January 16, 1999
Adair gets a toehold in land of Blackfeet
The letter of intent with independent tribal entity Native American Economic Enterprises allows Adair to set up a joint venture under which the Blackfeet Tribal Council will sell or assign land and rights of way for a power project to develop 38 million cubic feet of gas per day. It will flow through a 10-inch pipeline to a 150-megawatt plant operated and managed by the company on behalf of its local partners.
The agreement also allows the possibility of later expansion. US outfit Miller Exploration and Calgary-based partner K2 Energy are poised to explore the gas potential of Blackfeet acreage under a deal signed last autumn. It is estimated Adair's $135 million investment will eventually generate annual cash flow of $70 million. Chief operating officer and President Steve Hill says the project will begin to pay out in less than three years following debt recovery. The agreement is a first in that it was signed under the auspices of the Indian Economic Development Council, a federal body charged with encouraging the development of infrastructure in Native American lands.
Company founder and Chairman John Adair is himself half Cherokee and sits on the IEDC's voting commission. He is a distant cousin of legendary firefighter Red Adair, who is also understood to be an investor. Equity in the Montana gas and power projects is split 51% for the tribal council and 49% for Adair, though the proposed deal imposes an obligation on both parties to make available a level of participation to private local investors. However, Native American Economic Enterprises chairman and chief executive Smokey Doore cautions it would be premature to talk of any deal until the particulars have been sorted out.
Northern Montana is one the last hot petroleum prospects held by the Native American peoples but oil explorers operating in tribal areas work under the most complex system of land tenure on the globe. Suitors must clear a gamut of federal, state and local hurdles to gain access to subsurface mineral rights held by tribal, allotted and free status landholders. Compliance with Environmental Protection Agency rules is complicated by the need to satisfy the Montana State Oil and Gas Conservation Commission and competing regulatory frameworks imposed under four overlapping pieces of rights legislation enacted in 1909, 1938, 1969 and 1982. The Indian Minerals Development Act of 1982 attempted to streamline the system but the one-and-a-half million acre Blackfeet map still resembles a chequerboard masking multiple ownership with companies forced to get 100% agreement from everybody before proceeding.
The US Energy Department estimates the belt contains up to 7 trillion cubic feet of gas although a technical source at the Bureau of Indian Affair's billings area office admits there is a tendency to talk up reserves to attract investors. For now Conoco, K2 and a handful of independents are still producing a few barrels from a clutch of Blackfeet stripper wells, although the current oil price climate puts those in jeopardy. The majority of reservoirs operate using enhanced recovery, says Dan Newman of the BIA's energy and minerals resources division. The Crow still have a few wells and Wyoming's Wind River is nearly depleted but the Blackfeet have more prospects than most, he adds.
