Dick,
North Dakota Administrative Code 43-02-06-01, subsections 6 and 11 dictate that to properly request information from a mineral royalty disburser, it must be sent via certified letter and a 30 day response time is also required of the mineral royalty disburser.
You are absolutely correct that we have no means to verify whether we are being properly compensated. It required a lawsuit to substantiate the right of the North Dakota Department of Trust Lands to audit and expect that requested information being submitted to the Department.
Many financial experts suggest that Oil & Gas transactions are the most complex financial instruments in the world, bar none. Further complicating the issue is that leases have evolved over the years as court cases have been decided in a manner that was adverse to the industry. A new lease form has been created at various junctures when a loss was too substantial. This wide variation in lease language makes the situation more and more difficult to assume what is or Is not appropriate or legal.
When the oil and gas leases were signed in ND during the late 40's and early 50's, it was assumed that a 1/8 lease meant you would get 1/8 of the value of whatever oil and gas was produced. That practice seemed to be followed for more than 50 years. It was the "trust me" practice that reputable industry leaders took pride in providing. The new corporate leaders seem to have no inhibitions to violate that policy and the "trust me" philosophy has died. We are now dependent on the courts making all decisions about what the language in a lease means. I believe it is time for the state legislature to address the many issues related to our concerns, but it is incumbent on us to work together and help define the solutions we believe appropriate.
I also believe you are asking how the $319 million dollar figure was determined. I will try to delineate.
Using the latest production numbers from the NDIC of 1,480,000 barrels per day (bpd), $43.28/ barrel being used by the Legislative Assembly for budget projection purposes, and assuming everyone has a 1/8 (12.5%) I will run through the process.
But first we must make an assumption of what we believe the average Postproduction cost (PPC's) is that is being assessed. Hess Bakken Investments since the beginning of 2016 has assessed more than 35% PPC's. Rumors have it that other companies are also at a similar percentage being withheld as well. Some companies suggest that there PPC's are much less but it difficult to understand why the same companies pay less for the produced oil. So we are going to assume that the average PPC being assessed by some means is only 10% overall. I would suggest that is very conservative.
So here is the math and you are welcome to tell me where I may have erred in my assumptions or calculations:
1,480,000 BPD x 12.5%= 185,000 BPD to Royalty Owners (RO)
185,000 BPD x $43.28= $8,006,800 Dollars/Day to RO
$8,006,800 x 10% PPC's=$800,680 /day PPC's
$800,680 /day x 365 days= $292,248, 200 per year
This number includes the latest daily production from NDIC but also includes the per barrel price used by Legislative Council for projections rather that the original estimate of $50 per barrel. If $50 / barrel is used, the estimate becomes $337,625,000. We also know that not everyone has a 1/8th lease. I believe this to be a conservative estimate of real PPC's.
