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Bob Skarphol showing a group of mineral royalty owners the breakdown of a royalty statement during an organizational meeting in early October.

Bob Skarphol had message for the dozens of people who were jammed into the Williston City Commission meeting chamber Wednesday night: What he was proposing wasn’t going to happen overnight.

But, he told the group of mineral royalty owners, if they hoped to change what they see as unfair deductions from their royalty checks, they need to work together and be patient. Wednesday was an organizational meeting for the Williston Basin Royalty Owners Association, a new group Skarphol hopes will help mineral owners get better treatment from oil and gas companies.

For now, Skarphol is the president, but, he said, he hoped to find other people to take over the group’s leadership.

“I’m not looking for another job,” the former District 2 legislator said.

Skarphol called the meeting, and many people attended Wednesday evening, because some royalty owners are upset at charges eating into their checks from oil and gas companies. Many of their leases allow for post-production charges, and a 2012 state Supreme Court ruling legitimized the practice of oil and gas companies deducting the cost of making gas marketable.

But, Skarphol said, that goes too far at times.

He gave one example of a company adding so many post-production charges that the balance owed on gas was negative. The difference was taken out of what the company should have paid in oil royalties.

“I believe that can be challenged in court,” Skarphol said.

One big problem is how difficult it is to get information from the oil and gas companies. Sometimes questions go unanswered and totally ignored, while other times mineral rights owners are simply told that the information they want is confidential.

“Lack of knowledge is killing us,” he said. “A feeling of hopelessness is killing us. Do we want to get angry enough to do something about it?”

Another problem is the complexity of the industry. Skarphol said oil and gas transactions are some of the most complex in the world. But one look at a royalty statement can show that something’s not right.

“You don’t need to be a financial genius to see you’re being taken advantage of,” he said.

It isn’t as simple as filing a lawsuit. For one thing, an individual royalty owner doesn’t have the financial resources to go up against corporations as big as the oil and gas companies. And class action suits are unlikely to succeed because the leases are almost all different, Skarphol said.

His proposal was one that would take more time and work, but he said he thought there was a better chance of success. Start educating the state’s lawmakers about the plight of royalty owners and help them understand what needs to change.

“This is about whether or not North Dakota wants to change how royalty owners are treated,” he said.

That comes down to action on the part of a group of royalty owners to push legislators across the state to change things.

“They all need to know how unhappy you are and that you want change,” he said.

The group has already been registered with the Secretary of State’s Office and as a lobbying group. A website is coming soon, and there’s already an email address for royalty owners to use: info@wbroa.com.

Other groups, including the National Association of Royalty Owners, haven’t helped much, Skarphol said.

“If you want it to happen, we’re going to have to do it ourselves,” he told the crowd.

The turnout Wednesday night — every seat in the room was filled and more than a dozen people stood at the back throughout the more than hour long meeting — is likely a good sign, but as Skarphol said, there isn’t a short-term fix.

“Sustaining that interest over a long period of time is going to be difficult,” he said.

 

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