Unexplained production costs that have been deducted from some mineral owners’ royalty checks are sparking the possible formation of a new group, the Williston Basin Royalty Owners Association. There will be an informational meeting at 7 p.m. Wednesday, Oct. 10 in the city commission meeting room at City Hall to gauge interest in such a group.
Bob Skarphol, former state representative for District 2, is spearheading the initial meeting, and said he hopes mineral rights owners will come out and bring their questions.
“We are testing the waters to see if there’s enough interest,” he said. “I’m going to be 73, so I’m not interested in more work. There will have to be group participation.”
Skarphol said he decided to schedule the meeting after several discussions with other frustrated royalty owners who also felt their questions were not being answered.
“Most of the frustrations that are out there on the part of royalty owners comes down to the fact that we need to be more assertive as a united group, to make the legislature and the executive and judicial branches in North Dakota more aware of the fact that we don’t think the treatment of royalty owners is entirely appropriate,” he said.
What’s behind all the frustration, Skarphol said, are the increasing post-production deductions from royalty payments that came in the wake of a 2012 Supreme Court decision allowing gas processors to charge for making produced gas marketable. The case was Bice vs Petro Hunt.
“Some gas gathering and processing companies have obviously decided that gives them ‘carte blanche’ to confiscate whatever fees they deem appropriate, without explanation,” Skarphol said.
His wife, for example, inherited some mineral rights from which as much as 50 percent in post-production costs are being deducted.
“When you look at a royalty statement and start seeing negative numbers, you start to wonder,” Skarphol said.
Questions about the new deductions have largely gone unanswered, Skarphol added, which has prompted lawsuits.
“But one individual cannot battle a corporation of that magnitude unless you are Warren Buffet or whoever,” Skarphol said.
Changes to royalty statements intended to clarify all these deductions were a step in the right direction, Skarphol said, but since then, the North Dakota Industrial Commission decided to delay implementation until after the 2019 legislative session.
“The decision strongly indicates that the executive branch of North Dakota would rather acquiesce to the NDPC and their interests, than to take the right and appropriate actions to support the mineral owners, taxpayers and citizens wronged by these ambiguous and abusive costs,” Skarphol said.
Because of these things, Skarphol said royalty owners need to band together to have a stronger voice in the state legislature, and to help ensure through the legislative process that royalty owners are being treated fairly and compensated justly.
“I don’t want anyone to get the impression we are anti-oil or anti-development,” Skarphol added. “We are not. We want development. We want oil wells drilled. But we want to be fairly compensated for the value of a product they’re getting based on an agreement we assumed we had made, but that is constantly kind of changing.”