This text was produced for ProPublica’s Native Reporting Community in partnership with the North Dakota Monitor. Join Dispatches to get our tales in your inbox each week.
Reporting Highlights
- In search of Assist: North Dakota mineral homeowners requested state leaders to assist them get info from oil corporations.
- Oversight Program: Lawmakers created a royalty oversight program. It had help from the business however was lower than mineral homeowners needed.
- Restricted Scope: This system has solved some issues, however it has failed to handle a significant one.
These highlights have been written by the reporters and editors who labored on this story.
One morning in February 2023, a small group of mineral homeowners arrived on the North Dakota Capitol on a mission. That they had traveled from throughout the state and different components of the nation to clarify to lawmakers how the highly effective oil and fuel corporations had been chipping away at their earnings.
It’s not simple to recruit individuals to testify through the winter months of the legislative session. Ranchers are busy with the calving season. Snowbirds have relocated to hotter climates. It’s a greater than three-hour drive for these residing within the Bakken oil area.
However those that made it to Bismarck lined up at a podium to share particulars of their very own experiences and the broader issues affecting the estimated 300,000 individuals who obtain cash from the business in change for the proper to their underground minerals. For practically a decade, that they had grappled with corporations withholding vital parts of their royalty funds with out explaining how they decided how a lot to deduct, as the North Dakota Monitor and ProPublica reported final week.
Now they have been on the Capitol for a selected cause: They needed legislators to require corporations to supply extra info so homeowners might discern in the event that they have been being paid accurately, and to impose penalties if corporations didn’t comply.
Shane Leverenz, who manages earnings his prolonged household receives from quite a few oil wells, learn aloud e mail responses from corporations as an example the shortage of cooperation mineral homeowners face once they request info. “We aren’t obligated to mail every proprietor a calculation as to how their curiosity was calculated,” one firm wrote.
“There isn’t a transparency,” Leverenz advised the legislators. Leverenz, whose great-grandfather homesteaded in North Dakota and had his property deed signed by President Theodore Roosevelt, has helped manage royalty homeowners on this difficulty lately. Leverenz grew up in Epping, a city of fewer than 100 individuals within the northwest a part of the state, and traveled to North Dakota from Texas, the place he now lives, to testify.
Credit score:
Jeremy Turley/Discussion board Information Service
After enter from Leverenz and others, lawmakers determined to create a brand new state program that they hoped would deal with conflicts between royalty homeowners and firms. Particularly, mineral homeowners had mounting issues over postproduction deductions, the cash corporations withhold to cowl the prices of processing and transporting minerals after they’re extracted and earlier than they’re bought. Corporations say they’re allowed to cross on a share of these prices, whereas royalty homeowners say they shouldn’t bear that duty as a result of generally lease agreements don’t point out these bills.
The state’s “postproduction royalty oversight program” had the help of the business, however it was far lower than what Leverenz and different homeowners needed. Within the two years since its creation, this system has not lived as much as its identify and has not alleviated homeowners’ issues over deductions or transparency, an investigation by the North Dakota Monitor and ProPublica discovered. This system has resolved 69 circumstances up to now, and none have concerned postproduction deductions, in response to paperwork obtained underneath a public information request. A case can symbolize a grievance or query from a royalty proprietor.
“The legislative intent was speculated to be addressing the difficulty of the postproduction prices that they have been hitting individuals with,” mentioned Rep. Don Longmuir, a Republican from Stanley, within the northwest nook of the state.
The newsrooms’ investigation discovered that this system has targeted on different points. It has as a substitute helped homeowners resolve complaints about corporations withholding funds totally and failing to pay curiosity on late royalty funds, information present. Some mineral homeowners mentioned in interviews that they don’t belief state officers to assist them get details about the deductions and subsequently haven’t tried to make use of this system.
Leverenz mentioned this system, additionally known as the ombudsman program, has not completed what he and different royalty homeowners have been advised it could. He has taken six complaints to the ombudsman; three have been resolved however three stay open, together with two for greater than a 12 months. The unresolved complaints don’t contain deductions, he mentioned, and deal with different points together with his household’s royalty funds.
“The ombudsman is operating into the identical factor that I’ve, the place there’s simply no response from the oil corporations or they stalled,” Leverenz mentioned. “There’s been no ahead momentum.”
Ron Webb, who coordinates this system throughout the state’s Division of Agriculture, mentioned it has helped facilitate communication between mineral homeowners and firms. He mentioned this system is voluntary and doesn’t have authority to compel corporations to vary how they calculate funds and even to supply info. “Oil corporations should not required to work with us,” Webb mentioned.
This system not promotes itself as with the ability to oversee issues about royalty deductions though that was a part of the legislative intent. On the division’s web site and in a brochure, the phrase “postproduction” has been dropped from this system’s identify though it’s within the title of the legislation that created it.
The division’s authorized counsel, Dutch Bialke, mentioned the identify of the legislation is irrelevant to how this system operates.
“The title is totally legally non-binding and has no authorized impact,” he wrote in an e mail, citing North Dakota legislation.
Credit score:
Obtained by North Dakota Monitor and ProPublica. Highlighted by ProPublica.
“Nothing Is Clear”
Ever since Neil Christensen and his sisters observed in 2016 that Hess Corp. was withholding practically 25% of their royalty earnings — up from lower than 1% simply two years earlier — his household has tried to get solutions from the corporate.
He traveled to Minot, North Dakota, some years in the past to fulfill with Hess representatives at their manufacturing workplaces. He additionally referred to as the corporate’s accounting workplace and its royalty proprietor hotline, however he mentioned their explanations didn’t make sense.
“It doesn’t appear as if the corporate has a big curiosity in explaining themselves,” Christensen mentioned. Spreadsheets stored by his household present withholdings have been as a lot as 42% lately. “The transparency difficulty is an enormous downside with oil operators and mineral homeowners.”
The royalty statements could be lots of of pages lengthy however present solely a basic description of the explanations for the deductions, leaving homeowners unable to confirm the businesses’ prices and whether or not they’re being paid a fair proportion. Christensen’s household and others mentioned they’ve had funds diminished for bills the businesses incurred years earlier.
“Nothing is obvious,” mentioned his sister Naomi Staruch, who has spent most of her profession working in finance for banks and church buildings in Minnesota. “I’d get so pissed off actually wanting onerous on the statements.”
Diana and Bob Skarphol, who’ve advocated for years on behalf of royalty homeowners, mentioned complicated and overwhelming royalty statements are a typical concern. The couple acquired one assertion final 12 months that included 39 pages of calculations for a single effectively — together with reductions to previous royalties going again 9 years. The Skarphols acquired $1.15 that month from the manufacturing of the effectively.
Merrill Piepkorn, a Democratic former state senator from Fargo who was the prime sponsor of the transparency laws, mentioned oil corporations’ ways are “obfuscation by way of transparency.”
“You get a lot info, there’s no solution to discover what you’re searching for,” mentioned Piepkorn, who unsuccessfully ran for governor in 2024.
Todd Slawson, chair of the North Dakota Petroleum Council, mentioned royalty statements are complicated partly as a result of state regulators throughout the final decade started requiring corporations to incorporate further classes of data. Hess mentioned it maintains a web-based portal the place royalty homeowners can entry their royalty info and operates a name heart that mineral homeowners can contact with questions.
North Dakota doesn’t regulate the prices that corporations can cross on to particular person homeowners, although the state and federal governments regulate deductions on government-owned land. The state audits the royalties paid on state-owned minerals to make sure the quantities are appropriate and, since 1979, the state’s leases don’t permit deductions. However non-public mineral homeowners don’t have that very same entry and sometimes find out about deductions by evaluating their statements with each other.
“It’s form of all rigged towards the person royalty proprietor,” Leverenz mentioned.
State officers have advised mineral homeowners that they’ll’t get entangled in non-public disputes and that litigation is the homeowners’ finest recourse. However litigation isn’t financially possible for many households, in response to legal professional Josh Swanson, who represents mineral homeowners.
“It simply exceeds six figures, and that’s cost-prohibitive for most people,” Swanson mentioned. “A part of the playbook for lots of operators is making this stuff as cost-prohibitive as they’ll.”
Swanson was the legal professional Janice Arnson and her household employed to attempt to get solutions from Hess. Hess had been deducting between 15% and 36% of their royalty earnings every month since 2015, in response to a spreadsheet maintained by Arnson. That they had no luck getting an evidence from the corporate till they employed Swanson in 2017. When Hess responded, an organization legal professional mentioned in a letter that the deductions have been “correct and permissible” underneath the phrases of the lease. Whereas Swanson disagreed, the household declined to pursue litigation as a result of “it was going to be an costly go well with.”
“We have been one small, little household,” mentioned Arnson. “We simply didn’t have the sources towards Hess to struggle.”
(Hess didn’t contest or touch upon Arnson’s or Christensen’s claims.)
Some royalty homeowners have turned to the Northwest Landowners Affiliation, a nonprofit advocacy group, for assist. Troy Coons, the group’s chair, mentioned he has fielded a number of calls every week from royalty homeowners who’re offended that state leaders haven’t helped them with the deductions. “It’s a large concern for individuals,” mentioned Coons, whose group has sued the state on behalf of property homeowners on a special difficulty. “We’re not speculated to be bearing the burden of bills.”
Lawmakers initially had bipartisan help in 2023 for a invoice that will have assured mineral homeowners entry to digital spreadsheets detailing their funds and would have required corporations to supply extra info on how they calculate a royalty proprietor’s share of the earnings from every effectively. It additionally would have directed courts to require corporations to reimburse royalty homeowners for attorneys’ charges in the event that they efficiently sued for the knowledge.
However that invoice was discarded in favor of laws creating the royalty oversight program.
The Legislature “took our invoice and so they stripped it of every thing, and so they shoved the ombudsman program into it,” Leverenz mentioned. They created this system “with the guarantees that, you already know, that is going to be the reply to all the problems which were introduced up through the years with the royalty homeowners.”
Sen. Brad Bekkedahl, a Republican from Williston, initially backed each payments. The senator mentioned he hoped the invoice creating the ombudsman program could be amended within the legislative course of to present it extra authority to advocate on behalf of mineral homeowners. That didn’t occur.
“That may have been, I feel, extra useful to royalty homeowners,” mentioned Bekkedahl, who in the end voted towards it.
“Barking Up a Tree”
In pitching this system to lawmakers in 2023, Doug Goehring, the state’s agriculture commissioner, mentioned the objective was to “attempt to develop some decision” for royalty homeowners with questions on their funds, together with issues over deductions.
The invoice required a report back to legislators. Goehring advised lawmakers he would share with them “full and full info in regards to the circumstances” dealt with by this system and the problems confronted by mineral homeowners with a purpose to inform future laws. “We’ll definitely present you eventualities, conditions, and among the challenges and difficulties we’ve handled,” Goehring, a Republican, testified in 2023. “And even some recommendations about the way you appropriate a few of this transferring ahead.”
The outcome has fallen in need of what Goehring pledged in testimony, the information organizations discovered. Goehring now says it isn’t this system’s job to search out decision for royalty homeowners who query the deductions. “We don’t have a leg to face on to attempt to advocate or attempt to extort cash out of the corporate,” Goehring mentioned. He mentioned an exception is that if deductions are particularly prohibited in leases, however most agreements, particularly these signed a long time in the past, are silent on the difficulty of deductions.
As a substitute of an in depth report, Goehring delivered a one-page abstract to legislators in September that broadly categorized the problems dealt with by way of this system. Legislators accepted the report with out dialogue. Goehring mentioned a extra detailed report was not essential. “They don’t wish to know that,” he mentioned. “We typically don’t write reviews in that method. We give them the fundamental info.”
Credit score:
Kyle Martin for the North Dakota Monitor
Of the 147 circumstances filed with this system, about half stay unresolved, together with greater than two dozen which were pending since 2023. Goehring mentioned among the circumstances stay open on the request of royalty homeowners.
Two of the pending circumstances contain postproduction deductions, together with one which has been open since September 2023, in response to Bialke, the Agriculture Division’s authorized counsel.
The circumstances are assigned to 2 power corporations that function ombudsmen, Diamond Assets and Aurora Power Options, which contact the businesses on behalf of the mineral homeowners. Neither of the businesses responded to questions from the North Dakota Monitor and ProPublica.
The information organizations paid $425 to acquire information associated to the circumstances that had been resolved as of late June. In these circumstances, the ombudsmen have answered royalty homeowners’ questions and obtained solutions for them when corporations had not been responsive. In some circumstances, they mediated options that resulted in royalty homeowners receiving funds they have been owed, information present.
In a single case, an ombudsman spent practically 10 months going forwards and backwards with an organization till the royalty proprietor received paid. In different circumstances, ombudsmen helped royalty homeowners perceive technical points associated to taxes and the probate course of after inheriting minerals. The division redacted firm names from the paperwork launched, with Bialke citing state legislation.
“It has been extraordinarily useful for pissed off royalty homeowners who can not get their questions answered,” mentioned Slawson of the North Dakota Petroleum Council, who additionally owns an power firm. “Having deductions all of a sudden present up on income checks and questions not being answered or not defined effectively can result in suspicions of wrongdoing.”
Kenneth Schmidt, who owns minerals close to Ray in Williams County, contacted this system after struggling to persuade an organization that it owed curiosity on late royalty funds as mandated by state legislation. It took just a few months, he mentioned, however the firm paid him.
“I used to be very glad with this system,” mentioned Schmidt. “As a substitute of going to an legal professional and I’ll pay $400 an hour, they did it without cost, however by way of the state.”
Goehring mentioned this system has been profitable, citing suggestions from the business in addition to the truth that no payments associated to royalty deductions have been launched throughout this 12 months’s legislative session, the primary time in practically a decade.
“If there’s no payments which might be arising, then is not that a sign? It’s form of like should you don’t have a cough, then perhaps you don’t have a chilly,” he mentioned.
Whereas this system has resolved disputes like Schmidt’s, that are extra cut-and-dried, it isn’t effectively outfitted to deal with extra complicated disagreements, Goehring mentioned. That isn’t a shock to one of many lawmakers who labored on the invoice.
“I don’t doubt that in some circumstances, facilitating that communication in all probability helped, however I don’t assume it offers all of the solutions to the royalty homeowners that they’re searching for,” Bekkedahl mentioned.
Numerous royalty homeowners advised the information organizations they merely don’t belief this system to assist. “I didn’t really feel the ombudsman program had any enamel in it in any respect to do something,” mentioned Brian Anderson, who has not filed a grievance though he desires corporations to extra absolutely clarify their deductions. “They’ll placate you; they’re not going to do something about it.”
Curtis Trulson, a royalty proprietor in Mountrail County, agreed: Going to this system, he mentioned, is simply “barking up a tree.”
