Just scratching the surface
The recent oil boom in the Bakken Formation has ushered in a number of changes to North Dakota, ranging from the tumult of a mushrooming population and irritations of heavier traffic to the economic benefits of low unemployment and a balanced budget. But for those who may not recall the previous petroleum push of the early 1980s, today’s activity might also be a learning experience.
As might be said for any place on the map, the history of North Dakota seems to follow the possession of its land. The nomadic tribes which initially followed after migrating herds upon its rolling plains settled the area, building communities and cultivating it. Eventually taken from them, its sod was busted and pastures subdivided, becoming the foundation on which immigrant families would build their livelihoods in farming and ranching. Fast-fowarding to the present interest in what lies far beneath the surface, a number of inhabitants have found that the property they call their own sort of peters out just beneath their feet, from a legal standpoint.
This “split estate” that can exist between overlapping surface and mineral rights is not a new phenomenon, rooted in common law at least dating back to old English practices and now standard in all 50 states. As the resources below ground cannot be reached without access from above, a norm was established prioritizing mineral rights over those of the surface, making it the dominant estate. Legally, this means that mineral owners have right of way to access their property without unreasonable impediment from the surface holder. In practice, this can lead to problems between the two parties.
For the readers keeping track of such things, in May 2011 The Minot Daily News had related the woes of Curt Braaflat, an area rancher who was experiencing difficulties at a parcel of land he held near Belden. At the time, Whiting Petroleum leased the mineral rights which ran beneath his property and had just begun setting up a well pad for extracting oil.
Not uncommon, mineral estates in the Belden area are an assorted quiltwork of different mineral rights owners, with parcels sold door-to-door to residents in the post-war period by roving land speculators. Under his 720 acres of land, Braaflat estimated there was anywhere between 50 and 70 different parties with various sized holdings. “It’s a mess down there,” he said.
In the article, Braaflat had expressed frustration that the lease price had been dictated rather than negotiated and that conditions of the agreement were not honored, including damage done to his property not being properly redressed. Despite repeated complaints to Whiting, Braaflat had felt there was nothing being done to resolve the situation and that he had little legal recourse to press for improvements.
Protections for surface owners from damages caused by extraction operations were not a part of common law, but modifications have since been adopted on a state-by-state basis. For North Dakota, the Oil and Gas Production Damages chapter to its century code was passed in April 1979. In addition to requiring that site operators provide advance written notice to a surface owner prior to commencing operations, the code also requires that a surface owner be paid a sum covering the net damage sustained through lost agricultural production of income, decreased land value, and lost improvements due to drilling operations.
In North Dakota, chances are good that a number of privately-held surface properties around the state rest atop some form of publicly held minerals, the rights to which may be leased practically right from under the surface-dwellers’ feet without their knowledge.
The federal-level Bureau of Land Management holds about 5.6 million mineral acres in North Dakota alone, with 4.5 million of those on a split estate. Like the federal government, the state of North Dakota holds a number of mineral properties as trust lands, largely through federal endowment, but with foreclosed lands making up about 26 percent and that which runs beneath navigable rivers another 4 percent.
Of the approximately 2.6 million mineral acres managed by the North Dakota Department of Trust Lands’ minerals division, it owns 693,254 of the corresponding surface acreage, with the remainder falling under split estate. Perhaps putting that into better perspective, North Dakota covers about 44.45 million acres; between the two governing bodies, roughly a sixth of the state’s total mineral rights are publicly held.
As the mineral estates are considered dominant over the surface, their holders have a certain priority of access to their subterranean property once those privileges have been leased.
“In every state in the Union, the mineral estate is the dominant,” explained Drew Combs, director of the North Dakota Department of Trust Lands’ minerals management division. In managing the mineral acres element of state lands, Combs’ division is also responsible for the leasing of North Dakota’s mineral holdings, which are offered at quarterly auctions.
Combs said that parties bid on a one-time payment for a lease that lasts not less than five years, through the viability of the venture. The state’s monthly royalty fees that eventually accompany production are at a rate set by the Land Trust board, typically 3/16. After that, “we’re like any other fee owner.”
With proceeds from developing those lands going into the state’s trust funds, Combs stated that “it is our fiduciary duty to make that estate work for the trust.” However, his division is also tasked with ensuring that lessees are compliant with the terms of their holdings.
“That is a contract between two parties,” Combs said. “We monitor our leases. If there’s a breach of the lease then we have to do something about it.” He explained that the risk of losing one’s claim is an expensive enough incentive for many companies to keep a close watch on their operations. “Most of the leases that get terminated are expired,” but those are becoming few and far between.
Getting back to split estate situations, once the mineral rights have been obtained the arrangements made between those lessees and private surface holders are between them alone, largely independent of the state. Although oil companies have earned a reputation for their brusque and at times unneighborly focus on fast extraction, this does not mean that split-estate surface holders have entirely been tossed to the dogs.
“This is from me talking to people,” related Combs. “People have a lot more pull than they think they do.”
There are a variety of channels for airing grievances. Often, problems arise from a lack of communication or misinformation. To remedy this, the North Dakota Petroleum Council makes available the contact information of various operators at (www.ndoil.org/?id=135).
Other concerns associated with drilling include ground and well water quality, for which tests can be run by specialists if contacted by the resident or property owner. An informative .pdf format brochure has been made available by the state Department of Mineral Resources at (www.dmr.nd.gov/downloads/waterwelltesting.pdf).
The North Dakota Department of Agriculture offers voluntary mediation services that can be of assistance, resolving property issue disputes related to energy development without having to resort to court action. Disputes include surface damages, property access, mineral rights and royalties payments. Information on the program can be had by calling 1-800-642-4752 or visiting (www.nd.gov/ndda).
When other options fail to suffice, there are always civil court proceedings to be considered. Accompanying the oil extraction firms to the Bakken, a number of petroleum-minded legal firms offer services that include consultation and representation. If the problem warrants the expenses involved, such counsel can be found in the phonebook or online at sites like (northdakotaoillawyers.com).
In Braaflat’s case, simply being the squeaky wheel helped. In a follow-up interview over two years after the first, his situation seems to have improved. “I think things are going better,” he said. Shortly after that article but not necessarily because of it, managers from Whiting were swift to quite literally mend fences at his Belden property, clearing debris and better organizing access to and from the well site.
“It should have not had to come to that,” Braaflat recounted, “but they did what I asked.”
Living near Plaza, his beef now is with Ward County, where Braaflat contends heavy truck traffic diverted by construction on N.D. Highway 23 onto the gravelly County Road 20 is moving too quickly for safety and kicking up unseemly amounts of dust in the process. “It’s a haze here, all the time,” he said.