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Members of the Land Board listen to minerals management director Drew Combs in a discussion on a leasing request from Marathon Oil on Thursday morning. Seated from left are Land Commissioner Jodi Smith, Secretary of State Al Jaeger, Gov. Doug Burgum, Treasurer Kelly Schmidt and Superintendent of Public Instruction Kirsten Baesler.

North Dakota's Board of University and School Lands has denied a leasing extension to an oil company that has sought to develop several Badlands mineral tracts since 2013.

The panel of five state elected officials chaired by Gov. Doug Burgum voted unanimously at its meeting Thursday morning to deny Marathon Oil's request for another 360-day leasing extension. The company has faced rough terrain, mixed landownership and protected species requirements in siting a drill pad.

Land Board members said there was nothing in law to grant the extension to Marathon Oil, to which the panel in March 2018 had granted a one-time 360-day extension under amended contractual terms.

The state Department of Trust Lands leases mineral tracts for five years, with two 180-day extensions available to operators under certain conditions. Marathon Oil has leased the tracts since May 2013, spending more than $4 million related to the tracts since then, according to Land Board documents. 

In April, Marathon Oil asked for another yearlong extension. State Land Commissioner Jodi Smith told the Tribune that a vote to approve another lease extension would set a precedent. 

"To extend it beyond this amended term, we just don't believe is in the purview of the statute for us," Smith told the Land Board. "It would be setting a new precedent for this board. We have never granted an extension beyond the 360 days." 

North Dakota Attorney General Wayne Stenehjem said Marathon Oil's 2018 amended lease and state law don't provide for another leasing extension, which, if granted, "would create all kinds of complications" while other companies have expressed interest in developing the tracts, such as Enerplus, which operates near Marathon Oil's tracts.

Smith previously said her department grants 60 to 70% of requested leasing extensions, but operators must have drilling at commercial production within 180 days to hold their lease.

With the board's vote, Marathon Oil's four leases to about 470 mineral acres north of Killdeer will expire Friday, to go up for auction in August, where the company and other operators may bid on the tracts.

Zac Weis, a lobbyist for Marathon Oil, said the company will now consider the Land Board's action. 

Ron Ness, president of the North Dakota Petroleum Council, said Marathon Oil's circumstances were challenging. 

"I think probably the one thing that we would like to see in the future is some type of a formal appeal process and ability for the permittee to be heard on a deal like this, where it's a long-term opportunity and significant circumstances and consequences related with the denial of an extension," Ness said. "It'll be interesting to see where it goes."

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Reach Jack Dura at 701-250-8225 or jack.dura@bismarcktribune.com.

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