Oil royalty owners should know how much they are getting paid and what the deductions are for.
The deductions are probably legitimate, but owners have no way to verify them at the moment. Mineral owners have been frustrated because the royalty statements are sometimes difficult to understand. The North Dakota Industrial Commission proposes to revise the rule to require oil companies to clearly identify the amount and purpose of each deduction or adjustment made to a royalty payment.
Royalty owners often budget for the payments, so when they receive a reduced payment they want to know the reasons.
Now it’s up to the oil companies to follow the rule. Bob Skarphol, a retired legislator from Tioga, says the burden will be on the companies and he’s not sure all will comply. If that’s the case he wonders how effective enforcement will be. Skarphol told reporter Amy Dalrymple it might take large royalty owners like the state and the tribes to take action to enforce the new rule.
It shouldn’t come down to that. Oil companies should provide the required explanations on the statements. Transparency is the best way. If a company doesn’t follow the rules it indicates it has something to hide. The Tribune editorial board sees no reason why oil companies wouldn’t comply.
Another oil-related change made by the Legislature was opposed by the Tribune. Legislators approved a bill that no longer requires small, contained spills to be reported. The new law took effect Aug. 1 and says oil companies do not have to report spills of oil, produced water or natural gas liquids that are less than 10 barrels, or 420 gallons, if the spills stay on the well site or facility location. Companies are still required to clean up all spills.
The Legislature considered these spills as minor and decided companies shouldn’t be burdened with reporting requirements.
The Department of Mineral Resources is taking public comments on all rule changes. The department is making one major change. It is requiring oil companies to file a document known as a sundry notice within 10 days after the cleanup of any spill that was not reported. The notice, which will be available in a well file, will include details about the spill including the type of liquid and an explanation of how the spill volume was determined.
That’s an important change and eases some of the Tribune’s concern about the change in the law. The public and especially landowners should be able to research the history of all oil sites. There might not be any reportable spills, but a site could be plagued by numerous small spills. That document must be made easy to access by landowners to be effective.
In both royalty payments and spills the state is putting a lot of faith in the oil industry. While we have rules in place to assure compliance the cooperation of the industry is essential. The Bakken will be producing for a long time and a good working relationship between all parties involved will be important.