Tiny North Dakota Town Sitting on Oil Jackpot

Jan. 18, 2008— -- When you first set eyes on the frozen, wide open landscape that is western North Dakota, the word that comes to mind probably isn't "charmed." Lifelong farmer John Warburg was born there, and was never considered to be particularly lucky, until about a year ago.

Much to his surprise, Warburg is a resident of the newest and largest oil reserve in America.

"My wife called on the cell phone and she said there is a message on the machine that someone wants to dig an oil well on Grandma's [property]," he said. "Well, OK, right off the bat I got to thinking, OK, which neighbor is playing a joke on me?"

It was no joke. Stanley, N.D., with a population of 1,200 -- a place most people have never heard of and would never choose to visit -- is blessed with black gold. Warburg and his neighbors are sitting on what geologists believe could be well over 200 billion barrels of oil, far more than in the highly publicized and controversial Arctic National Wildlife Refuge in Alaska.

Black Gold Beneath Their Feet

"Hell, I dunno, it's like God flew overhead and dropped a dart and it landed on granddad's homestead … and that's all it is, is luck," Warburg said.

Oil had actually been discovered in the area a half century ago, but it was too hard to reach and was left untapped. Now new technology has made the oil accessible, just as rising oil prices made it worth the investment.

Warburg, who calls himself a medium-size farmer, and grows Durham wheat on his property, wouldn't have believed his good fortune if the man on the other end of that answering machine message hadn't shown up with contracts and plans to build an oil rig.

"Wealth can be measured in two ways," said Warburg. "It's only wealth if you're enjoying life, and so I guess I'm wealthy from the standpoint that I feel some comfort in that, but what I gathered at this point in time some celebrities would probably blow in one shopping spree so wealth is relevant to what you are used to."

Warburg keeps a sample of his black gold in a jar at home, like the proud first dollar bill from a new business.

The potential profit isn't without problems -- jealousies have begun to bubble up and some are worried that something Stanley has long resisted is now inevitable: change.

"There's roads where there didn't used to be roads, there's pipelines where there was nothing … it's changed it a lot and will continue to change it, from what we are told," Warburg said.

Tiny Town Transformed

Lately, the town's population has been growing as oil workers, contractors and specialists from two dozen oil companies flood this frozen farm land. There's no better place to see the oil boom in action than the county courthouse, where a whole new industry has suddenly exploded into the hallways.

A group mostly made up of women but known as "land men" spend their days going through old land leases to help tie up mineral rights for thirsty oil companies. They make between $300 and $500 and have come to Stanley from places like Texas, Oklahoma and Colorado.

"Well, you've got to track the land and there might be a surface owner, but the surface owner may not necessarily own the minerals, so what we are doing is going back and trying to figure out who in fact the mineral owners are," said Gerry Nelson, a "land man" working for an oil company at the courthouse.

Sometimes owning a farm isn't the lottery ticket it would seem. Ruth Zacher's family owns valuable land, but not the mineral rights to the oil that's been found underneath.

"We are not profiting. We will be losing money in the long run," said Zacher. "They will come in and offer us a certain amount for a well site. …They said to us you will have $6,000 for the site, and we turned the papers back to them and said, no, that's not enough, we need more than that, because of the agricultural loss over the years."

Zacher also worries about the quickly changing landscape of a vast farmland now dotted by drilling rigs, carved up by new roads and connected by a brand-new pipeline.

"It's not about the money," she said. "I just want to keep what I have. I want to keep everything the way it has always been. I've been here for 22 years."

Zacher isn't the only one. County Sheriff Ken Halvorson -- who moonlights as the coroner here -- worries about his town.

"I hope we don't go from a quick boom to a bust," he said. "That isn't good for a community."

'Great for All of Us'

Most people in Stanley are confident that the oil boom will be good for everyone. Oil profit taxes now bring in about as much per month as the county used to earn in a year.

Stores along the town's main street are experiencing the trickle-down effect of success. Ruth Hysjulien owns a clothing store on Main Street in Stanley and just expanded, adding an entire room devoted to oil rig worker clothing.

"I think it's going to be huge," she said. "You know, the way it sounds, it's going to be a huge oil field, bigger than what people anticipated, and I think it's just going to be great for all of us."

The oil boom has already been great for Warburg, who has been collecting payments from EOG, the company that maintains the rig on his land for almost a year. Warburg is using the first easy money he's ever seen to pay off farm debt, take care of his family and secure his future.

He's securing something else too.

"A lot of the people kept asking me what I was going to do with all of my money," Warburg said. "Well, my standard answer was I'm going to get my door hinges fixed on my old blue pickup."

Sure enough, this oil man's first big shopping spree was for a new set of door hinges. Warburg has been told to expect as much as 20 years of oil profits, but he's hedging his bets anyway. He's using the money to put his son through college where, ironically, he's studying how to design engines that run on alternative fuels.