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ASK YOUR GOVERNMENT: Reader wonders about state-owned oil, gas wells

Q. How many oil and gas wells does the state own outright, and where is the publication of such posted on a monthly basis for oil and quarterly for gas? What does the average royalty per well amount to on a percent basis of state-owned wells? Is ...

Teri Finneman
Teri Finneman

Q. How many oil and gas wells does the state own outright, and where is the publication of such posted on a monthly basis for oil and quarterly for gas? What does the average royalty per well amount to on a percent basis of state-owned wells? Is it 20 percent, 25 percent or 30 percent? Where is this accounted to us taxpaying citizens? Is it available on a website? -- James Flournoy, Dickinson, N.D.

A. I contacted North Dakota Department of Trust Lands Commissioner Lance Gaebe. This is his response:

"The state does not own or participate in any oil or gas wells 'outright.' Instead, state-owned minerals are leased to oil companies, which own or operate the wells to extract oil and gas. The operator of a well pays a royalty based on the production and sale of the oil and gas.

"It is important to note that royalties are not a tax, but are compensation received by a mineral owner for the extraction of hydrocarbons from a property.

"If a well is drilled and starts to produce oil and gas, the mineral owner will receive a monthly payment, or royalty, based on the amount of oil/gas produced, the amount of acreage owned within the spacing unit for the well and the royalty rate found in the lease.

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"The Department of Trust Lands' managed trust funds have a royalty interest in approximately 1,700 wells out of a total of 6,200 wells drilled in the state. The standard royalty rate for Department of Trust Lands' leases is either 1/8 or 1/6 of the value of the production, depending upon when the mineral acres were leased.

"The state's interest in each well varies substantially, depending on the number of net mineral acres the trusts own within a well's spacing unit.

"As royalty payments are received by the Department of Trust Lands, they are entered into a computer system that identifies the payments by well or property and by trust fund. Currently, there is no place on the Internet where this information is posted or published in 'real-time' for a specific location or well.

"However, the aggregated royalty information for each quarter and the biennium is available on the website of the Department of Trust Lands at www.land.nd.gov . Specific royalty collection by well or location could be available upon request.

"Although there are some mineral acres managed by other state agencies -- including the Game and Fish Department, the Parks and Recreation Department, the Department of Human Services and the Veterans Home -- the majority of mineral acres owned by the 'state' are managed by the Department of Trust Lands under the direction of the Board of University and School Lands.

"The state and state trusts own more than 2.5 million mineral acres. The Common Schools Trust Fund and several other permanent trusts own 1.8 million of those acres as a result of the federal enabling act that allowed for the creation of the state of North Dakota."

Do you have a question for a North Dakota state government official or agency? Send us your question, and we'll do our best to find an answer.

Email politics@wday.com (Subject: Ask your government).

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You may also write to Teri Finneman c/o Forum Communications, Press Room, State Capitol, Bismarck, ND 58505.

Please include your name, town and a phone number to reach you for verification.

Teri Finneman is a multimedia reporter for Forum Communications Co.

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