Mixing oil and cattle: ND ranchers say mineral rights get too much emphasis
BELFIELD, N.D. - Byron Richard’s pickup bounces up and down over the washboard gravel road. He clutches the wheel with one hand and points with the other as he passes dozens of oil wells on land where once crops grew and cattle grazed. A few of the wells are decades old; most are new or under construction. Oil field vehicles of assorted shapes and sizes clog the road in places and kick up thick clouds of dust.
Richard’s way of life is changing. He knows that. He accepts that.
But the Belfield, N.D., farmer and rancher says too many of the changes favor the oil industry at the expense of him and other agriculturalists.
“We’re not anti-oil. We can co-exist with oil,” he says. “But there needs to be more focus on surface rights owners.”
Here in western North Dakota’s booming Oil Patch, where surface rights and mineral rights often are separated and sold, Richard and other farmers and ranchers want an answer to this question: In a society whose laws favor mineral rights owners, what happens to the people who earn their living from the soil atop those minerals?
“It’s been recognized for a long time that mineral rights dominate over surface rights. That basic notion continues today,” says David Saxowsky, a North Dakota State University professor whose teaching experience includes applied agricultural law.
Without physical access to minerals, the rights to them would be worthless. So, laws nationwide emphasize mineral rights, he says.
Saxowsky also says North Dakota legislators have done more than their peers in most states to protect surface rights owners.
But much more protection is needed, say Richard and other western North Dakota farmers and ranchers. Among their complaints:
-- Dust on unpaved roads raised by oil industry trucks hurts crops and livestock.
-- Heavy oil industry vehicles damage rural roads.
-- Some oil well sites are poorly situated and unnecessarily create chunks of land too small to farm with modern equipment.
-- Compensation from oil companies to owners of surface rights is inadequate.
-- A state-run mediation program doesn’t do enough for surface rights owners.
Regional state politics also concern many in western North Dakota. They worry that legislators in eastern North Dakota will try to tap oil-generated tax revenue that otherwise would be spent on roads and other infrastructure in the western part of the state.
“There’s some east versus west competition for dollars, no doubt about it,” says Jay Elkin, a Taylor, N.D., farmer and rancher and Stark County Commissioner. “But I do believe even those in the east recognize there’s a need in the west.”
He and others in oil country are acutely aware that the North Dakota State Legislature, which meets every other year, reorganizes Dec. 1 to 3 and reconvenes in regular session Jan. 6, 2015.
Big economic impact
Balancing the needs of the oil industry against those of farmers and ranchers isn’t a new issue in the state — western North Dakota has pumped out oil since the 1950s. But new, improved technology has led to the drilling of wells that weren’t commercially viable even a few years ago.
North Dakota’s oil production has jumped fivefold in just five years, and the state now trails only Texas. In April, for the first time, North Dakota produced more than 1 million barrels of oil a day. Production is projected to rise to 1.7 million barrels daily by 2017.
Stark County, in which Belfield is located, produced 470,000 barrels in April, up from 99,500 in April 2009. Production in the county is expected to keep soaring.
Growth so far has brought huge economic benefits to North Dakota, a largely rural state with about 725,000 residents. The North Dakota Petroleum Council says the industry now contributes about $50 million daily into state and local economies, pays about $11 million daily in state and local taxes, and has created about 56,000 new, well-paying jobs since 2011.
Richard and other ranchers acknowledge the benefits, both statewide and in Stark County.
The oil boom has created high-paying jobs that allow young adults to remain in their home communities after high school and college. It’s allowed ranchers and others to start businesses, such as trucking companies, that profit from the oil boom. And it’s bringing more school-age children to the county, a big deal in rural communities concerned about maintaining their schools.
Richard, 53, worked in North Dakota’s oil patch in the 1980s, a lean time for cattle. He says he and some other ranchers his age would have had to quit ranching without their oil field jobs back then.
“So we know personally what the oil industry has meant,” he says.
Younger ranchers also recognize the positives.
“There are pros to oil development,” says Brandon Richard, Byron’s son, also a farmer and rancher. “But people need to realize there are cons, too.”
One sign of how the area has been affected: “I lock our doors at night. I never used to do that,” says Emily Richard, Brandon’s wife.
Another downside of the oil boom, from ranchers’ perspective, is their struggle attracting and retaining workers. Ranchers say they can’t afford to match the high wages paid by the oil industry.
But ranchers’ chief complaint is the inferior status of surface rights. The owner of mineral rights has the legal right to go on the land to explore and develop, even if surface rights are owned by someone who opposes development and even if the land is being cropped or grazed.
Under North Dakota state law, however, owners of surface rights receive compensation for damages during exploration and development. Byron Richard and others in the Belfield area say compensation consists of a one-time payment per site and annual payments of varying size and length.
Ron Ness, president of the North Dakota Petroleum council, says compensation can vary substantially and that generalizations about it shouldn’t be made.
In any case, Richard says, the compensation is inadequate for lost farmland and the disruption of normal farming and ranching.
He recalls the time a stream of big oil industry vehicles tied up a rural road, preventing him from moving farm equipment at a critical time in spring planting for 45 minutes. Finally, he stopped a deputy sheriff who happened to be passing. The deputy worked with the oil vehicles to allow Richard to move his equipment. Without the deputy’s help, he would have been idled much longer, Richard says.
Ranchers say the system is less frustrating when they also own the mineral rights, which allows them to receive royalties based on the oil produced.
It’s difficult to say how many ranchers own both mineral and surface rights. One study found about 55 percent of minerals in the state’s oil-producing counties are owned by North Dakotans, the other 45 percent by nonresidents. Active ranchers account for some of that 55 percent, but it’s unclear how much.
Today, after years of separating mineral and surface rights, it’s rare for young ranchers to own the mineral rights, Richard says.
“For these younger ranchers,
things can be especially hard,” he says.
Elkin, the farmer-rancher and county commissioner, says, “I do believe there should be more compensation. But I don’t know where it should be.”
Kim Shade, who ranches west of Belfield near Medora, N.D., says oil development hurts him in a number of ways.
Oil industry vehicles often travel too fast and sometimes hit cattle grazing in open ranges, he says.
He estimates he’s lost $25,000 from cattle killed by oil vehicles through the years. Insurance doesn’t cover the losses.
Dust raised by oil industry vehicles on unpaved roads is another big concern, he says.
Much of the new oil development involves fracking, or hydraulic fracturing. The process involves injecting fluids into the ground at high pressure to crack rocks and open formerly inaccessible oil deposits.
As Richard notes, fracking requires large amounts of water carried by truck, which increases already-heavy truck traffic.
And Shade blames the death of 15 calves on what he says was a chemical spill by an oil company.
But his overriding complaint, like that of other ranchers in oil country, is the priority given to mineral rights.
“I’m trying to make a living here. And it’s a lot harder when the mineral rights have preference over surface rights,” he says.
The state Department of Agriculture operates the North Dakota Mediation Service. Established in 1984 to help financially distressed farmers and ranchers, the service was expanded by the 2011 state legislature to include resolving disputes of property issues related to energy development.
Richard says he would like the state-run mediation program “to have more teeth to it.”
Doug Goehring, North Dakota ag commissioner, says “I’d like it to have more teeth, too.”
But the voluntary program, which he thinks is the only one of its kind in the country, is effective despite limitations, he says.
He’s interested in developing a better program, but isn’t sure if that’s feasible.
Goehring, a Republican, is up for reelection this fall.
His opponent, Democrat Ryan Taylor, a rancher in Towner in north-central North Dakota, has proposed a five-point “Landowner’s Bill of Rights.” One of the five points is “fix(ing) mediation procedures to level the playing field between landowners and developers.”
Oil industry response
Ron Ness, president of the North Dakota Petroleum Council, says his industry takes the needs of surface rights owners seriously.
“We’ve got to work with landowners. I think for the most part we’re doing a good job,” he says.
But his industry has to balance many needs and interests, and “what’s best for one isn’t necessarily best for all,” he says.
The task is complicated when the surface owner doesn’t own the minerals, he says.
The industry’s fast growth in North Dakota requires it to bring in many new workers, some from out of state who aren’t familiar with agriculture. As those workers gain experience, they better understand the needs and concerns of farmers and ranchers, Ness says.
Most oil company employees are conscientious about doing what’s right for farmers and ranchers, Richard says.
“But 10 percent aren’t, and they’re the ones who cause problems,” he says.
Richard says some oil companies do a better job than others in looking out for farmers and ranchers. For instance, he praises Whiting Petroleum Corp. for picking up roadside garbage.
Ness says the oil industry wants to improve at controlling dust. But good gravel is crucial to doing that, and the supply of high-quality gravel is limited, he says.
Having greater access to pipelines would lead to fewer trucks on rural roads and less dust, he says.
Saxowsky, the NDSU professor, says protecting the interests of both agriculture and energy is difficult but necessary.
“The two industries are going to have to live together somehow. It’s going to take some patience and understanding by both to make it happen,” he says. “But I think we’re making progress.”
Richard and other ranchers say things won’t get better for them until and unless surface rights receive more emphasis.
His pickup comes to the top of a small hill that provides a good view of the surrounding countryside, dominated by both energy and ag.
He shrugs when asked if he misses the old days, the old way of life, when cattle and crops were ascendant and the landscape less crowded.
“It (the old way of life) isn’t gone totally. But it’s being impinged on,” he says. “That’s why we’ve got to get more attention on surface rights.”