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Murky waters: Industry, royalty owners question whether state is trying to claim minerals under Lake Sakakawea

WILLISTON - Oil industry representatives and private mineral owners are questioning whether the state of North Dakota is trying to claim ownership of minerals under Lake Sakakawea, and one attorney warns the uncertainty could deter development an...

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A drilling rig is pictured near Lake Sakakawea near New Town, N.D., on Thursday, Sept. 8, 2016. Some fear that uncertainty about who owns the minerals under the lake will deter oil development in the area. Amy Dalrymple/Forum News Service

WILLISTON – Oil industry representatives and private mineral owners are questioning whether the state of North Dakota is trying to claim ownership of minerals under Lake Sakakawea, and one attorney warns the uncertainty could deter development and lead to decades of lawsuits.

The Board of University and School Lands has traditionally leased minerals under the Missouri River but not minerals under Lake Sakakawea, created by the Garrison Dam.

But in recent court cases involving disputes over minerals, attorneys representing the state have asserted that there is no distinction between the historical river channel and Lake Sakakawea.

The statements in court, combined with a lack of clarity from the Land Board that has only discussed the matter in closed-door executive sessions, are causing some to question the board’s intentions, said Ron Ness, president of the North Dakota Petroleum Council.

“That would lead one to clearly believe they’re attempting to take ownership of the minerals under the lakebed,” Ness said.

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It’s causing concern among private mineral owners who have already leased minerals under Lake Sakakawea, Ness said.

“Families and others have owned and operated these minerals like private property,” he said. “Leases have been taken, wells have been drilled, royalties have been paid. We’re only 10 years into a very long Bakken play.”

Lawrence Bender, a Bismarck attorney who represents several oil companies, warns that if the state is changing its position on who owns minerals under the lake, there are potentially billions of dollars in royalties that will need to be refunded.

“If the state of North Dakota continues with its position, I believe it’s going to be decades of litigation,” Bender said.

The Land Board, which manages state-owned minerals and is chaired by Gov. Jack Dalrymple, is expected to discuss the issue at a meeting Tuesday. Dalrymple declined to comment until after the board meets on Tuesday, said spokesman Jeff Zent.

Lance Gaebe, commissioner for the Department of Trust Lands, said the agency has not changed any leasing practices and has not initiated any of the lawsuits.

The state is involved in defending a handful of court cases involving disputes over minerals. Gaebe said the board has a responsibility on behalf of North Dakotans to protect and maintain public ownership.

In one case, William S. Wilkinson v. the Board of University and School Lands involving a dispute over ownership of about 200 mineral acres west of Williston, attorney Jennifer Verleger from the Attorney General’s Office, made the following comments on behalf of the state:

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“Lake Sakakawea is simply an expansion of the Missouri River; it is not a separate and discrete water body” and “Simply because the Corps dams up a river, and backs up water, and gives that water body a new name, it does not mean the water body did not exist at statehood.”

That case is being appealed to the North Dakota Supreme Court.

In another case dismissed this month in federal court, U.S. Judge Daniel Hovland wrote in an order, “The state contends it owns all of the oil and gas under Lake Sakakawea because North Dakota’s title to the beds of navigable waters extends up to the ordinary high water mark.”

Ness said he would like Land Board members to clarify their intentions.

“Is their intention to try and take these minerals, or is it just to answer these lawsuits and not contend that beyond these specific lawsuits?” Ness said.

More people have been asking questions about lakebed mineral ownership recently after the topic was featured in the Oil Patch Hotline, an industry publication, Bender said.

Fred Evans, a mineral owner from Stanley, wrote a letter to Land Board members calling it “ridiculous” to suggest that the state owns the minerals under the lake. Evans urged the elected officials to protect citizens’ rights to minerals they have owned for generations.

“The very thought of this should scare any North Dakota private property owner,” Evans wrote.

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In addition to the statements made in the court cases, the Land Board sent a letter to the state engineer in November 2015 asking for a cost estimate to survey the ordinary high water mark from the Fort Berthold Indian Reservation to the Highway 85 bridge near Williston. The state engineer’s office has not yet responded to the request, Gaebe said.

The court cases prompted the Land Board to seek that survey, Gaebe said.

More than $50 million is held in escrow at the Bank of North Dakota related to disputes over mineral and property ownership, Gaebe said, with many of those disputes related to the river.

There is ongoing disagreement between the state and the Three Affiliated Tribes over ownership of minerals under the Missouri River as it flows through the Fort Berthold Indian Reservation.

Bender said he’s had cases before the North Dakota Industrial Commission involving companies that wanted to avoid drilling under the Missouri River on the reservation because of the dispute.

Now, if there’s uncertainty over who owns the minerals under Lake Sakakawea, that could curb future development under the lake, Bender said.

“If it’s uncertain who owns the minerals, oil companies aren’t going to drill,” Bender said.

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