Oil & Gas News

Latest bout over North Dakota royalties goes to oil industry

Bakken, North Dakota Bakken DUC

By: Dave Kolpack – AP – The latest bout of legal wrangling over the collection of North Dakota oil and gas royalties has been won by the energy industry, over a bill it promoted and was passed by the 2021 state Legislature.

A state judge on Thursday ruled in favor of the law that limits how much interest companies have to pay for unpaid oil and gas royalties and sets a statute of limitations on how far back they have to pay. The decision came after a state agency argued that the legislation is unconstitutional.

McKenzie County, North Dakota Judge Robin Schmidt is unlikely to have the last word, however. Fargo attorney Joshua Swanson, who has successfully represented clients over oil and gas mineral rights in North Dakota, said when the law was challenged in court last month that the issue is likely headed to the state Supreme Court regardless of Schmidt’s opinion.

A brief filed on Aug. 6 on behalf of the Board of University and School Lands, referred to as the Land Board, complained that the legislation violates the U.S. Constitution because it harms the obligation of previously agreed-upon contracts. The board said it will cost North Dakota hundreds of millions of dollars that mostly go to schools.

Few of the key players in the long-running dispute are talking.

State Land Commissioner Jodi Smith did not immediately return a phone message Monday seeking comment. A spokeswoman for state Attorney General Wayne Stenehjem, who filed the motion challenging the constitutionality of the law, first referred all questions to the Land Board, of which Stenehjem is a member, and then directed inquiries to Smith. Republican Gov. Doug Burgum, a member of the Land Board, and David Garner, an attorney for Smith and the board, did not immediately respond to email requests by The Associated Press.

The law approved earlier this year by the Republican-led Legislature and signed by Burgum states that the Land Board cannot collected royalty payments from before August 2013. It also reduces the amount of interest the state can charge companies for unpaid oil and gas royalties, from 30% to 15%.

The state Supreme Court sided with the Land Board two years ago in the debate that started with a lawsuit filed by an operator in 2018 after the state determined that companies were taking improper deductions.

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