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Port: Land board is being unreasonable, and not at all transparent, on royalty payments

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Wells operate in the oil fields of Texas, where an oil boom is also under way but in a bit of a lull currently. Forum News Service file photo
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MINOT, N.D. — The recent decision by North Dakota's Department of Trust Lands to pursue, on a breakneck timeline, past royalty payments from the oil industry is a curious one.

North Dakota's state government loves to tout itself as business-friendly, and typically that's reasonably accurate, but this decision is a significant departure from that philosophy.

The demand stems from the outcome of a legal dispute over the way royalties were calculated. The state Supreme Court found in July that royalty payments weren't being appropriately calculated for oil development happening on state-owned lands. The department oversees those lands. They want those royalties paid.

Fair enough.

The problem is that letters sent out by the department to the dozens of oil companies responsible for the development ask them to go back and make good on about four decades worth of miscalculated royalties within 90 days.

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Those who take longer than 90 days face interest charges and other expenses.

"I don't know how anyone could possibly comply within 90 days," Ron Ness, head of the North Dakota Petroleum Council, told the Bismarck Tribune.

You might expect Ness to say that since he, you know, represents the oil industry. But that doesn't necessarily make him wrong, particularly in light of other facts.

Not the least of which is that in calculating these royalties, the oil industry used guidance from the state itself. We can fairly say that both the state and the companies developing oil resources for the state made a mistake. Now the state is using a timeline that is abrupt to the point of being punitive for a mistake it was a party to.

Worse, in the lead-up to these letters, the state's Board of University and School Lands (which counts Gov. Doug Burgum and Attorney General Wayne Stenehjem, among other statewide elected officials, among its membership) met repeatedly behind closed doors — almost a half-dozen times in the last three months according to the Bismarck Tribune — to discuss the issue.

There was no public vote on the matter. There was no allowance for public scrutiny or comment.

That's not right.

What's more, not only is it extremely unusual to apply this sort of Supreme Court decision retroactively, there is still litigation pending which could impact this situation. Continental Resources, one of the most significant players in North Dakota's oil fields, still has a lawsuit against the state pending over this same issue.

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Land Commissioner Jodi Smith told the Bismarck Tribune it "was important that the department move forward in collecting the underpaid royalties despite the ongoing litigation because that suit could be pending for years," but that doesn't make any sense.

It sounds more like the state wants to hustle some money out of these oil companies before another court ruling changes what's owed.

Of course, the Continental case might not change anything, but wouldn't it be prudent to wait and see?

If there's a good reason for this short timeline for paying these royalties, our elected officials should publicly explain what that reason is. They should be forthcoming for their reasoning in putting this burden on one of our most important industries.

Maybe a good reason exists.

From where I'm sitting, I'm not seeing it.

To comment on this article, visit www.sayanythingblog.com

Rob Port, founder of SayAnythingBlog.com, a North Dakota political blog, is a Forum Communications commentator. Listen to his Plain Talk Podcast and follow him on Twitter at @RobPort.

Rob Port is a news reporter, columnist, and podcast host for the Forum News Service. He has an extensive background in investigations and public records. He has covered political events in North Dakota and the upper Midwest for two decades. Reach him at rport@forumcomm.com. Click here to subscribe to his Plain Talk podcast.
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