North Dakota Owners Fight for Shoreline Mineral Rights

North Dakota property owners are set to ask a state court judge to rule against the government and declare them the owners of subterranean mineral rights worth millions of dollars in lands along navigable waterways.

The band of earth between the high- and low-water marks, known as the shore zone, increased in value after it was discovered to contain oil. The property owners argue the state relinquished title to that strata when it set the boundary for its own riparian rights at the low-water mark after entering the union in 1889.

“The state cannot renege on that choice -- made nearly 125 years ago -- simply because oil has been discovered in the shore zone,” they told Williams County District Court Judge David W. Nelson in September.

North Dakota did nothing of the sort, Attorney General Wayne Stenehjem’s office said in its own filing in October, asking the court to decide the issue in the state’s favor.

Nelson, at the hearing in Williston about 70 miles south of Canadian border, is scheduled today to hear arguments from lawyers for each side, and from attorneys for Brigham Oil & Gas LP who raised the same issue in a separate case.

The oil is being extracted from the Bakken shale formation, part of the geologic region called the Williston Basin, centered beneath Williston, a city of 14,716 according to the 2010 census.

The state produced more than 21.7 million barrels of crude in August, second only in U.S. production to Texas’ 62 million, according to U.S. Energy Information Administration data.

Economic Health

That productivity has driven North Dakota to the top of Bloomberg’s rankings of the economic health of U.S. states for the one-year period ending with the second quarter of 2012.

The “plaintiffs allege that North Dakota only recently asserted title to minerals under the shore zone, and that it has done so only because oil money is to be had,” the attorney general argued in his October filing. “The allegations are unsubstantiated, and silly.”

North Dakota’s ownership of the zone and its resources was innate upon its statehood and has been consistently and repeatedly asserted, Stenehjem said, citing U.S. Supreme Court precedent.

Lawyers for lead plaintiff Stanford Reep, and a proposed class of land owners, concede that point in part, contending that while the state held the lands in a “public trust” requiring it to preserve the public’s use of navigable waterways and riverbeds, North Dakota also had the authority to transfer its shore zone interests and did so.

Low-Water Mark

“The state chose to enact a statute providing that upland owners take their interest to the low-water mark, which necessarily includes the shore zone,” Reep’s lawyers said in court papers, adding that some form of that statute has remained part of the state’s laws since 1889.

“No authority in North Dakota -- the courts, the attorney general, the state engineer or the legislature -- ever has suggested that the public trust applies to subsurface minerals,” the plaintiffs’ lawyers said, adding that the state’s shore zone interest is limited to its preservation of public waterways and the surface of its river beds.

“Private owners of shore zone minerals have been deprived of millions of dollars in payments by the state’s taking and leasing of their interests,” lead lawyer Jan Conlin said in closing in her Sept. 21 filing.

Stenehjem asked the court to look at the issue more broadly.

“The public values associated with the land along our rivers and lakes are not just ‘economic,’” he argued in his filing. “These lands have extraordinary benefits and they will be compromised,” if title is transferred to private parties.

The case is Reep v. State of North Dakota, 53-2012- CV-00213, District Court of North Dakota, Northwest Judicial Circuit (Williston).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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