Panelists address the public on oil boom questions in Spearfish Friday, Sept. 14. From left, Kent Ellis, Reuban Bezpaletz, David Ganges and Buzz Skretteberg. PHOTO COURTESY/CHRISTIANE LEE TOLMAN
Oil and gas experts talk turkey about leases, water, tribes
By Talli Nauman
Native Sun News
Health & Environment Editor SPEARFISH — The first thing to know about leasing land for oil and gas development is that a lease for petroleum is not really a lease, commercial litigation and natural resource attorney David Ganges told about 60 people attending the Oil, Gas and Mineral Rights Workshop sponsored by the Black Hills Pioneer on Sept. 14. The workshop is one of several taking place in the area around the Bakken oilfields of western North Dakota, where advances in the technology of hydraulic fracturing, or fracking, have boosted the fossil fuel industry. Among the workshops, one is being planned specifically to deal with tribal concerns on Indian reservations, Black Hills Pioneer Publisher Letitia Lister told Native Sun News. “Hydrofracking takes lots of water,” Ganges said. “Water is more central to life than anything, and it is drastically affected by hydrofracking,” he noted. “Tribes own a large percentage of the water and could make it difficult for us to move it in sufficient quantities,” he said. On a panel with Ganges, Reuban Bezpaletz, chief counsel for the South Dakota Legislative Research Council, recognized that South Dakota is second only to New Mexico in tribal land, where most ownership is by federal patent, and mineral leasing is overseen by the federal Bureau of Indian Affairs. With 49 different agents involved in reviewing an oil and gas lease on Indian land, the process slows development, panelists concurred. “It’s much more difficult to get by the Bureau of Indian Affairs than private landowners,” Bezpaletz said. The Three Affiliated Tribes of the Mandan, Hidatsa and Arikara on the Fort Berthold Reservation in the North Dakota oil patch were “at the tail end of the dog in getting units to move in to produce oil and gas,” he said. “One of the biggest reasons is because the BIA is taking special care to make sure the resources and oil and gas on reservations are better preserved.” Bezpaletz said the “most likely next productive area in South Dakota is around Dewey and Ziebach counties,” both of which are “being held up” subject to revision by the BIA. A private landowner and an industry representative typically sign a contract for oil and gas leasing that is only about two pages long, and the landowner doesn’t comprehend the definitions of the terms, Ganges said. “I don’t understand why people rush into something that’s going to last that long,” Ganges said. “Be careful with leases. They are very significant contracts. “In South Dakota there is a maximum number of years you can lease land, by statute, and many states have these so it doesn’t become a perpetuity lease,” Ganges told workshop participants. “Oil and gas leases are not leases. It’s a misnomer,” he said. “There are some in South Dakota that are 100 years old,” he noted, adding, “Once an oil and gas lease gets into production, it can go on in perpetuity. It would be more appropriately described as an option contract.” Also on the panel of experts were retired Superior Oil & Exxon Co. geologist Buzz Skretteberg; Aurora Energy Solutions land agent Kent Ellis; and certified public accountant Rex Vigoren of Ketel Thorstenson consultants, which co-sponsored the event at the High Plains Western Heritage Center. They discussed royalty clauses in contracts, which spell out a percentage of oil and gas value that goes to landholders. Ganges called these clauses “the meat and potatoes of the contract … where most of the economic gain will be found for landowners.” But, he said, “Too much emphasis is placed on royalties. They are not as important as protection of property rights for current and future generations. “Our surface protection damage statutes are not well developed, and no statute can properly protect the owner. But you can put in contract terms to protect from damage to livestock and damage to crops. That’s the safety mechanism and an opportunity to do well under the contract.” Surface owners should insist on lessee insurance liability and immediate indemnification in case of damage, because compensation under state bonding law is very slow, and the required bonding level in South Dakota is $2,000, well below the cost of many kinds of mishaps. Drilling cannot be expected to boom in South Dakota before five years, regardless of potential increases in petroleum demand, because the drill rigs are all busy in North Dakota, Ellis noted. The South Dakota Board of Gas and Minerals responds to citizen concerns about the impending petroleum pressures. However, former Oklahoma oil lessor Marilyn Allison told fellow workshop participants, “The best thing you can probably do is get together and have a mineral owners group, and help each other out.” (Contact Talli Nauman at talli.nauman@gmail.com.)
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