BISMARCK, N.D. (AP) — Oil companies would have to provide landowners with earlier drilling notices and more compensation options under legislation considered Thursday that would reshape how property owners are paid for the disruption caused by North Dakota’s energy boom.
Farm and environmental groups, as well as representatives of oil companies and property owners, have endorsed the legislation, which the North Dakota Senate’s Natural Resources Committee reviewed at a hearing.
"This is already having a positive effect" on relations between oil companies and landowners, said Souris resident Myron Hanson, president of Northwest Landowners Association. "We have anecdotal reports of oil companies already changing their negotiation practices."
The landowners’ group, which has more than 200 members, was recently formed to help inform property owners about the impacts of oil exploration.
There was some dissent on a related measure that would give the state Agriculture Department’s existing mediation agency the authority to handle disputes between oil companies and landowners.
Ashley Lauth, a spokeswoman for the Dakota Resource Council, a Dickinson-based environmental group, called the proposal "all smoke and mirrors." Oil companies could refuse to submit disputes to mediation, and the agency could refuse to take cases, she said.
"It doesn’t have any teeth," Lauth said of the mediation bill.
In western North Dakota’s oil-producing region, landowners often do not own the right to benefit from oil exploration beneath the land’s surface. North Dakota law gives oil companies access rights to the land’s surface to set up the equipment needed to explore for crude.
The situation has caused friction between oil companies and landowners as the number of oil wells drilled in North Dakota has climbed.
In March 2006, North Dakota had 3,327 oil wells producing an average of 105,807 barrels daily, according to the state Department of Mineral Resources. Last December, there were 5,097 wells, pumping an average of 343,867 barrels daily.
North Dakota law now requires companies to give the owner of the land’s surface at least 20 days’ advance notice before drilling equipment may be brought onto the property. It also allows oil companies to offer only a lump-sum payment to compensate landowners for damage to their property and loss of its future productive value.
The legislation reviewed Thursday says oil companies must provide at least seven days’ notice before any drilling preparation begins. It would apply, for example, to surveyors and other employees who visit a site to plan its layout before equipment is brought in. Surveyors are not affected by the present 20-day notice requirement.
Hanson said the initial entry onto a landowner’s property can be done months before any bulldozers or drilling equipment show up. "This will give you much better notice," he said.
Ron Ness, president of the North Dakota Petroleum Council, said relations between oil companies and landowners sometimes have a rocky beginning if a surveyor shows up unannounced.
"If I come home and there’s somebody out in my field and I didn’t know they were there, it just makes me mad," Ness said. "And when you start out mad, you stay mad."
The legislation also will involve the landowner in discussions about the layout of the drilling site, which could be done to minimize the loss of use of nearby land, he said.
"If I went out to my piece of land and they had a drilling rig sitting right by my favorite pheasant bush, as opposed to 50 yards up over the hill, where it wouldn’t really bother me, I’d be a little irritated," Ness said. The legislation will help to avoid those circumstances, he said.
The bill allows a landowner to choose annual payments, instead of a lump sum up front, to compensate him or her for the loss of the land’s productive value while oil production continues. Hanson said annual payments would likely increase a landowner’s compensation over the long term.
"Typically, what that involves is your crop loss that you incur every year," Hanson said. "These production sites can be there for 40 or 50 years."
The legislation specifies that affected landowners are entitled to two payments — compensation for the property’s lost productive value, and a payment for damage to the land when the drilling site is set up.
The mediation bill would rename the state Agriculture Department’s Agricultural Mediation Service as the North Dakota Mediation Service, and expand its jurisdiction to include resolving disputes between oil companies and surface landowners.
Several interest group spokesmen backed the idea, but Lauth said an independent mediation board with expertise in disputes between landowners and oil companies would be a better option. Sen. John Warner, D-Ryder, sponsored legislation to create a mediation board, but it was defeated in the Senate last month.
"The ag mediation service has been based upon the fact that parties enter into mediation out of their own volition," Lauth said. "Surface disputes are when a landowner, just a regular old North Dakotan, has a problem with a company and what they’re doing to their land and their livelihood. That is a completely different situation."
Ness said the Petroleum Council, which represents oil companies and businesses that provide services to them, would encourage the use of state mediation services in disputes.
"We’re going to promote this heavily among our members," he said.
The compensation bill is HB1241. The mediation bill is HB1462.