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Group strives for improved landowner surface rights

The Northwest Landowners Association had just finished organizing last December when they found themselves in Bismarck two weeks later, drafting legislation to address some of their concerns about issues between surface owners and the North Dakota’s booming oil industry. Following action in the state House of Representatives last week, those efforts have started to see success.

2/23/11 (Wed)

By Caroline Downs

 

The Northwest Landowners Association had just finished organizing last December when they found themselves in Bismarck two weeks later, drafting legislation to address some of their concerns about issues between surface owners and the North Dakota’s booming oil industry.

 

Following action in the state House of Representatives last week, those efforts have started to see success.

 

On Thursday, the House passed HB1241 by a vote of 94-0, one of the few bills to receive a unanimous favorable vote from the chamber this session. The bill addresses notice of oil and gas drilling operations, compensation for loss of agricultural production and income due to oil and gas production, damage and disruption payments to affected surface owners, and the obligation to pay oil and gas royalties.

 

Myron Hanson of Souris, NWLA president, was pleased with the outcome, although he’s cautious about predicting an easy ride for the bill through the Senate to the Governor’s desk. “There was a compromise on both sides,” he said.

 

Legislative bill is

combination of ideas

The current bill took the contexts of HB1324, HB1387 and HB1264 and rolled them into one bill. District 6 Representative Glen Froseth introduced two of the original bills, but he was satisfied with the new version. “The Petroleum Council and the Northwest Landowners Association sat down and came to an agreement,” he said.

 

HB1241, as passed by the House, creates two amendments to Chapter 38 of North Dakota Century Code.

 

One amendment would, first, recognize the damage to land caused by oil and gas exploration, with payment made to the landowner in one lump sum. The amendment includes new language in the law related to separate loss of production payments caused by oil and gas production and completion operations on specific acres. Finally, the amendment adds language specifying the notice of oil and gas operations to landowners.

 

Hanson said the notice of operations had been a major concern among members of the NWLA. “We addressed this so landowners would have more notice that this was happening on their land, and input into where the well was going to be staked,” he said. “We wanted 30 days notice in front of the permit hearing, but the compromise was seven days before the surveyors begin. Farming around [oil and gas operations] with the big equipment we have today becomes inefficient, and this way we can work with the surveyor to take into account the accessibility of our equipment.”

 

The annual loss of production payments likewise showed the benefits of another compromise, as the NWLA resisted including a specific dollar amount in the bill. “Everybody’s situation is different and it’s up to the individual surface owners to negotiate their own damage and loss payments,” Hanson said.

 

That portion of the bill includes the phrase “mutually agreeable formula” to determine the amount of loss of production damages. Hanson said the most likely scenario would be to use the individual producer-reported federal crop insurance yields, with a multi-year average. “That way, you take the established yield for a crop times the high average price over the five-year price,” he said, adding that prices paid may differ by locality.

 

He emphasized the difference in the two types of damage payments made to landowners. “We delineated a damage compensation for when they bulldoze the surface and basically ruin the land,” he said. “Then every year after, you’re paid for your lost economic opportunity because of that [oil or gas] production site on your land.”

 

The second amendment to Chapter 38 of NDCC adds language guaranteeing all mineral rights will be paid without the mineral owner being required to request interest payments on any delayed royalties. The responsibility for making the full and correct payments rests with the mineral companies, not the mineral owner.

 

Landowners vs. industry

District 6 Representative Bob Hunskor was directly involved in the process of developing HB1241 as a member of the House Energy and Natural Resources committee. After considering the four related bills submitted to the committee, a sub-committee was formed to combine the bills into a more stream-lined document, with Representatives Hunskor, Mike Nathe and Jim Kasper.

 

Parties from both sides of the issue were invited to discuss their differences, a process Hunskor noted as extraordinary. “Landowners have been frustrated in attempting to resolve [their] concerns,” he said as part of his statement on the House floor before the bill’s vote, citing the extensive resources of the major oil companies pitted against individual landowners.

 

He described the input for the bill from North Dakota Petroleum Council president Ron Ness and NWLA president Hanson and board member Tom Wheeler of Ray. “Our sub-committee met three times and the first time, the two major players were quite a ways apart,” he said. “Then the two of them got together and resolved a lot of differences. The miracle of it all was they worked it all out between them.”

 

Hunskor would like to see this process repeated. “With a growing oil industry, there will be more problems between the landowners and the industry,” he said. “It is our hope the negotiation process that took place in this sub-committee will be an example and a stepping stone for resolving future problems in the oil patch.”

 

Hanson called the discussions with the sub-committee amicable, starting with the landowners’ concerns about the permitting process and moving to the unclear language about damage and disruption payments to surface owners from the oil companies. “We’d put ideas out there, and everybody gave a little bit on each side,” he said. “The process moved forward. I think the House Energy and Natural Resources Committee was pleased with the effort, because [the bill] came out with a unanimous do-pass recommendation from the members in attendance.”

 

As of Monday, HB1241 was not yet scheduled for a hearing with the Senate Natural Resources Committee, but Hanson is prepared to return to Bismarck to make the case for NWLA. “I’ll be in contact with several senators again,” he said. “We’re hoping to make one or two trips to Bismarck on the Senate side and that they’ll pass it without any problems. Getting through the House was the primary hurdle for us.”

 

All kinds of surface

issues to address

Not all of the NWLA’s efforts in the state legislature have gone as smoothly this session. “We had one bill on the Senate side for enhanced rule enforcement through the state’s Oil & Gas Division,” Hanson said. “We didn’t get that one through, but it generated quite a discussion and we have been promised there will be additional inspectors available to monitor the activity out here.”

 

Hanson believes the NWLA is just starting its work. “There are all kinds of surface issues out there,” he said, listing the impact of perpetual easements with the U.S. Fish & Wildlife Service and the expanded rights of eminent domain requested by pipeline companies as two examples.

 

He also believes the booming oil and gas development in North Dakota will lead to more challenges for surface owners. “This bill sprang up in response to this wild activity taking place from here to Montana,” he said. “In two months, we’ve taken huge strides [as an organization].”

 

Group is not against

oil development

The NWLA currently has 192 members, with more welcome, according to Hanson. “The timing is really ripe for a group like this,” he said. “In Bottineau County, there’s always been oil, but nothing much was happening until EOG moved in and started talking about thousands of wells. People living from Stanley, Tioga and Ray up to Wildrose are worked up about what’s going on over there, and toward Bowbells, people are pretty concerned about the impact.”

 

Hanson himself is a third-generation small grains and oilseed farmer in Bottineau County, where he’s spent 30 years working the land homesteaded by his great-aunt and then farmed by his father, and in Williams County, where he farms land belonging to his wife’s family through her grandfather and father.

 

He emphasized the NWLA does not want to stop oil development in the state. “We support the oil and gas industry,” he said. “What they do is critical to production agriculture. We don’t operate without energy, and we don’t do anything without consuming some form of energy.”

 

However, the organization is concerned about changes the industry is causing for the region’s lifestyle. “You can’t ignore the impact on the viability of farms and ranches out here,” Hanson said. “This is a cash-intensive business, and this farm is my 401(k). They have to recognize what they’re doing to us.”

 

He continued, “This is about private property surface rights. That’s what we’re trying to address here. The discovery of this oil formation has immense value not only to North Dakota but also to the entire nation. Now, I want to work with the Petroleum Council as much as we possibly can to help mitigate the impact. [Oil development] is here, it’s going to stay and how do we work through that?”

 

As the NWLA tackles those larger issues, the group will be focused on specific targets, too, starting with informing the members and other landowners about the details of HB1241 if the Senate passes it and Governor Dalrymple signs it into law.

 

“We’ll have to have some regional meetings to educate our members and every farmer and rancher out there,” Hanson said. “Once the [legislative] session ends, we get busy in the field and we lose momentum, but we have to get everybody acting together on this.”

 

He is also interested in watching how the oil industry responds if the bill becomes law. “We’ve talked it up enough and raised the issues,” he said. “It remains to be seen how the oil companies honor the legislative intent.”

 

Persons with further questions about the Northwest Landowners Association are welcome to contact Hanson at 701-243-6386. For individuals interested in joining the NWLA, a $100 donation can be sent with name, address, phone number and email to NWLA, c/o Bob Grant, 6050 Old Highway 2, Berthold, ND 58718.