Changes proposed to North Dakota oil rules aim to give royalty owners more information about deductions taken from their payments, addressing a growing frustration among mineral owners.

The Department of Mineral Resources is seeking public input on updates to oil and gas regulations, including revising a rule related to royalty statements that the state hasn’t updated in 25 years.

“It was really our No. 1 source of calls that we were getting was royalty owners unable to understand what kind of deductions and why deductions were being made from their royalty payments,” Director Lynn Helms said.

As prices for natural gas and natural gas liquids dropped, royalty owners started noticing more deductions from their payments for transportation, processing and other costs, Helms said.

But often the deductions aren’t adequately explained on the statements, and several owners expressed frustration about getting answers from the oil companies.

“Without the information, they have no way of evaluating it according to their lease and seeing if the deductions are proper or too much or too little,” Helms said.

The revised rule would require oil companies to clearly identify the amount and purpose of each deduction or adjustment made to a royalty payment.

North Dakota's chapter of the National Association of Royalty Owners supports full transparency for royalty owners about deductions.

“Royalty owners should not have to file suit and compel discovery to determine deduction details,” Gary Preszler, vice president of the North Dakota chapter, said in a letter to Helms.

Bob Skarphol, a retired legislator from Tioga who raised his frustrations about royalty deductions to the North Dakota Industrial Commission last year, said the effectiveness of any new rule will depend on the enforcement.

“I don't know how you make a rule or a law that will accommodate what needs to be done, unless the companies want to follow the rule and the law,” Skarphol said. “If they’re of the attitude, ‘Sue me if you think I’m wrong,’ there’s not much that we’re going to do about it unless some of the most highly invested entities out there, royalty owners like the state of North Dakota and the tribes, unite in ensuring that the laws are adequate and there’s enforcement.” 

Spill reporting bill

The Department of Mineral Resources also is taking comments on other rule updates, including revisions prompted by the Legislature’s approval of a bill that no longer requires small, contained spills to be reported.

The new law that took effect Aug. 1 means 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. All spills still have to be cleaned up.

The department is now updating its rules to be consistent with that new law, as well as making some other changes.

One addition 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, must include details about the spill including the type of liquid and an explanation of how the spill volume was determined.

Troy Coons, chairman of the Northwest Landowners Association that opposed reducing the spill-reporting threshold, said he’s glad the proposal would at least require there to be a record of every spill.

“It’s still our property and we want to know about every spill,” Coons said. “You can’t just not tell us about it.”

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The proposed rule changes would also require a full environmental assessment at a well site if there was uncertainty about spills or possible contamination at a site.

Bill Suess, spill investigation program manager for the North Dakota Department of Health, said he’s noticed a reduction in spills reported since the new law took effect Aug. 1, but some companies have continued to report small spills.

“Some companies just have their regulations, they report everything no matter what,” Suess said.

If approved, the rule changes would take effect next April. The proposed rule changes are available at www.dmr.nd.gov/oilgas.

Four public hearings are scheduled to take comments on the proposal:

• Bismarck, 9 a.m. Oct. 11, Oil and Gas Division Field Office, 1000 E. Calgary Ave.

• Dickinson, 1 p.m. Oct. 11, Oil and Gas Division Field Office, 926 E. Industrial Drive.

• Williston, 8:30 a.m. Oct. 12, Home Place Lodge and Suites, 1505 15th Ave. W.

• Minot, 2 p.m. Oct. 12, Oil and Gas Division Field Office, 7 3rd St. S.E., Suite 107.

Comments can be sent through Oct. 23 to brkadrmas@nd.gov or sent to Oil and Gas Division, 600 E. Boulevard Ave., Dept 405, Bismarck, ND 58505-0840.

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(Reach Amy Dalrymple at 701-250-8267 or Amy.Dalrymple@bismarcktribune.com)