Tribes herald agreement on reservation's natural gas fields

Montana State Roundup

Published July 1, 1994  | July 1994 issue

The Assinboine and Sioux tribes entered into a unique joint venture agreement earlier this year with Energx Ltd., Riverton, Wyo., to develop and produce natural gas on the Fort Peck Indian Reservation.

What makes the agreement the first of its kind is that the tribes are a partner in the venture and will own stock in Energx in lieu of receiving the traditional lease bonus and royalty payments. Initially Energx will receive 100 percent of the gross revenue until its investment is recovered, after which the tribes will receive 40 percent. The tribes will also own 10 percent of Energx, or 1 million of the company's 10 million shares of stock when it goes public, which is expected within the year.

The Fort Peck gas field covers about 300,000 acres on the 2 million- acre reservation, located in the northeast corner of the state, and is about 25 miles east of the prolific Bowdoin field. According to Jon Chafin, Energx president, the reservation's gas fields could have the potential of the Bowdoin field, which has produced 460 billion cubic feet of natural gas, with perhaps an additional 1 trillion cubic feet in reserves.

While oil has been produced for more than 50 years on the reservation, it wasn't until the Northern Border Pipeline was completed that it made sense to develop the shallow gas reserves that had been discovered, says Ray K. Eder, vice chairman of the tribes. The project will create a "fair number of jobs" on a reservation with about 60 percent to 70 percent unemployment, Eder says.

Some of the reservation's 6,000 Indian residents work for small reservation businesses that rely on federal contract work. "But with cuts in the defense budget, that work is decreasing," Eder says. He adds that the gas fields have the potential not only to provide more jobs, but more economic independence for the tribes. "They would be a boon to the reservation's economy," Eder says. Energx's Chafin concurs: "Those wells could produce for the next quarter century and beyond—and ensure the tribe income over that period."

Energx, a subsidiary of U.S. Energy Corp., will drill, test, produce and market the gas, and build a gathering system that will link with gas pipelines. Three of the five requested permits have been issued, and exploratory wells will likely be drilled before the end of summer, followed by drilling to determine the size of the field.

Kathy Cobb