Some Rules of Engagement for Drilling in North Dakota

When it comes to the extraction of mineral resources, the question of ownership is a big one. Surface owners only have the rights to use the surface of the land. Mineral owners have rights to the subsurface, including all oil and gas deposits. Fee owners refer to those that own both.

Rights of Surface Owners

  • Landowners who are accommodating drilling operations on their property should expect their input to be taken seriously as to the placement of the drill site. The location is based on many factors, including geology, but all should be given equal consideration. 
  • If mineral rights that exist on a current landowners property have been abandoned, surface owners have first claim. 
  • Damage payments are owed to surface owners in the case of devaluation of land or agricultural production. The amount is to be determined by the parties involved.

Rights of Mineral Owners

  • Royalty payments can begin as soon as two months after the start of drilling, but could also take many more months to activate. It is dependent on the specific situation or contract.
  • When leasing to an operator, it is up to the lease broker whether or not to divulge the identify of the oil or gas company. Many times these companies wish to remain anonymous to the public.
  • Mineral owners who do not lease receive a cost free royalty.
  • Mineral owners or lessors must properly dispose of waste, operations such as North Dakota aggregate haulers are qualified to do this.

Rights of the State

  • Ultimately, the spacing of the well is to be decided by the state, specifically the Industrial Commission Order. Input from all other parties involved is taken into account.
  • Only the NDIC has the authority to approve any forced action, such as “force pooling” or the “recovery of a risk penalty”. 
  • The state of North Dakota has the right to enforce production cutbacks in order to preserve a balance of cash flow and evaluate gas reserves at the same time. This also promotes economic stability by preventing “flares”.
  • The NDIC Oil and Gas division can inspect a drill site up to two times per week in order to make sure that oil companies stick to what their permits allow.

There are many more rules to abide by, but hopefully this covers some of the basics in language that is easier to understand than that of the state code book. You should not take this as a comprehensive summary.