Industrial Commission adopts rules on royalties, smaller liquid spills

Dec 5, 2017

North Dakota Industrial Commission meeting 12/4/17.
Credit Dave Thompson / Prairie Public

Under new rules adopted by the state Industrial Commission, oil companies will have to give royalty owners more details on deductions taken from their royalty checks.

Royalty owners have complained about trying to get answers from the oil companies on why some deductions are taken from their royalty payments.

North Dakota Mineral Resources assistant director Bruce Hicks said the rule will provide clarity and transparency.

"The statute says the royalty owner has to be clearly able to identify the deductions on the royalty statements," Hicks told reporters. "The rule we have in place now allows a little more leniency."

Hicks said it is now a cumbersome process, where the royalty owner has to notify the operator, then get word back on what those deductions are.

"We wanted to make sure we had a standardization, where the royalty owner is aware of what deductions we have," Hicks said.

Oil industry representatives said they don’t like the new rule – in part because it will cost about $1 million to upgrade software to meet the new rule. 

"In September of this year, industry distributed $8 million a day," said Mineral Resources director Lynn Helms. "I don't like that it's going to cost $1 million, but I think it's justified."

The rule changes will now be considered by the Legislature’s Administrative Rules Committee.

The new rules won’t take effect until July 2019, to give the Legislature a chance to look at the issue.

Meanwhile, the 2017 Legislature passed a measure that says oil or other liquid spills on site at a well that are 10 barrels or less do not have to be reported to the state.

But a new rule approved by the Commission modified that slightly.

"We wanted to make sure that if a company did not go in and appropriately clean that spill up, or use appropriate resources to contain it, that we had that in the well file," Hicks said. "Industry agreed during the rule-making they would not object to that."

Hicks said the rule now goes to the Legislature’s Administrative Rules Committee.