Shale Daily / NGI All News Access

North Dakota High Court Royalty Ruling Payoff Still Unknown

The amount of North Dakota's added state revenues from a post-Christmas state Supreme Court ruling is still unknown and will take some time to resolve, according to Lance Gaebe, commissioner of the Department of Trust Lands.

The high court ruling dealt with who is entitled to oil/natural gas royalties and bonuses from disputed stretches along the Missouri River (see Shale Daily, Jan. 3).

Based on the Dec. 26 ruling, the state, not private landowners, owns the bulk of certain disputed mineral rights in Bakken Shale production fields that include disputed stretches between high- and low-water marks of the Missouri River.

"Some of the money the state has already received in the form of bonuses," Gaebe told NGI's Shale Daily. "That money [$135 million] has already been put aside by the state. Then there is also about $6.5 million in escrow funds that were set up as part of a process required to buy an [oil/gas] lease in 2010."

Now that the court has acted, all of those funds become available to the state, but there is still an unknown amount, Gaebe said, related to funds individual producers have been setting aside since the legal action began a couple of years ago. "I don't know the amount of the funds placed in suspense accounts by operators," he said.

"We will start to try to track that down and seek payments," Gaebe said. "I don't know the dollar amount in total or the number of operators involved."

While the state can now begin allocating some of the more than $140 million in bonuses and royalties it controls, landowners still have the chance to challenge state ownership of the disputed parcels in some circumstances. The Supreme Court said that individual landowners can claim ownership if they can show that the state sold or granted them some of the shore zone in the past.

Gaebe said he thinks this only amounts to a "handful" of landowners. This dates back to how the state acquired some mineral rights through business transactions unrelated to the river bed lands. "The state may have lent money to a farmer and then when it had to foreclose, the state came to own particular parcels of land and the mineral rights," he said, noting most of the land was subsequently sold back to private owners, but the state retained the mineral rights.

The exceptions permitted in the court ruling are still a relatively small part of the overall funds in play, said Gaebe. It is unclear what the timetable will be for sorting out exceptions to the ruling in favor of the state.

Gaebe said the next step is for his department to work toward an overall valuation of the monies set aside by the producers.

The Department of Trust Lands, which is overseen by a five-member commission comprised of the governor, secretary of state, superintendent of public instruction, state treasurer, and attorney general, dates back to the 1880s when the federal government gave the state more than 3 million acres to help fund public education.

Eventually, the state’s constitution created the state lands board that has evolved into its current composition.

"The primary responsibility of the Department of Trust Lands is to manage the permanent educational trust funds and assets," according to the department's website.

ISSN © 2577-9877 | ISSN © 2158-8023

Recent Articles by Richard Nemec

Comments powered by Disqus