North Dakota's Board of University and School Lands is set to decide on an oil company's request for a leasing extension that the state land commissioner said may set precedent, if granted.
Marathon Oil Company has had four leases to about 470 mineral acres in Dunn County since May 2013. The Badlands-area tracts north of Killdeer have proven difficult to develop for a variety of reasons, such as rough terrain and locating a drill pad. Marathon Oil has spent more than $4 million related to the tracts, according to Land Board documents.
Mineral tracts leased through the North Dakota Department of Trust Lands expire after five years, with two 180-day extensions available under certain conditions. In March 2018, the Land Board, comprising five state elected officials with Gov. Doug Burgum as chairman, negotiated and granted a one-time 360-day leasing extension to Marathon Oil under amended contractual terms.
In April, the company requested another 360-day extension, which state Land Commissioner Jodi Smith said would be unprecedented if granted. The Land Board meets Thursday to take action on a recommendation to deny the request.
"We're very hesitant to set that new precedent because we have a contract that says five years," Smith said Friday. "The contract also says we can grant you two 180-day extensions, and so to kind of break that contract and go beyond that, again, it sets a precedent for the department and for the board and for the state that we're very hesitant to do."
Should the Land Board grant Marathon's Oil's request, Smith said they'll work through terms for the lease extension.
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If the Land Board denies the request, the tracts would be put for auction in early August, where Marathon Oil may rebid among other operators.
Marathon Oil lobbyist Zac Weis did not return three phone messages or an email seeking comment. Ron Ness, president of the North Dakota Petroleum Council, spoke on behalf of the company, pointing to "unique" circumstances in what operators encounter.
Ness said Marathon Oil has encountered issues ranging from a combination of state, tribal and private landownership, the tracts' rugged terrain, protected species and timing stipulations.
Smith said operators all over the state encounter "cantankerous" or "challenging" situations related to their tracts. Ness said the Land Board's decision won't set a precedent for leasing extensions, which he noted don't "come for free."
"This is just like any other case with special circumstances," Ness said Wednesday. "I think a review by the full board is warranted and it'll be interesting."
Smith 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.
The Land Board meets Thursday morning at the state Capitol in Bismarck. Marathon Oil's leases expire Friday.
Reach Jack Dura at 701-250-8225 or email@example.com.