Suing the State: Millions, if Not Billions, of Dollars at Stake

Local News

It’s an age-old question: Who owns the mineral rights underneath Lake Sakakawea?

There’s no clear answer, at least not right now, but possibly billions of dollars are at stake over the matter. A number of landowners in our state have sued North Dakota over mineral rights they claim as their own.

But before we get into that, let’s go all the way back to statehood.

Back in 1889, the United States government granted the State of North Dakota’s Department of Trust Lands 3.2-million acres of land, two sections in every township. The land was sold by the state to private landowners, and at first, the landowners took ownership of the minerals rights in the sale.

But by the 1950s, the state took ownership of 100 percent of mineral rights from those 3.2-million acres, even after the land itself was sold.

According to Jodi Smith with the Department of Trust Lands, the money the state makes off those mineral rights is important.

“So over time, the state recognized that we would need that income and that resource to in order to be able to sustain the budget for the state of North Dakota,” shared Smith, the Commissioner for the Board of University and School Lands.

All in all, the Department of Trust Lands collects about a billion dollars every year by leasing the land to oil companies. $390-million goes toward K-12 education every two years. The remainder of the money goes into various state trusts.

But back to that original question: Who owns mineral rights underwater?

That’s been an on-going debate since statehood, and it’s especially important today because of the advent of hydraulic fracking. Energy companies can extract oil horizontally underground, making land under bodies of water much more valuable all of a sudden.

One thing that’s clear: the State owns all of the land and mineral rights under the Missouri River, within the boundaries of the ordinary high watermark. The OHWM is the line where the edge of the water meets land at high tide.

In the 1950s, the U.S. Army Corps of Engineers came in and created Lake Sakakawea.

At that time, the Wilkinson family sold its land to the federal government, land which would be covered by the water with that change. Now, they’re fighting the State for money they believe is rightfully theirs.

We’re told by the family’s lawyer, Josh Swanson, it’s currently on appeal to the North Dakota Supreme Court. The outcome of the Wilkinson’s appeal will set a precedent for years to come.

“There’s no other state that’s really going through this so as we go through this, and as these lawsuits go through court, we’re essentially creating case law for the nation,” Smith shared.

Swanson, with Vogel Law Firm, argued, “Nothing gives the state the right to claim ownership of these minerals.”

Swanson said the Wilkinsons were able to lease their mineral rights to oil companies for 50 to 60 years after selling the surface rights in 1958.

He explained the process, “The feds paid them for the surface. So you have hundreds of thousands of acres of some of the best farmland in North Dakota that would ultimately end up underneath Lake Sakakawea. When they did that the private landowners like my client reserved the mineral rights.”

This brings us back to 2010 when oil companies discovered a way to get oil underwater — horizontal drilling.

According to Swanson, it was right after this discovery that the state land board decided the underwater mineral rights now belong to them.

“It just so happened, one of my clients was on the State website, saw their acreage on there and said this must be a mistake. They contacted the Land Board, who just brushed them off and said, ‘We’re going to claim it until a guy or a girl wearing a black robe, meaning a judge, tells us we can’t do that’. And to me, that’s offensive. But it’s what the state did,” Swanson shared.

Ever since the Wilkinsons made this discovery, they’ve been in legal battles with the state. They are currently on appeal to the Supreme Court in hopes of regaining their mineral rights.

Swanson said the State taking his clients’ mineral rights is in violation of the 5th Amendment of the United States Constitution, under the takings clause.

He said even though their land was sold and flooded, the Wilkinsons should still own the mineral rights up to where their property once met the Missouri River, back in the 1950s, or the original high watermark.

“The state is continuously working to try to identify where’s that historic channel, and a couple of legislative sessions ago they put through a bill called Senate Bill 2134, and that directed the Industrial Commission to conduct a study,” Smith inserted.

It’s commonly referred to as the WENCK study, and it redraws what the Army Corps of Engineers originally laid out decades ago.

Even so, Swanson pointed out the Wilkinson’s property on a map, and it’s well above the newly determined high watermark from the WENCK Study.

“No matter how you slice this, There’s no study. There’s no declaration. There’s no Fiat that the state of North Dakota can claim that changes where the historical ordinary high watermark is. There’s nowhere where they could draw them that would deprive the Wilkinson’s of their mineral rights that have been with the family, and any other attempt to say so by the state or to gloss over it, is nothing short of stealing,” Swanson exclaimed.

We asked the Vogel Law Firm Attorney: “What you’re saying is there’s no point in redrawing the line in the first place because the original line is all that matters?”

To that, he responded, “Amen. That’s exactly right, in a nutshell. That is exactly right.”

Smith couldn’t comment on this specific case, but she said the WENCK line is now set in stone.

“What we’re trying to do is determine the acreage between the new line and the old line so if we need to reimburse a private mineral owner for the royalties that we have inadvertently then received, we can do that,” she explained.

To date, the Wilkinsons said the State is holding about $900,000 in royalties made off of their 286 mineral acres since 2010.

Smith said that money is currently frozen and will be until the Supreme Court makes a decision. The case will be argued sometime late this spring.

But the Wilkinsons are not the only ones fighting the State in this way, not by a long shot.

Swanson said five years ago he discovered that over a quarter of a billion dollars was in dispute between landowners and the state. He estimates that the number is much higher now.

Smith said the state has about 500 leases along the river and knows there is a long road ahead, full of legal battles that could affect the future of K-12 funding in North Dakota.

And, the Department of Trust Lands has more work to do.

Senate Bill 2211, passed by state lawmakers in 2019, requires the Department to take a closer look at all state-owned land along the Missouri River, based on the new high watermark from the WENCK study.

Trust Lands recently contracted an engineering firm to do that. The firm’s acreage adjustment should be completed in June.

After it’s done, there will be two years for landowners to contest the new line.

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