“It’s absolutely going to be a long night,” the sheriff said. “It’s very unfortunate.”

Nine rail cars derailed Tuesday afternoon near Blair, Mont., about 20 miles to the west of the Thursday derailment, said the sheriff.

Both derailments were within about 50 miles of Williston, N.D.

The tracks had reopened about 12:15 p.m. Mountain Time on Thursday after crews repaired 1 mile of damaged track from Tuesday’s accident.

Tuesday’s derailment disrupted Amtrak service between Whitefish, Mont., and Minneapolis, and the sheriff said he expects more delays are likely.

Tracks reopen in Montana; full Amtrak service resumes Saturday

BLAIR, Mont. – The railroad tracks have reopened in northeastern Montana after crews made repairs after a train derailment earlier this week.

The tracks reopened about 12:15 p.m. Mountain Time today, said Matt Jones, spokesman for BNSF Railway.

Nine rail cars derailed Tuesday afternoon near Blair, about 50 miles west of Williston, N.D., damaging about 1 mile of track.

The derailment caused significant delays for Amtrak passengers.

Amtrak service between Whitefish, Mont., and St. Paul continued to be disrupted on Thursday, said Amtrak spokesman Marc Magliari.

Normal service on the Empire Builder heading east is expected to resume on Friday, Magliari said. Full service will resume as normal on Saturday, he said.

The cause of the derailment was still being investigated, Jones said.

Train derails in far northeast Montana, delays Amtrak service

BLAIR, Mont. – Tracks are estimated to reopen Thursday as crews work to clean up after a BNSF Railway train derailment Tuesday afternoon.

Nine rail cars derailed about 4:30 p.m. Mountain Time near Blair, about 50 miles west of Williston, N.D., and 40 miles east of Wolf Point, Mont., said BNSF spokesman Matt Jones.

The train was not carrying any hazardous materials, but had some empty tank cars with residue of ethyl alcohol and liquefied petroleum gas, Jones said.

The derailed cars remained upright, he said.

The train was carrying a mix of freight and was headed east from Pasco, Wash., to Minneapolis, Jones said.

Crews were working to repair about 1 mile of track that was damaged in the derailment, Jones said. BNSF estimates the track will reopen mid-day Thursday.

BNSF is investigating the cause of the derailment, Jones said. No one was hurt.

Amtrak service was disrupted as a result of the derailment. Buses are transporting passengers to stops between Wolf Point and Minot, N.D., said Amtrak spokesman Marc Magliari.

Passengers are experiencing lengthy delays, in some cases as much as 12 hours, Magliari said.

After the tracks reopen, Amtrak will need to adjust equipment before normal service can resume, he said.

Recent derailments and an increase in oil shipments from North Dakota have called attention to the need for training for first-responders to train accidents.

Firefighters who responded to the derailment with the Culbertson Fire Department had completed hazardous materials training about a month ago due to the increase in rail traffic in the area, said volunteer firefighter Travis Northington.

Firefighters didn’t initially know if the three tank cars that derailed contained hazardous materials, so they proceeded with caution and used what they’d learned in training, he said. The other six cars that derailed were empty box cars, Northington said.

“We stayed at a far distance and made sure it was empty before we proceeded further,” he said.

Six oil tankers derailed near Heimdal, N.D., on May 6, and the fire and smoke plume prompted nearby residents to evacuate the area. Oil tankers also derailed near Casselton, N.D., in December 2013, causing a massive fireball and the voluntary evacuation of the town.

New TrainND facility now open in Williston

A new TrainND Northwest facility is complete in Williston, N.D., to provide workforce training for oil and gas companies and other industries Amy Dalrymple/Forum News Service

A new TrainND Northwest facility is complete in Williston, N.D., to provide workforce training for oil and gas companies and other industries Amy Dalrymple/Forum News Service

WILLISTON, N.D. – A new $7.5 million workforce training facility in Williston is complete, filling a demand for oil industry training that remains strong despite a slowdown in drilling.

The new building for TrainND’s Northwest Center at Williston State College brings the classroom training together with its petroleum simulators and field program, which features a workover rig and other oilfield equipment.

“We don’t want our instruction to just be classroom stuff,” said CEO Deanette Piesek. “We really think it’s so important because there’s so many people coming to Williston that have never been in the oilfield that they actually get to see some of the equipment.”

The workforce training program has seen a drop in participants along with the decline in oil activity, but it hasn’t been as significant as some had projected, Piesek said.

For the 2014-15 school year, TrainND in Williston provided training to more than 320 businesses and 14,000 participants, including some who took more than one training course.

That represented a drop in enrollment of about 2,000 people from a year ago, but enrollment was higher than in 2012-13, Piesek said.

Many companies in northwest North Dakota are trying to keep their good employees during the downturn and are using the slow time as an opportunity to take refresher courses or update safety certifications, Piesek said.

“Instead of having them sitting around, they’re upgrading their training,” she said.

Nearly three-fourths of the workforce training the Williston program provides is for the oil and gas industry. The next largest programs are transportation and health care fields.

With the new 19,740-square-foot training and educational center, TrainND will have more space to diversify and expand its programs, Piesek said.

Andy Reeves, who teaches several safety courses for the oil industry, said the new facility will help the program better accommodate companies that are starting to request more specialized training courses.

Piesek said she’s excited that TrainND is still getting requests to train new oil industry hires. Halliburton requested two classes for new hires this summer and is scheduling a few more in the coming months, Piesek said.

“It’s a strong sign when you see companies hiring again,” Piesek said.

TrainND plans to begin offering classes at the new facility on Aug. 17.

The oil industry donated $1 million toward the building. Other funding sources included $750,000 from the city of Williston’s STAR Fund and a $2.5 million loan from the Bank of North Dakota.

Pipeline flags becoming problem for western North Dakota landowners

Rancher Vawnita Best holds a pipeline flag on Monday, June 22, 2014, in a hay field south of Watford City, N.D. If the flags aren't removed, the metal can get chopped up into hay bales, which Best says has killed three of her cows in recent years. Amy Dalrymple/Forum News Service

Rancher Vawnita Best holds a pipeline flag on Monday, June 22, 2014, in a hay field south of Watford City, N.D. If the flags aren’t removed, the metal can get chopped up into hay bales, which Best says has killed three of her cows in recent years. Amy Dalrymple/Forum News Service

WATFORD CITY, N.D. – As more and more pipelines criss-cross western North Dakota, flags that mark the underground utilities are becoming more than a nuisance for landowners.

Metal pin flags used to mark the pipelines so excavators can safely work in the area are often left behind, creating hazards for cattle when the metal winds up in hay bales.

“They are everywhere out here,” said McKenzie County rancher Vawnita Best. “It looks like a confetti plant blew up.”

It’s the excavator’s responsibility to remove pipeline flags or other markings after an excavation is complete, said Ryan Schmaltz, public relations director for North Dakota One Call, which manages the “call before you dig” 811 line.

A law change that the Northwest Landowners Association advocated for during the past session aims to remove some gray area with the requirement.

Currently, the law says excavators need to remove pipeline flags or other markings “when possible,” but after Aug. 1 the requirement will be to remove the markings “upon completion of the excavation.”

For farmers and ranchers in western North Dakota, finding flags abandoned in their fields is more than a headache.

Dr. Bruce Pedersen with the Watford City Veterinary Center said cattle are at risk of getting hardware disease if the metal flags get into hay bales.

While Pedersen said he’s not aware of tests that have confirmed that pipeline flags have harmed cattle, the metal poses a significant risk that will grow as the number of pipelines increases.

“I think it’s enough of an issue that it should be addressed,” Pedersen said.

Best said she believes she’s lost three cattle in the past two years as a result of eating the metal.

In addition, farmers have reported damage to their equipment from running over the flags, said Troy Coons, chairman of the Northwest Landowners.

The North Dakota Public Service Commission is working to raise awareness that the flags need to be removed promptly.

“It is very clear, it’s the excavator’s responsibility,” said Commissioner Brian Kalk.

But finding the responsible party, particularly in western North Dakota where there’s a lot of construction activity, isn’t always easy.

Best recently spent four hours on the phone trying to find who was responsible for flags marking a natural gas pipeline that had been left behind in her hay field. She ended up removing them herself after getting the OK from North Dakota One Call, paying a relative to cut her hay while she handled the flags.

“Nobody picks any of that stuff up,” said Best, also a McKenzie County Commissioner.

If the pipeline markers sit in a field long enough, the flags can blow away and then the metal is even harder to find.

Daryl Dukart, a Dunn County commissioner, said he’s seen some pipeline markers in his area for as long as two years.

Kalk said the issue also affects people in urban areas of the state. He’s also working with a downtown Fargo business owner to get markings on a sidewalk removed.

“If people have concerns, they’ve got to let us know,” Kalk said.

Schmaltz said he can help landowners track down the responsible party if they have a location of the utility markings and the estimated timeframe they appeared. Landowners can contact Schmaltz at (701) 751-1019 or ryans@occinc.com.

If landowners continue to have issues, they can file a complaint with the Public Service Commission through www.psc.nd.gov.

Dukart said he thinks the best approach is for landowners to give workers a friendly reminder to clean up after themselves.

“Right now I don’t know how you could put enough people out here to try and regulate it,” Dukart said.


May oil production up as companies become more efficient

WILLISTON, N.D. – Oil companies are drilling faster and focusing on core areas of the Bakken, leading to a surprise increase in North Dakota oil production in May, the state’s top regulator said Friday.

The state produced 1.2 million barrels of oil per day in May, a 2.7 percent increase despite a continued slowdown in oil activity, preliminary figures show.

Director of Mineral Resources Lynn Helms said although the number of drilling rigs operating in the state – 73 on Friday – is the lowest since November 2009, the rigs that remain are twice as efficient as they were two years ago.

In addition, operators are focusing on the core areas of the Bakken and Three Forks, which is boosting the initial production rates of new wells, Helms said.

While the rig count has dropped 67 percent, the drop in applications for drilling permits has dropped 48 percent, Helms said.

“Companies are still really optimistic about Bakken drilling, it’s just more a matter of when, not if,” Helms said.

At the end of May, North Dakota had an estimated 925 wells waiting on hydraulic fracturing crews, the same as the end of April.

Helms anticipates companies will continue to hold off fracking most wells until the West Texas Intermediate oil price is at $65 a barrel, or possibly $60 if fracking costs continue to decrease.

Drilling rigs are expected to return in a significant way when the price hits $70 a barrel, Helms said.

The price for WTI crude was $52.80 a barrel on Friday, according to Bloomberg.

Oil production stayed flat on the Fort Berthold Indian Reservation in May. Helms said the reservation has seen a more significant drop in rig count and well completions due to uncertainty about changes going on with the tribe’s oil regulations.

Natural gas production increased 6.4 percent to an average of 1.6 billion cubic feet per day, a new all-time high, according to the preliminary figures.

The percentage of natural gas flared remained unchanged since April at 18 percent.

However, the volume of natural gas flared increased 23.5 million cubic feet per day since April to 293 million cubic feet per day, Helms said.

About 52 percent of North Dakota oil was transported by rail in May, a drop of 2 percent since April, said Justin Kringstad, director of the North Dakota Pipeline Authority.

Judge will decide illegal dumping case


BISMARCK – A North Dakota Industrial Commission case against Black Hills Trucking seeking fines for illegal dumping allegations is heading to an administrative law judge.

The Industrial Commission filed a complaint last year against Black Hills Trucking, part of True Companies of Wyoming, for charges that the company improperly disposed of produced water, a byproduct of oil production.

Surveillance equipment recorded the company’s trucks dumping produced water on a Williams County gravel road in February and March of 2014, according to the complaint. A Department of Mineral Resources inspector also observed one incident, which led to a criminal charge against the driver.

The Industrial Commission proposed fines of $950,000 plus $1,526 in fees for the violations.

In a written response to the Industrial Commission, Black Hills Trucking denied the illegal dumping allegations. The company admitted that in one instance, a former employee improperly opened the drain valves on a truck and trailer that may have resulted in the discharge of a small volume of produced water on a gravel road.

Black Hills Trucking argued in its response that the complaint falls outside of the Industrial Commission’s jurisdiction and the fines are disproportionate to the gravity of the offense.

Because Black Hills Trucking did not agree to terms of a settlement with the Industrial Commission, the matter will be decided by an administrative law judge, said Department of Mineral Resources spokeswoman Alison Ritter. A hearing has not been set.

The North Dakota Department of Health also took enforcement action against Black Hills Trucking for violations including operating without a waste transporter’s permit. The company was ordered to pay $200,000 in fines with $259,000 suspended if it followed the terms of the agreement.

Leo Slemin, the driver who was charged in criminal court, pleaded guilty last year to violating the Industrial Commission’s rules. He was fined $3,000 and received a suspended jail sentence.

A coalition of labor unions who oppose a pipeline proposed by Bridger Pipeline LLC, also part of True Companies, points to the Black Hills Trucking violations in its criticism of the company’s track record.

Union calls company’s pipelines unsafe

BELFIELD, N.D. – A company proposing a new crude oil pipeline in southwest North Dakota has a poor track record of spills and can’t be trusted to build and operate the project safely, a coalition of labor unions says.

The Laborers International Union of North America plans to urge North Dakota regulators to reject a pipeline from Bridger Pipeline LLC, the same company responsible for an oil spill in the Yellowstone River this year.

“We support pipelines because they’re the safest, most efficient way to move oil, but only if they’re built, maintained and operated right,” said Evan Whiteford, a career pipeliner from Ray. “Unfortunately, when companies like Bridger hire contractors that apparently do low-quality work, and then fail to properly inspect and maintain the lines, accidents are more likely, the public is endangered, and our industry takes the blame.”

Tad True, vice president of Bridger, which is part of True Companies of Wyoming, said Wednesday he was surprised to hear about the protest from the labor unions and said their comments don’t paint an accurate picture of the company.

“The Yellowstone spill was a terrible accident and we sincerely regret that,” True said. “We have a very simple goal and that’s zero spills, zero injuries, zero lost time. That’s our goal, and we track that stuff very carefully and we take that extremely seriously.”

The Jan. 17 rupture of a Bridger pipeline caused an estimated 30,000 gallons of crude oil to spill into the Yellowstone River and temporarily contaminated the drinking water in Glendive, Mont.

Now Bridger proposes to construct a 15-mile crude oil pipeline in Billings and Stark counties that would run parallel to an existing Bridger pipeline and increase capacity by 125,000 barrels per day.

The 16-inch pipeline would allow more oil to be transported by pipeline and take trucks off the road, True said.

Representatives of labor unions whose members build pipelines in the U.S. and Canada plan to speak out against the project today during a North Dakota Public Service Commission hearing in Belfield.

The concerns about Bridger and its affiliated companies are much broader than the Yellowstone spill, Whiteford said. True Companies, which includes Bridger, Belle Fourche Pipeline Co., Black Hills Trucking and other companies, has a record of spills, safety incidents and law violations, the union representatives say.

“We want to raise the awareness that if we want this industry to keep going strong and smooth, we need to step up to the plate and make sure that these companies are held accountable for their actions,” Whiteford said.

The same union organization recently showed support for a different crude oil pipeline proposed by Dakota Access LLC.

Black Hills Trucking has been cited by North Dakota regulators for improperly dumping produced water and for operating without a permit.

Another example the labor representatives point to occurred in Wyoming. There, Bridger operated a crude oil pipeline after telling the Bureau of Land Management that the pipeline was no longer in use, said Christian Venhuizen, a BLM spokesman.

The BLM discovered the pipeline was being used last year when the pipeline spilled more than 25,000 gallons of crude oil, Venhuizen said. The BLM assessed Bridger $27,000.

True said that situation arose from turnover in the company’s land department and a permit that didn’t get handled properly.

In response to the comments about the company’s track record, True said the company goes above and beyond what is required by the federal Pipeline and Hazardous Materials Safety Administration. He pointed to the company’s largest pipeline system, the Butte Pipeline, which he said has an incident rate that’s 40 percent better than the industry average.

“Since 2008, we have effectively doubled our effort in terms of inspecting our pipelines, in terms of monitoring our pipelines, and we’ve done a tremendous amount of effort in terms of maintaining the integrity of our pipelines,” True said.

Public Service Commission Chairwoman Julie Fedorchak said Wednesday commissioners will ask Bridger about the recent Yellowstone River spill, including what the company learned from the incident and what steps are being taken to prevent future spills.

Commissioners also will review information they received from the labor unions regarding Bridger, Fedorchak said.

“We’ll talk thoroughly, like we do in all our hearings, about their construction techniques, monitoring systems they will have in place and their response plans in the event of a spill occurring,” Fedorchak said.

The hearing is at 9 a.m. MDT today at Belfield City Hall, 107 2nd Ave. N.E. For more information, contact the Public Service Commission at (701) 328-2400 or www.psc.nd.gov.

OSHA turns an eye to safety incentive programs

WILLISTON, N.D. – Investigations into workplace injuries and deaths in North Dakota will now include a look at whether the employer had an incentive program that compromised safety.

The Occupational Safety and Health Administration plans to compile information about an employer’s safety incentive and whether it factored into an incident, said Eric Brooks, director of the Bismarck OSHA office.

Programs that give workers a bonus for working a certain length of time without a safety incident may actually compromise safety, Brooks said.

“It puts a lot of pressure on that employee that did suffer an injury to not report it,” Brooks said.

The Bismarck and Billings, Mont., OSHA offices plan to include companies’ incentive programs in their investigations through the end of the fiscal year, which ends in September, Brooks said.

The effort will focus on all industries in North Dakota, South Dakota and Montana, but in North Dakota, the oil and gas industry accounts for half of the state’s workplace fatalities.

“It’s not a violation to have an incentive program, we just want to make sure that it’s not compromising safety in and of itself,” Brooks said.

Once OSHA has gathered the information, officials can communicate with employers about incentive programs that are working and programs that may have the potential to create a problem, Brooks said.

“For those, we prefer to nip those in the bud before someone has to pay the ultimate price,” Brooks said.

Kari Cutting, vice president of the North Dakota Petroleum Council, said safety is No. 1 for the oil and gas industry, and companies have safety personnel who monitor incentive programs.

Cutting said it’s long been debated whether rewarding workers for reaching safety milestones will discourage them from reporting an incident, but she doesn’t think bonuses have that effect.

“If someone needs first aid or if they need stitches or if they break a bone, somebody will have witnessed it,” Cutting said. “It’s pretty difficult to fly under the radar.”

Jack Kolberg, safety consultant for the Associated General Contractors of North Dakota, said some employers are moving away from rewarding workers for not having safety incidents.

“People were actually encouraged not to do the right thing, not to report the hazards or injuries, because they were afraid of losing something,” Kolberg said.

Instead, some employers are adopting programs that incentivize turning in near-miss reports or identifying hazards to take corrective action before an incident occurs, Kolberg said.

“I think they’re way more effective than the old-style incentive programs,” Kolberg said.

North Dakota has had 11 workplace fatalities in the fiscal year that began Oct. 1. Six of those were from the oil and gas industry.