Tribune editorial: State mineral valuation is a prudent step

Tribune editorial: State mineral valuation is a prudent step

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The North Dakota Department of Trust Lands is taking an important step by hiring a Watford City firm to conduct a valuation of state-owned oil and gas minerals.

The department, under the guidance of the Board of University and School Lands, manages 2.6 million acres of oil and gas minerals.

In fiscal year 2019, the state collected about $319.5 million in oil and gas royalties and $4 million in oil and gas bonuses.

Land Commissioner Jodi Smith said the state does not know the potential value of its undeveloped minerals. The study by the firm MineralTracker aims to show the value of the state-owned assets, including what’s in commercial production and what has yet to be developed.

MineralTracker, run by petroleum engineers with expertise in managing minerals in the Williston Basin, will analyze active wells that are under the board’s management to project future oil and gas production. The firm also will assess undeveloped mineral acres.

That valuation will help the department when companies seek to extend a lease. The state will now have an appraisal to guide those lease negotiations.

The state Legislature authorized $350,000 last year to do the study. That will be money well spent considering the value of the minerals to our state. It's expected to be complete in 3 ½ months.

The department says no other state agency or federal entity has conducted a similar valuation on its assets.

The valuation comes at a time when the board also is working with oil companies to collect unpaid gas royalties. The state agency claims some oil companies have taken improper deductions from oil and gas royalty payments, but the industry has disagreed with the department’s interpretation of the lease. The dispute is now in litigation.

One challenge for the department is it has had to rely on information from the companies to validate the royalty payments.

Now by working with MineralTracker, the department will have another check and balance to help validate that the royalty payments made by companies are correct.

The royalties benefit state trusts such as the Common Schools Trust Fund. It’s important that the board work to collect the oil and gas royalties that are owed to the state. 

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