Land board discusses mineral acres

State Land Commissioner Lance Gaebe speaks to Secretary of State Al Jaeger during the Board of University and School Lands meeting held at the state Capitol on Friday, February 3, 2012.

A North Dakota Supreme Court decision releases millions in oil bonuses and royalties into the state coffers.

The high court said Thursday that the state owns minerals up to the ordinary high water mark on both sides of navigable rivers. Unless appealed to the U.S. Supreme Court, this ends a years’ long dispute while oil revenue that would normally have been paid out was withheld in special accounts.

The loser in this opinion are dozens of individuals, the city of Williston and Williams County who claimed minerals between the low- and high-water marks along the Missouri River in the Williston region, or what’s called the “shore zone” of the river.

Jan Conlin, the lead attorney for those individuals, said the ruling is disappointing and turns North Dakota’s own state law dating back to 1889 upside down.

She said at statehood states could choose to set themselves up as low- or high-water mark states and North Dakota, in a state law written 125 years ago, chose the low-water mark option.

“This sets North Dakota apart from all other states that set themselves up as a low-water state,” Conlin said.

She said other attorneys and the clients in the case are evaluating their only option, which is to petition for a hearing at the U.S. Supreme Court level.

In the state’s opinion, Justice Dale Sandstrom wrote that the state owned the shore zone minerals at statehood. Further, he said, the state's constitutional anti-gifting clause prevents interpreting state law (cited by Conlin) as a gift of state minerals in the shore zone to upland owners.

Sandstrom did note there may be exceptions.

“… our decision does not preclude an upland owner from taking to the low water mark if the chain of title establishes the state has granted its … interest to an upland owner," Sandstrom wrote.

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The decision means the state can allocate $135 million in lease bonuses that were set aside on the state Department of Trust Lands’ books and another $6.5 million in royalties that oil companies have been putting into escrow in the Bank of North Dakota since 2010.

Trust lands' director Lance Gaebe said prior to 2010, oil companies suspended royalty payments on river shore minerals claimed by both the state and private individuals rather than deposit them in escrow. He said companies weren’t required to report suspended payments so the total of those isn’t known.

He said the department will send notice to companies that the suspension ends with court’s ruling and the payments can be released to the department.

One company involved in the legal dispute is Brigham Oil, now Statoil Oil and Gas, which joined the litigation so the court could sort through the conflicting claims on its oil wells.

The dispute involves 150 wells so far, Gaebe said. It’s the outcome of horizontal drilling in the Bakken formation that allows oil companies to access oil and gas under rivers and Lake Sakakawea unlike vertical drilling in the past.

Appeals after the district court ruled for the state were consolidated for the state Supreme Court case.

Gaebe said he doesn’t expect an appeal to the U.S. Supreme Court, because the federal court isn’t likely to weigh in on how a state supreme court interprets its own Constitution.

He said the ruling fills in a big piece of the mineral-ownership puzzle along the Missouri River and under Lake Sakakawea, where the state owns minerals in the original river channel flooded by Garrison Dam.

He said other smaller pieces will have to be filled in, such as how the ruling affects variations to the ordinary high water mark caused by structures like bridges, dikes and levies.

He said the money will go into the Strategic Investment and Improvements Fund for school and hospital construction.

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Reach reporter Lauren Donovan at 701-220-5511 or lauren@westriv.com.