North Dakota Landowners Fight State Over Oil Rights

North Dakota landowners claiming the state is usurping their subterranean oil and mineral rights and costing them millions of dollars are asking a state court judge to let them proceed with a lawsuit.

At the state courthouse in Williston, 70 miles south of the Canadian border, the landowners’ lawyers today opposed North Dakota Attorney General Wayne Stenehjem’s bid for dismissal of the lawsuit they filed in March.

“The defendants in this action have engaged in a course of conduct deliberately designed to procure mineral rights belonging to private individuals -- without compensation, due process or even any notice.” the owners said in an April court filing.

North Dakota, the third-smallest U.S. state by population with 672,591 residents as of 2010, is ranked second in crude oil output. Only Texas, with 54.4 million barrels, produced more crude oil in March than North Dakota’s 17.8 million barrels, according to U.S. Energy Information Administration data.

That productivity has propelled the state to the top of Bloomberg’s state economic health and employment and rankings for 2011. The oil is drawn from the Bakken shale formation, a feature of the geologic region called the Williston Basin, the heart of which is beneath Williston.

Rivers, Lakes

The property owners claim they own the mineral rights between the high and low water marks of land abutting the state’s rivers and lakes.

North Dakota disputes that assertion, countering that the issue of ownership is at best unclear.

Williams County District Court Judge David W. Nelson told the parties today that that issue must be decided, while withholding his decision on whether the balance of the landowners’ lawsuit seeking compensatory damages for the state’s alleged taking of their land can proceed, lead plaintiffs’ lawyer Jan Conlin said in a telephone interview

“It was an important first step,” Conlin said.

A spokeswoman for Stenehjem, Liz Brocker, declined to confirm Conlin’s account.

“We have nothing to say at this time,” Brocker said in a telephone interview.

‘High Watermark’

The plaintiffs seek class-action, or group, status on behalf of all people who own mineral interests in land below the “ordinary high watermark,” of the state’s navigable waters, including the Missouri and Yellowstone rivers.

Conlin today said while she didn’t have a precise headcount for the class size, there could be hundreds or even thousands of claimants.

Millions of dollars in royalties from oil-producing wells have been set aside in escrow-like bank accounts until the ownership issue is resolved, Charles Neff, a lawyer for the plaintiffs, said in March.

“The essence of this case is a boundary dispute, one that turns on how a statute is interpreted,” Stenehjem’s office said in an April court filing asking Nelson to throw out the case.

“This claim is premature,” the state’s lawyers said. “Plaintiffs first need to show they own the shore zone.”

Conlin said she contested that claim in court today.

“We told the judge that the state of North Dakota does not own the mineral rights in the shore zone,” Conlin said. “The North Dakota statute says the land owner owns to the low water mark.”

‘Unsettled Questions’

In court filings, Stenehjem’s office also said the state court case duplicates a pending federal lawsuit involving some of the same parties.

On June 5, U.S. District Judge Daniel L. Hovland in Bismarck, North Dakota, sent that case, filed by Brigham Oil & Gas LP, to the same Williams County court as the landowners’ case.

“The dispute presents important and unsettled questions of law which potentially impact numerous riparian landowners throughout North Dakota,” Hovland wrote. “Novel and important matters of North Dakota law, like those presented here, should be left to the state courts and, ultimately, the North Dakota Supreme Court to resolve.”

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

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