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Bombing North Dakota: What It's Like to Live Amid the Oil Boom

The oil rush in North Dakota has turned life there inside out. As White Earth rancher Scott Davis puts it: “We’re collateral damage.”

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Owning a piece of land is not the same as owning the rights to what is beneath its surface, the mineral rights. Beginning in the 1940s, oil, coal, and gas companies approached Dakota families and offered to buy the mineral rights of their properties. Many people agreed; the possibility of development seemed remote and the payments felt like free money. As a result, out-of-state investors and corporations own the mineral rights to much of the land in the state. When the Jorgenson family bought their most recent 1,000 acres, for instance, they did not have the option to buy mineral rights; those rights had long since been sold to a broker in Louisiana.

Between 2006 and 2009 oil companies approached mineral rights owners and offered $30 to $50 an acre and 18 to 20 percent royalties for a lease “option” to drill on their land. A typical lease option runs for three years, with the oil company having a second option to renew it for another two years at the same price. The owner of the mineral rights cannot refuse this renewal. If no drilling occurs during the renewal period, the oil companies must renegotiate at market rates.

Between 2009 and 2011, as the extent of the Bakken reserve became clear and the global price of oil fluctuated around $75/barrel, oil companies radically increased the pace of drilling. They did not want the option renewals to expire and thus be forced to renegotiate the price at market rates, which by 2010 had skyrocketed to between $1,000 and $3,000 per acre, depending on how near the land was to proven finds.

When an oil company builds a well pad (which can range in size from seven to 10 acres), farmers and ranchers lose the use of that land. North Dakota law requires companies exercising mineral rights to compensate landowners for that loss. But the companies only pay fees similar to those asked for grazing cattle or growing crops – usually no more than $45 per acre a year. There is no compensation for losing the use of land adjacent to the well pad. Don Nelson, 48, a second-generation wheat and hay farmer who lives near Keene, ND, says that when a seven-acre well pad was built in the middle of a 20-acre field, the whole piece of property became useless to him. “It’s not economical to farm around it,” he says. Nelson still had to pay taxes on the entire 20 acres, and the compensation didn’t cover his losses.As the drilling began, farmers and ranchers discovered they had little say over what the oil companies did. Long-established common-law tradition concerning “split estates” holds that mineral rights are dominant over surface rights. If landowners decide not to allow access for drilling, the drilling company has the right to sue – and invariably wins. By landowners’ accounts, even modest requests for change, such as the plea to move a well pad to the other side of a fence to allow for calving or to move a well’s location to save a prairie wetland, are often ignored. Oil companies tell landowners that “plans have been made” and that it’s “too late” to change them.

In 2011, North Dakota began requiring oil companies to negotiate with surface rights owners who claimed present and probable future damages to their land, but the state didn’t require them to reach a settlement. Those landowners who have secured settlements normally receive about $1,750 an acre per year in damages. One White Earth rancher who refused to give her name because she worried about “violent retaliation” by oil company workers (she said cattle in the area have been shot by oil workers) says: “You either take the money or they take it [the land] from you anyway by court order.”

 
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