MINOT, N.D. — Imagine that one day you got a letter in the mail from your local government informing you that, due to a decades-long error in the way your property taxes were calculated, you now have an enormous bill for back payments.
What's more, you have 90 days to pay up, or else severe penalties kick in.
Do you suppose you'd feel mistreated and angry?
Might you be angrier if the narrative, promoted in the news media's reporting, is not the government's colossal error in administering their own policies but rather your supposed obstinance in not immediately forking over the cash?
This is the situation North Dakota's oil industry finds itself in.
A powerful state board failed to do its job competently and, instead of owning up to the error, they're trying to whitewash it by making the oil industry the bad guys.
Earlier this year the North Dakota Land Board — made up of Gov. Doug Burgum, Attorney General Wayne Stenehjem and other statewide officials — sent out letters to oil companies who developed on state-managed lands informing them that their royalty payments to the state weren't calculated correctly.
This is a situation where the mineral rights are owned by the State of North Dakota. The Land Board administers the leasing of those minerals and provided the oil companies holding the leases with guidance on how to calculate royalty payments.
Only, the guidance was wrong.
This error, in some instances, goes back as far as four decades.
The letter gave the oil companies 90 days before the penalties commenced.
Jeremy Turley reports on this unfortunate situation today, and while his headline is unfortunate — "Big-name oil firms owe North Dakota millions in old royalties, state says" — he does touch on the fact that the Land Board was lax in its oversight of leases.
"Previously, only a couple of employees were responsible for ensuring that every company was paying the right amount to the state," Turley wrote.
"Petroleum Council Vice President Kari Cutting said the companies may not have known the deductions they had taken for years were not allowed, so forcing them to make years of retroactive payments wouldn’t be right," he continued.
Seems reasonable, doesn't it?
Land Board Commissioner Jodi Smith shouldn't be blamed for her department's past laxity in this area. It took place before her tenure.
She deserves plenty of blame for turning this unfortunate but entirely resolvable matter into a pitched battle with one of our state's most important industries.
Smith's defense of her actions is pure sanctimony. “I don’t think asking a company to adhere to their contractual obligations is bad business. I think it’s the opposite,” Smith told Turley. “That’s how I was raised: When you make a promise, you stick to it.”
One might say the same of state employees who promise to do their jobs diligently and competently.
It won't surprise you to learn that there is litigation pending in this matter, which is the source of much of the delay in paying the disputed royalties.
Some of the oil companies Smith claims owe back payments have said they'll pay, but many of the companies are waiting to see how the courts weigh in.
While they take that reasonable approach, Smith has, under the banner of fulfilling her responsibilities, attempted to badger them into payment, deploying a media strategy seemingly calculated to paint the industry as the black hats when, in truth, it was incompetence in Smith's own department which created this situation.
These royalties go into a trust fund that is used for schools and education.
Getting the payments right is of the utmost importance.
Those who owe should pay.
But Smith's handling of this matter has been abysmal.
As I wrote in March, Smith and the Land Board owe the oil industry an apology.
To comment on this article, visit www.sayanythingblog.com
Rob Port, founder of SayAnythingBlog.com, is a Forum Communications commentator. Reach him on Twitter at @robport or via email at email@example.com.