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State careful when leasing land for oil development

BISMARCK -- A federal wildlife refuge and a deposit of flint once used for making stone tools are among the areas where oil and gas companies are seeking mineral rights at an upcoming state auction.

But those areas have been flagged as sensitive by state agencies that are now asked to review the long list of state-owned lands where mineral rights may be leased.

Four times a year, thousands of North Dakota mineral acres are put on the auction block, with money from the auction going to a fund to benefit schools.

But before the auction, research by the state Department of Trust Lands and reviews by the state Game and Fish Department and North Dakota State Historical Society look for areas of historical or environmental significance.

Oil and gas leasing companies have asked the state to lease more than 54,000 state-owned mineral acres for the state's Aug. 6 quarterly auction in Medora.

And like previous lease auctions, many areas have been flagged as having natural wildlife and vegetation or boasting a historical or culturally significant event.

Jim Fuglie, an avid outdoorsman from Bismarck, has watched the oil companies slowly move to the edges of the Bakken oilfields and is raising awareness about the potential effects of energy development on cultural and natural resources.

"Each time the industry moves in a new direction, everyone has to be on guard," said Fuglie, who has concerns about the mineral rights at Stewart Lake National Wildlife Refuge in Slope County, south of Theodore Roosevelt National Park. "When you see the development encroaching in the new area, it means there will be some new impact on the habitat."


Leasing mineral rights dates back to statehood, when mineral rights were given to the state and the Board of University and School Lands was constitutionally required to manage the trust lands for the public schools' benefit.

The Department of Trust Lands' Minerals Division manages 2.5 million mineral acres throughout the state, with 1.2 million mineral acres in oil- and gas-producing counties and the other 1.3 million acres in other counties.

Lance Gaebe, commissioner of the North Dakota Department of Trust Lands, said the Land Board has a responsibility to the state, so it must do what it can to draw in revenue, but it does so "with a recognition and eye toward the historical, geological and wildlife resources of the property."

Gaebe said that when areas are flagged, the lease includes instructions to coordinate with the commissioner. Gaebe works with the appropriate agency to mitigate the impact on the resource. That process has been in practice for at least 20 years, he said.

"There are ways to work with the industry. If there are concerns, cultural or historical, we can work with the operators to try and mitigate and minimize the potential impacts," Gaebe said.

"We do it in a broad scope. Rather than stay off land, let's figure out what works best."

He highlighted the Land Board's decision to postpone the offering of 3,800 mineral acres from its February 2012 lease auction amid public concerns about wildlife resources.

Those concerns led to the partnership between the Land Board and Game and Fish to determine any potential issues.

The 3,800 acres were eventually put up for auction, but the lease-holder must work with the land department and Game and Fish officials before any surface work could be done.

Steve Dyke, conservation supervisor for the state Game and Fish Department, said the screening process looks for areas where wildlife might be affected by oil and gas exploration or if the area may be too close to a fishing lake. Flagged areas are reviewed more thoroughly using aerial photos and other means.

Due to time constraints, Dyke said they do not conduct onsite reviews.

Dyke said Game and Fish has recommended against surface development in some cases, but allowed access to the mineral below ground. Horizontal drilling technology makes this possible.

For oil wells, Dyke said his staff can "try to direct it to certain land features or a distance from the landscape."

In this round of nominations, Game and Fish flagged more than 200 tracts of mineral acres, with many too close to Lake Sakakawea, so the department recommended no surface occupancy within a half-mile of the shoreline.

For the Stewart Lake National Wildlife Refuge, the state will lease the minerals under the refuge, but Game and Fish recommended no activity above ground.

Dyke says the process to determine what minerals can be leased is a balancing act.

"We are trying our best, but we're not an agency that can stop any sense of oil exploration or production," he said. "We are left with working and trying to minimize impacts and providing information and working with regulatory folks and the industry."

Merlan Paaverud, director of the State Historical Society, said the relationship between the historical society, land department, Industrial Commission, which issues drilling permits, and the oil industry has developed nicely since the oil boom hit, but it has taken time.

"We have good cooperation from oil companies, who realize they have an opportunity to make a difference and keep resources from depleting," he said.

Like the Game and Fish Department, the historical society is given the list of nominated properties six weeks before each auction. The society uses its libraries with volumes of historical data from around the state to determine whether the locations may impede on any cultural or historically significant areas.

"Once they are gone, they are gone forever. Some are very sensitive areas for Native Americans and history within the state, so we want to do our part to try and preserve those things," Paaverud said. "If the state can't, we hope to at least help salvage the area to collect information prior to any work being done."

One sensitive area that drew public outcry recently was the Killdeer Mountains.

Despite public objection, the state allowed drilling to begin in the mountains found sacred to Native Americans and site of a historic battle.

The historical society, the only state entity outside the land department to review the area, did not provide a recommendation about the area when the mineral rights on state-owned land were leased both in 1989 and 2006.

Paaverud said the historical society doesn't have a complete record of the area, and has been trying to find money to survey it to provide better recommendations.

"A survey would help us tremendously to determine and provide info that would be helpful in locating sensitive areas," he said.

For the Aug. 6 auction, the historical society found concerns with four areas.

The first was land overlooking the Little Missouri River, which was surveyed for cultural resources in 1990 but has not been evaluated for significance.

The second is the Sand Creek area in Slope County, which was surveyed in 1991 and tested to contain significant cultural deposits.

The most immediate concerns to the historical society are two tracts in Dunn County that contain a quarry of Knife River flint, which is stone once used to make tools by early North Dakota settlers, and a section in Golden Valley County that contains the Beach Clovis cache, the largest collection of early Paleoindian artifacts known in North Dakota.

Future generations

Companies pay $1 for the lease on a mineral acre, and bid for the rights to the minerals for up to five years. If there is no production, the lease expires. The bids and royalties that come from the areas are put into permanent funds where 5 percent of the money in the fund is used to support for public education.

The Common Schools Trust Fund distributed $130.3 million for the 2013-15 biennium -- $92.5 million was allocated for the 2011-13 biennium.

"It's a gift that was given to the people of North Dakota when it became a state, and we are positioned to protect these assets for future generations," Gaebe said. "The fund is always working for North Dakota, it just doesn't get spent and goes away. It is invested in securities and generates a return and always grows."

Williston-based Empire Oil Co., a lease acquisition company, nominated the mineral acres beneath the refuge for a client.

The acquisition company's president and chief executive officer, Bill LaCrosse, said when his company nominates lands, it doesn't look at what's on the property or adjacent areas since they are dealing with below-surface minerals.

"We look at the state website," he said. "If it's in the area we have a client of interest, we put the land up and go from there."

LaCrosse said his client is confidential and is unaware of its plans.

"I don't know if I've ever seen a rig sitting on a wildlife refuge," he said. "I'm sure most companies would do all they could to keep away from that aspect."

Fuglie, an avid hunter, believes the oil development is good, but has been concerned about the oil industries' want for mineral acres.

"They don't know where the deer specifically live," Fuglie said. "This isn't a bunch of guys trying to destroy critical wildlife habitat; they just aren't aware."

Mike Nowatzki

Mike Nowatzki reports for Forum News Service. He can be reached at (701) 255-5607.