A new North Dakota law better defining oil and gas ownership under Lake Sakakawea is constitutional but requires the state to refund too much money, a judge ruled Wednesday.
East Central Judicial District Judge John Irby issued a 25-page order in the lawsuit from Rep. Marvin Nelson, D-Rolla, former governor candidate Paul Sorum and others that challenged legislation approved by lawmakers in 2017.
The taxpayers argued they were seeking to prevent the state Board of University and School Lands from “giving away” up to $2 billion in oil and gas mineral rights in coming years, challenging the law as unconstitutional.
Attorneys representing North Dakota said the law is not a giveaway, but a process to define the boundary of the state’s mineral interests. The legislation sought to clarify ownership of minerals under Lake Sakakawea through a review of the historic ordinary high water mark of the Missouri River as it existed before the Garrison Dam.
Irby ruled in favor of the state, finding the law itself is constitutional. Irby wrote the law “codifies the state’s policy of not making any claims to the minerals above the ordinary high water mark of the historic Missouri River channel.”
But a second portion of his ruling fell in favor of the taxpayers. Irby wrote he is “troubled” with the implementation provisions of the law, which were estimated to reduce state revenues by $205 million by refunding oil royalty, rent and bonus payments.
Irby wrote that applying the law retroactively to oil and gas revenues earned from wells drilled since 2006 is unconstitutional. The statute of limitations to make claims against the state for those minerals is three years, he wrote.
Terrance Moore, an attorney for the taxpayers, called that portion of Irby’s ruling a “victory.”
“We’re very pleased that the court preserved $205 million for the state taxpayers,” Moore said.
It was unclear in the ruling if the state would have to refund payments from the past three years.
During a hearing on Jan. 4, Irby said he expected his order to be challenged to the North Dakota Supreme Court.
Moore said he and his clients were reviewing their options and hadn’t decided whether to appeal. The other plaintiffs are Michael Coachman, of Larimore, Lisa Omlid, of Bismarck, and Charles Tuttle, of Minot.
Land Commissioner Jodi Smith said she expects the Board of University and School Lands to discuss the ruling during a meeting on Thursday. The board, led by Gov. Doug Burgum, meets at 8 a.m. in the governor’s conference room.
Other defendants named in the case filed in Cass County District Court are the North Dakota Industrial Commission, Burgum and Attorney General Wayne Stenehjem.
Josh Swanson, an attorney for mineral owners in a case that’s cited by Irby, said he hopes the Supreme Court will provide clarity on the issue of refunding payments.
“I think there’s a lot of mineral owners that are going to be scratching their heads saying how can the judge say the statute is constitutional and the state has no basis to claim the minerals, but somehow the state gets all the money for the property they never had an interest in in the first place?” Swanson said.