 going to bring more questions and issues to our discussion. So an important part this afternoon will be the questions you asked and the exchange of information that we have. There's going to be times this afternoon when I'm going to say I don't know the answer, but perhaps somebody in the crew will be able to offer some thoughts for all of us to take home. So please don't hesitate to raise some questions, share some ideas. We're not going to be able to answer all the questions obviously. We're not going to get into the very detailed personal questions that some of you might have, but hopefully we'll be able to walk away from this whenever we finish up whether that's an hour from now or an hour and a half from now or maybe you're done in 15 minutes from now, but hopefully we'll be able to walk away with some ideas. This afternoon's presentations are already have us understanding the impact of the technology that the oil industry is using and that the technology has certainly changed in the past several years. Certainly it's different than it was several decades ago when the first oil was produced in North Dakota. And as suggested by Gene, there's going to continue to be technology evolving and impacting how the oil industry advances. No different than what all of us have experienced with agriculture. You think about how the technology has changed on our farms and our ranches, how we expect that technology to keep on changing, how that has impacted, how we operate our businesses, what it means to the resources that we use. These people in the oil industry are no different than the business people in the ag industry. The same thing that motivates you are probably the same values and same goals or similar goals that motivate other business people, including the oil industry. So give that some consideration. As you look at your industry of agriculture and I'm making the assumption that nearly all of us have some involvement with agriculture this afternoon. And then you think about how the energy industry is changing. It's an exciting time to be involved with both the food industry of agriculture as well as the energy industry. Again, we've already talked about the technology, the horizontal drilling, the fracking, the transportation, the flaring of the gas, the disposing of the brining, the multiple wells per pad, the pipeline infrastructure. I've heard an estimate that there's going to need to be about 8,000 miles of pipe to connect the wells in our several counties here. That's a lot of pipelines to be built. So as we've already seen the projections of the labor that will be here for perhaps the next five to ten years that we're not only drilling the well but we're building the infrastructure. Again, I don't need to repeat what we've already seen this afternoon but we need to keep those ideas in mind. So what have we seen the past several years? We've seen a rush to get that first well drilled on a spacing unit. We've already been introduced to the concept of a spacing unit this afternoon. We have divided this region into 1288 acres, one mile by two miles, and the technology allows us essentially to set a well at the one end of that two miles strip of land. Go ahead drill down until we hit the strata or the formation with the oil. The oil varies shame. Turn horizontally. I'm still not quite sure how they bend pipes but obviously they do it. And then you drill another two miles horizontally. Once that first well is drilled into that 1280 acres that oil company now essentially controls that spacing unit. So we had a mad rush by the oil industry to figure out which spacing units are we going to be able to get that first well into. Can we get it drilled? Can we get it operating so that we now control that spacing unit? And as also explained already this afternoon, most of those spacing units have that first well. Now we're going to come on back and put in those additional wells anywhere from another five to seven wells per spacing unit probably. Yeah, our family land is just a small track. It's an eastern Dunn county and it's right outside the gray area. I'm not retiring early. We've seen these types of maps already this afternoon. The left edge, the west edge represents the wells of the technology of several decades ago. The eastern region here has the technology that we're using today. We're the horizontal drilling. See Lake Sakakauia there. And as already illustrated by some of our other speakers, we have some of these well pads where there's multiple wells at the single pad and we're producing as many as two spacing units or four square miles worth of area off of one well pad. In the future, we'll be drilling deeper. That's already been described this afternoon, going into other formations. And then the question is, are we going to be going beyond the current oil field? Well, that's already been answered this afternoon as well. Probably not for a little while. Somebody was saying the other day that they thought they saw an oil rig in Grand Forks County. I think that was wishful thinking. As Jane indicated and as the maps have shown us, as the public information is available on the website, we know where this production is concentrated and new people are in the middle of it. Several topics for us to discuss this afternoon. And the topics deal with how we interact with each other. What are some of the questions that arise between us as we have these interactions? Who's going to have the interactions? Well, there's going to be the interaction between the mineral owner and the mineral developer as the title of this slide suggests. In a few moments, we're going to have a slide that is titled, between the surface owner and the mineral owner, when the minerals have been severed. And there's going to be some issues in that relationship. And then the third type of relationship that we'll be talking about this afternoon, you'll be asking questions about, and I'll try to see if I can answer a few of them, is between the mineral developer and the surface owner. So we have these three different types of relationships that I would ask us to think about this afternoon. Why use these categories? Well, I have to use these categories to try to keep my own thinking straight. So as you ask the question, my first reaction is, okay, which of these three categories does that particular question relate to? So that's the only reason why I suggest that we use these sort of ways of trying to organize our questions. Otherwise, we're going to be popping all over the place. So the first one that I would ask us to think about this afternoon are the types of questions that arise between a mineral owner and a mineral developer. And that relationship is essentially the mineral lease. There are some areas of the state where mineral lease has not yet occurred. Will it occur? Well, again, that's a projection as to how large is this oil development going to be in the near future. If it's going to take a little while for the oil development to go beyond these several counties where it's occurring at this time, there's not going to be a lot of mineral leasing in those other areas. Others would say a lot of the minerals have already been leased in this area where the oil development is mature using the terminology that Dale introduced us to this afternoon. So I don't know if we have a lot of questions about mineral leasing today. Some people might say, Gali, we should have talked about mineral leasing several years ago because that's when that was the hottest topic. But I do understand that there are some mineral leases expiring and that particular spacing unit may not have yet been developed. So there's an opportunity for some mineral owners to enter into an updated mineral lease at this time. So there might be a few questions. But again, we're trying to set the relationship between the mineral owner and the mineral developer. Certainly, we're still determining the ownership of our mineral rights. A lot of those mineral rights have been determined. Yeah, there's some very small fractions as families have held on to the minerals and allowed it to pass to the next generation and sometimes it passed to the next generation without people even knowing about it. So we're going through a sorting out process and trying to figure out who owns these minerals. Again, many of you perhaps have experienced that in the last several years, so we probably don't have to spend a lot of time with it. I'll just share a very quick experience that I had last August. A lady came to my office and she said that she had been contacted by an oil company. The oil company was trying to figure out who owns the mineral rights. She didn't know anything about it. They said, well, it looks like your grandfather owned the minerals on about 160 acres out there. The recall now was Williams County or McKinsey County. And if our calculations are right, you own 8 acres, the equivalent of 8 acres out of that. So you get a, how to do the math, 8 acres out of a 1280 acre spacing unit, that begins to be your interest in this oil well. By the way, that's already producing. So she was pleasantly surprised to find out that she had some interest in a producing oil well or at least mineral interest much to her surprise. So we're still trying to figure out who owns these minerals. At this point, I'm going to stop. It's your turn to start asking certain questions. Do you have some questions? Go ahead, sir. Well, apparently you've done a little research on their ownership of minerals. What's your interpretation of gross ownership? Gross ownership? Yeah. I'm not sure if I've ever heard that term before. In what context have you heard or seen that term? Well, in our final opinion, it said that gross ownership means the minerals have to stay with the landowner. It's our state law. And the original owner cannot I believe it sell, convey, or that there's three things and it's only for your lifetime that they can be held for income. And that's our law. And most people don't know that. I'm not familiar with that statute. You need to look it up. I'd welcome a citation on that. Legal opinion include. Citation to that law. Okay. I didn't do very well. Flock my first question. You have? Next question. Let's see if I can do any better next time around. You're doing pretty good at stuffing me, so come on. Let's see if we can get two out of two. Got a parcel of land, no minerals underneath it. It's kind of a typical scenario. All company comes in and they want to fill the row pad and they offer you this dollar amount. As we understand, as a service owner I have to accept whatever they heck their after. You don't have to. What happens when I don't? I won't sign their lease. First of all, you're taking us to the third category. But we'll just ask one more time. Are there any questions on this first category before we jump to the third category? Because I would expect that's what we're going to spend most of our time this afternoon is between the mineral developer and the service owner. I think that's what we're going to have in most of our discussions this afternoon. But one more time before we hop to category three, are there any questions on category one? Where it's between the mineral developer and the mineral owner? Just as we're signing these leases with that blue clause in that, that usually gives them another six months after they're in the lease to still drill. And we can also go with vertical blue clauses also. And those are some points to be talking about. Which mineral rights are we leasing? And these mineral leases are entirely negotiable. There might be times when somebody says well this document that I'm presenting to you is a standard mineral lease. The reaction is there is no such thing as a standard mineral lease. So don't hesitate to negotiate. Just like you negotiate when you lease your farmland or whatever else if you're negotiating. Don't hesitate to negotiate on the mineral lease. If you want to negotiate trying to people have successfully done it, divide your mineral interest by formations. I'll lease to you the right to develop the minerals in this formation. So now you're going to have to do a little bit of studying to understand the methodology of your minerals so that you can intelligently and appropriately specify that formation. Then that implies that you have reserved the minerals on the lower formation. So if another mineral company comes to you and says we'd like to lease your minerals and we recognize that we're not going to be able to produce the minerals on the upper formation because that goes to company A already Go ahead. You can lease out the minerals on a lower formation and you can stratify your mineral interest. Or you can try to do it. You can try to do it. It's negotiable. Why would you want to do that? You still have 20 rigs on your land. Why do you want to do it? There are the downsides. Are you going to have more drilling on your land? Maybe you're going to have that same drilling anyway. But it does give you a chance to say if the minerals are being developed at the 10,000 foot level today and they're not going to be developed at the 17,000 foot level for another decade, come on back when you're ready to talk about the 17,000 foot level sometime in the future. Or to hold a lease for 50 years like you just said. It's negotiable. Some of you are going to walk out here saying no I'm just going to lease it once and I'm going to have it lease because I think they're downside of trying to stratify my mineral interest. Others are going to walk out here saying that's something for me to think about. Maybe I'll at least look into it a little bit more before I make that decision. So I'm not going to say do it one way or the other. I'm not going to debate with you do it one way or the other. I'm just going to try to make sure that all of us are recognized that we have these opportunities. Yes. It says a company that you don't lease and a blank lease to. It doesn't go to sell zones in other companies. Oh, they're going to do that. They're going to if one company was to lease all of your minerals from the surface of the earth to the center of the earth, legally you own from the surface of the earth to the center of the earth. Actually legally you own from the sky to the center of the earth. When you own a track of land you own as high as the heavens extend to the center of the earth. So if you lease up the minerals you can rest assured that whoever's leasing it's going to be a business person just like you. When you lease something from somebody else you look for profit opportunities. The mineral companies are going to be no different. They're going to look for profit opportunities. And if their profit opportunity is to release the hyphen is there. The minerals at the 17,000 foot level, that's just a hypothetical number to pull it out and they're going to lease that to company B, that's part of doing business. No difference in the way we do business when we farm or ranch. Other questions or comments? I think I said it in favor of doing it earlier. You're four years late. I told that yesterday as well. Even though we're four years late, we need to be mindful that we are clearly producing more than just crude oil that the natural gas is almost equally important. Some situations perhaps more important than the crude oil. You have an opportunity to negotiate a mineral lease and be thinking of both the crude oil and the details that go into an agreement on the crude oil that's being produced and then another paragraph in the mineral lease where you think about the natural gas. Why the difference? The natural gas as been discussed this afternoon is going to be transported by pipeline. And it needs to be processed. It needs to be processed before it even reaches the major pipelines. That processing obviously includes a cost and one of the questions is who bears the cost of processing that natural gas so that it's ready to be included into the pipelines. Negotiate that into your mineral lease the best you can. Clarify who is paying that processing cost for the natural gas. Try to specify a market where you will be pricing that natural gas. Natural gas just brings in some details that don't necessarily become issues when you are thinking about crude oil. So when you look at leases you are looking at some leases as sample leases to help you think about the lease that you might want to negotiate and enter into be mindful that you try to address both the crude oil as well as the natural gas. Questions or comments? Yes. It seems like on the slide before that probably kind of missed the last part of that where it says questions about decisions not to lease. In the 80s we got legislation through that you didn't have to lease and you could participate in 16% of the minimum royalty is the basis for the minimum royalty. Correct. And so there's a few people that didn't get the terms that they wanted so they didn't lease and participate. And you could be a partial owner you essentially are a partner in that, well, yes. Or non-participating. They can't force us either. They could come up with money to be in with them. They can't force you to come up with the money but then you create a penalty in terms of how much you see and that's okay. So these are decisions that mineral owners need to make to consider their options as they then make these decisions. Other questions? Thought I saw another question in the back. I'm just going to say that if I had a landowner, mineral owner tell me that in his lease he gets paid for the natural gas or the good for him. Good. From a mineral owner's perspective, from a community member's perspective I'd say good for him. Other questions or comments? Over here. Go ahead. I've heard this, don't know if it's accurate or not, but has anybody been successful in negotiating a lease where you don't allow flaring of the natural gas? The question is, has anybody been successful in including a provision in a mineral lease that prohibits flaring? Do we know of any such mineral lease? I'm not aware of such a mineral lease. Maybe somebody else in the room may want to come up. I'm going to guess that that probably means that in majority. Flaring usually is going to be occurring at least initially. Comments. Very briefly then, the second category is, are there questions between the mineral owner and the surface owner? I think there's anybody that's not used to it. I just have a couple of points. It's well established that the mineral estate dominates over the surface estate even though people sometimes shake their head wondering how that ever came about. That idea probably arose a century ago or even several centuries ago that the mineral estate dominates over the surface estate, which essentially means I own the mineral rights. I can come onto your land even though you own the surface so that I can develop my minerals. North Dakota does have a statute in place that allows the surface owner to claim ownership of the severed mineral rights if the mineral owner hasn't used those minerals in the past 20 years. Essentially the mineral's interest has been on use for 20 years or more, considered abandoned. And then the surface owner can go ahead and initiate a process to try to acquire ownership of those minerals. Part of the process is that the surface owner needs to try to identify who is the mineral owner, needs to try to contact the mineral owner and inform the mineral owner that this process has been initiated and clearly if the mineral owner then receives that information or that notification from the surface owner, the mineral owner often tries to ask the question that what do I need to do to hold onto my mineral rights. But we do have this law in North Dakota. Other states have similar statute. Other states have litigated it and say yes, this is a constitutional law and therefore people in North Dakota are saying we're going to arguably rely on the other states that is constitutional here in North Dakota as well. There are those who also argue though that this law really is unconstitutional and shouldn't be enforced. I don't believe it's been litigated in North Dakota. I know it has been litigated in other states. So second category then is between the mineral owner and surface owner. Questions or comments? Go ahead. Can only the surface owner find what he needs? Yes. Okay what happens, say the oil company can't find all those mineral owners, down to small pieces. What happens to that money? That money is held in trust. So then the surface owner at some point would be discovered after go after it? No. The statute is clear. You don't get to go after those. Instead it's going to be held in trust. A portion of it goes to the county and eventually the rest of it goes to the state. Is there anything happening in the legislature currently that can change this law? I'm not following the legislation right now. It keeps me too busy to try to follow the legislature. I went until they're done and then I figure out what they did. Is there somebody else in the group here that's following some of the proposals in the legislature at this time? I haven't seen any. I don't think this I haven't seen that deal come across. And we're quoting the bad factor of past filing deeds. Any other questions or comments? Tank was going to the third category. The question that was asked a few moments ago and we didn't answer. When we have a dispute between the surface owner and the mineral developer the mineral developer is coming onto the land disrupting the surface activities where we act. North Dakota law requires compensation for the surface impacts. We have those statutes. We're going to look at them in a little bit of detail this afternoon. We're going to probably discover that those statutes don't answer all the questions. But at least they're a start. I understand that there are bills in this legislative session to refine some of these statutes and again there's probably some of you in this room that are following it much closer than I am at this time. But at least look at where we were at the end of our 2011 session and then be ready for what might still come out of our 2013 session. We also have North Dakota Mediation Service which is part of the North Dakota Department of Ag and the legislature has tasked the Mediation Service with the responsibilities that they've had since the 1980's but they have added, the legislature has added to those responsibilities to also help resolve some of these disputes or uncertainties between the surface owner and the mineral developer. So we do have a Mediation Service to help us negotiate or resolve some of these questions if we're unable to resolve them between ourselves and the mineral developer directly. We know that the pipelines are coming we know that the easements are necessary for these pipelines and they are going to be raising my expectation to be raising many more questions in the near future. Is there an imminent domain to that the pipeline companies can force a property owner to give up an easement for a pipeline? Yes? No? I think that one's still to be answered. Can we negotiate? Yes. Hopefully we'll have an opportunity to negotiate and then if the negotiations aren't successful, do we then use something like the Mediation Services again? Probably should have a fourth sub point at the very bottom here and that is when the negotiations fall apart you go to the court. I was a point that was discussed several times yesterday in Crosby the ultimate resolution even though it can be expensive and time consuming is through a court proceeding so we'll keep going for a few moments but be ready to ask some questions. The North Dakota Statute says that the surface owner is to be compensated for lost value to interrupted production. Some people would ask is this statute in North Dakota really offering the protection that we would like it to offer? There are other states that don't have this type of a statute and I would suggest in those other states that there's even less protection for the surface owner. For example, because the mineral estate dominates over the surface estate there are states that interpret that concept to mean that the mineral developer can enter onto the property develop the minerals and there is no obligation by the mineral developer to compensate the surface owner in some of those states the only time that the law requires compensation is if the mineral developer has caused unreasonable whatever that means has caused unreasonable damages North Dakota's statutes that we have in place certainly offers more protection for our surface owners than in those other states. North Dakota is trying to say surface owners are entitled to be compensated looking at the statutes a little more detail these are the current statutes these are the statutes as of 2011 they might be quite different by time we get done with the 2013 session as of now the statute talks about damage and disruption. A mineral developer is the surface owner for damages sustained by the surface owner and the tenant. That was one of the questions yesterday in Crosby well can the surface tenant try to negotiate with the mineral developer? Now while you look at this action it's pretty clear it's the surface owner that negotiates with the mineral developer and the surface owner negotiates on behalf of the surface owner as well as the surface operator, the tenant and there is concerns about well that surface owner might be an accident land owner in Minneapolis that doesn't understand or appreciate all of the interruptions and the impacts of mineral development on the surface use the person who understands that is the tenant. So surface owner you're going to need to be talking to the tenant, you're going to need to talk to the surface owner we'll see that addressed again by the North Dakota legislature just a few moments. So what type of damages is the surface owner to be compensated for under this North Dakota statute? Lost land value lost use of and access to the surface owner's land lost value of improvement caused by the drilling operations well if you look at those three categories of losses there's probably some other losses there that are impacts that aren't arguably incorporated or encompassed in those three categories dust off of the public road in front of my farmstead I don't think that one fits in those three maybe you can come up with some other examples so even this relatively broad language maybe it isn't as broad as it looks certainly doesn't include all the type of impacts. What do you mean by drilling operations? This statute applies to only drilling operations drilling operations and drilling and oil and gas well subsequent production and completion operations and oil and gas exploration activities well there's some things that mineral developers do that might not fit the definition of a drilling operation and if those activities don't fit the definition of a drilling operation then arguably this statute doesn't protect the surface owner for those other types of activities so the statute isn't quite as broad as it might look initially the amount of damages to be determined by mutual agreement between the surface owner and the mineral developer those are the two parties that the legislature anticipates doing the negotiating payments are to compensate the surface owner for damage and disruption these payments only cover land directly affected by drilling operations so my land's adjacent, my land's being impacted but the drilling operation isn't directly on my land arguably the statute doesn't apply so the statute might not be quite as encompassing again as it might look at first blush only one payment for damages caused by exploration multiple payments multiple years for other damages so that's one of the two statutes the other one statute talks about loss of production mineral developer pays the surface owner for damages sustained by the surface owner and the tenant for loss of agricultural production caused by oil and gas production and completion operation agricultural production is quite broadly defined in this statute amount of damages may be determined by mutual agreement again between the surface owner and mineral developer payments are to compensate the surface of owner for loss of production payments for loss of production must be made annually unless the surface owner lacks only one payment so you have an opportunity to have these payments for however many years he doesn't say that you get to renegotiate them every year just as you get to conceive the payment every year for both types of damages if there is no agreement between the surface owner and the farming tenant as to the division of the compensation the legislature says the tenant is entitled to be compensated so the legislature says there needs to be some compensation somehow because it's going to be the tenant the surface operator that's going to be impacted since a smaller field it's an irregularly shaped field it's a pathway or a roadway across the land or through the pasture so the legislature is trying to make sure it's clear that surface owners do have some responsibility to that surface operator or to the tenant the person offered compensation may accept or reject any offer and I think that was one of the comments that was leading up to the question a few moments ago if the person rejects the offer from the mineral developer that person can then bring a court action seldom that the includes language in a statute that says well people if you can't come up with a solution sue each other but it's pretty clear that the language in this particular statute as it sits as of today if people can't come to an agreement a mutual agreement that you both can live with the legislature makes it clear because the only solution then is to bring in the attorneys and use the legal system okay let's go ahead with questions and comments go ahead Dale you mentioned earlier about the mediation service through the department of A would that apply in this particular case if the surface owner didn't agree to the surface compensation thing that the agreement company was operating can that go to any mediation or mediation I guess it would be and wouldn't that hold any standing or would it still end up in court the hope is that if the two parties can't come to an agreement themselves try someone else to maybe help negotiate that agreement such as the mediation service the mediation service is a mandatory if one of the parties wants to involve the mediation service and the other party doesn't want to cooperate the negotiations fall apart there and then you're down to the last resort of courtroom if the parties are willing to use the mediation service and that mediation the discussions facilitated by the mediation service so it's successful that the parties come to some type of agreement good for everybody involved other questions yes and the state commission will tell you if there's wells drilled on state school land can they tell you which direction the leg might go yes you can first of all look at the map that we were showing this afternoon that shows where the leg is located and if you want more detailed information the industrial commission has that information is detailed that is public information where those wells are located where those horizontal bores are drilled that's all public information yes in the case of this mediation situation how much of mediation can you in this situation of land or mineral development in several minerals when I have visited with the people in the department of A they only give general responses I haven't given any specific numbers their comments are it's increasing and there a year ago about a year ago when I visited with the department of A about this responsibility their response at that time was we're getting ourselves ready for it because it was a new responsibility and they needed to get themselves prepped that they understood the subjects and they would be meaningful mediators so we're starting at a very low base as about a year and a half ago and it is slowly increasing but mediation service is very serious about that this is their responsibility and they want to be available for example in McKinsey county you know in a lot of the acres known by a railroad grant severed off the surface zone a lot of that exposed to various companies to develop minerals that aren't owned by the surface zone correct and this statute though is to provide some protection for the surface zone that when these minerals are being developed even though the minerals are owned by someone else because they were severed years and decades ago this statute, these statutes are to help the surface owner be compensated for the interruptions Is there any late in time that this severed mineral ownership can exist or is it forever? Well that was a earlier comment I think this afternoon was that it can be terminated if I understood the comment correctly but generally the severed ownership is perpetual it is unused for 20 years and then the surface owner claims Do you have any idea how many surface owners do not own minerals? Do you have any idea? The very general statement that I hear when the question is asked as to how many severed mineral rights are there and I need to dust off some cobwebs so that I can receive the statement between the federal government the state government, the railroad about 50% of the minerals in western North Dakota are held by those three entities and then when I make that comment almost inevitably somebody towards the back of the room says don't forget about the financial institutions that have retained minerals when they foreclosed the land and then sold off the surface rights and kept the mineral rights I would expect that there's people in this room that may have spent some time in the court houses looking at mineral ownership and land ownership that can answer that question better than I can I just have the general hearsay statement is in my opinion a big number. I think there's a lot of things that can really be stressed in the eastern part of North Dakota people because they look at us and say oh you got your money well very few of us own it but the assumption is that man you're really breaking in the door other comments yes I've got a question on compensation there for a while you know the salt water's supposed to be packed and a lot of these guys you know in suspicion they probably weren't open truckers but there's a lot of salt water dumpings and they load up the salt water truckers where they felt like dumping it they would on my property pulled up on a location back over the edge and dumped it they suspected two semi loads of salt water was on an oasis location and what kind of bothered me that the pumper didn't notice that like a thousand feet of trees that was killed in a draw they didn't recognize it so I went hey you got to compensate me and do something so we'll clean it up so they hired earth movers out of mine that did the adhydrous bill they came up a pretty good job of cleaning it up and they fenced me out of it so the pasture could rejuvenate again and now they're saying it was a dumping it wasn't a spill from us we're not going to compensate you anything for that spill and this has happened in three other locations is that fair for them to say we're lucky we cleaned it up for you but it was off their location a lawyer can't answer whether or not it's fair that's for a politician sorry a lawyer's comment is more of is there a potential legal remedy and probably going to end up sounding like a broken record this afternoon but when somebody does something on my land without the legal right to do it without my permission to do it it's trespass and I have to go to court to prove the facts that they really did it to my land and hear the damages under a trespass and they never did know who done it and unfortunately sometimes we don't know who pulled the trigger other questions or comments yes there was a question about where you and earlier stated you own everything above your land and everything below your land in the center of the earth and say in the pooled area the location is not on your property you own 40 acres in that pooled area and the well is drilled through your underground so is that considered a pipeline it's crossing your property trespassing but you're not paid for that pipeline underground which is deeper down they're actually producing the oil is that what they've crossed your property whether it's a driver or not but they've crossed your property in the pooled area they drilled through your property just as if it was a pipeline but it's deeper but it's still crossing your property as you stated earlier you own everything to the center of the earth so if they drill through your property you can prove it through the states is that considered damages it's not a trespass because what they're required to do is pay you for your portion of the minerals they have to figure out who all owns the minerals within that 12-earned 80 acres spacing unit and everybody who owns minerals within that 12-earned 80 acres shares in the production from those 12-earned 80 acres yes was that hold your lease your lease is with company A and company B drilling the well yes it holds your lease that 20-year deal does that include state and federal land no they own it forever that 20-year of unused mineral interest being declared abandoned does not apply to the states other questions or comments by the way if I don't know the answer I make one up you know how busy the courts are getting tied up with cases right now I would expect that the courts are going to get busier than they already are and that yeah we're going to have a lot of litigation I would expect that it's going to vary from district court to district court there are pleas in front of the legislature right now to see if we can get some additional judges into these areas where there's rapid population growth and rapid growth and legal issues so hopefully the legislature will listen to that and get a couple of judges that are additional judges to serve the western area so we can keep these proceedings moving forward the other alternative is to do your best to see if you can come up with negotiated settlements I've been perfectly involved with several of these matters and almost always eventually settle but it takes a little bit of pushing to so it helps to finalize it and I'm not saying that to promote the business for lawyers it does become a negotiating ploy that I'm serious and if you don't want to deal with me we will go to court can we negotiate water and you see when you look at mineral leases you look at surface agreements especially in other states there's often times some type of a question as to whether or not the surface owner or the mineral owner can grant the mineral developer the right to use water North Dakota really doesn't give the mineral owner or the surface owner that type of legal authority all water North Dakota is owned by the state of North Dakota and all water North Dakota is used by the permission of the state so if I grant you permission to use water on my land that's really quite worthless in North Dakota the only way for you to get permission to use water that has to be located on my land is to get that permission from the state okay yep all water in North Dakota is owned by the state of North Dakota you need an explicit permit to use the water permit from the state except if you're drilling a domestic well a well for livestock including a stock pond and a well or pond for recreational purposes and even if those get to be more than 12 and a half acre feet of water in a year's time you still need a permit for those so all water in North Dakota is owned by the state of North Dakota and you need permission from the state to use that water okay you get to a state like Texas where in Texas brown water is owned by the surface owner so if a mineral developer wants to use brown water in Texas they have to get permission from the surface owner that type of paragraph really has no meaning in a North Dakota mineral does North Dakota own Lake Sacargoia owns the water in it no question about it and the federal government even backed off on that one was there a bill that they just introduced about tax on it on all water the question is is there going to be a tax possibly imposed on what Lake Sacargoia water? All water used by the oil industry? I think it was defeated in that but that's what that is, all water all industrial water is asked then is cleanup after these wells and might be decades until these wells are no longer producing or some of these wells might go out of production fairly soon and are replaced by other wells but the question still is the cleanup of these wells and the mineral developer the oil company is to clean up the well site plug the wells and the industrial commission has a responsibility for overseeing that cleanup is occurring but it doesn't hurt to when you're negotiating this surface compensation agreement with the mineral developer remind them in your own agreement that by the way when you're done with this well whether it's next year or 20 years from now you still have a responsibility of cleaning it up I'd like to enforce that as going to come from the state but I would say it doesn't hurt to remind them that you're thinking about it as well yes? On reclamation of oil sites how long does that let's say that the release is held by production and it's happening right now the first well is now not in production but it's being held in production by another well but that particular site now is not active anymore do they have to reclaim that within the same limits or is it still you understand what I'm saying? They're actually some of the first wells that they drilled here you know they shot them down within three to four years but it's still being held by production. The industrial commission doesn't care whether the mineral rights are being held by production they care about whether or not this well is producing so your question of we have a well that's been producing another well beside it is also producing the first well is shut down from the mineral owner's perspective my mineral rights are still locked into this lease because there is the second well that continues to pump does that relieve the company or give the company some additional time of cleaning up the first well? No that doesn't change it at all the industrial commission doesn't care about whether or not there's a mineral lease being held they care about whether or not this well is pumping and once that well is not pumping you've got to go by the regulations to get it cleaned up. The responsibility of cleaning up the company industrial commission needs to step in so responsibility of the state to step in and I don't I'm not sure if the state is ready to take on all of that responsibility but the only provisions that we have right now it essentially shifts it to the state. It's the industrial commission that needs to get it cleaned up, get it plugged to make sure for example that water isn't going down there or something is not coming out and contaminating a water source at that well is getting plugged and then the industrial commission needs to try its best to get the money out of the responsible party. Don't they have to pose a first? You're asking some questions that I don't remember the answers to I do believe there is. But I know we had it up not too long ago. So there is there is a bond. It wasn't very much. Five thousand rather walk away. There is a bond that the mineral developer needs to post so that the state can draw on those funds to cover up some or to cover some problems that arise in the future. But as the suggestion was offered here, sometimes those bonds aren't enough to cover the costs. Other questions or comments? Go ahead. There was a case in the lake now but they drilled it on the other side when it was drilled before the lake was out there. And the outfit that drilled it went broke. And the state I think had it wrong plugged out. They did it on the ice. Even if it's a difficult well to plug, the state is expected to step forward and plug the well. On division orders, how long can a well company drag their feet on sending you a division order after the well is built and completed? I don't remember. There are regulations under the industrial commission for those type of details and I don't know all of those details. I'm pretty sure it's 150 days from the state of production. 150 days? But they can drag it out as long as they want as long as they pay you interest from that date. Only if you request it, it will give you your question. They're supposed to, unless you ask them. You people know those details far better than I do. They try to get you to again warranty the title or guarantee the title. Cross it out and wait it out or something. Yes. On your documents that state that you are guaranteed, that you are the owner of the minerals and so forth, you are absolutely correct. Cross out that language you do not want to warrant that I own these minerals to sometimes we think we own the minerals and we might not. So don't make any of those type of promises or guarantees or warrants within your documents. Good suggestion. Go ahead. The question on the division order is usually what happens. The oil company will find some particular title defect that then will start the clock over at some future time. So even though maybe the regulation is 150 days, they will find some title defect when you get that cleared up then the 150 days start over again. So it's a little bit fuzzy as to the actual time requirement because it's usually some way or other. How about the oil companies? Do they always account for every mineral acre or under that spacing? They're supposed to. How would you find out if they do? That's all going to be public information again with the industrial commission. It is? Yes. That's all public information. They went through on the reservoir now. They used a high water mark. They say more or less but we say more or less on just about every document. I'm releasing you 80 acres more or less and selling you up 320 acres more or less. That's just standard language of more or less. You can probably find that on most deeds and in most leases. On the lines of that continuation searching ownership of minerals, they're starting to come up with now your grandmother was born in 1880 how do we know she's dead? Look at a good world record of her. It's silly as it sounds. Asked just the lawyer doing his or her job but I say cover it. We do need to be a little more formal with some of our family transactions than we perhaps were in the past. We need to make sure that the death certificates are prepared at the time of grandma's passing even though we've all attended the funeral and make sure that we have a couple of copies of that death certificate available or that it is matter of public record we can go get another death certificate from the state records so that we can prove that documentation as silly as it sounds we do need to have those documents. Are we answering some of the types of questions that you wanted answered this afternoon or are we missing the vote? Yes. Like for you were talking about the abandoned wells okay it is awfully easy for the oil company to say no we haven't really abandoned that it's just terribly abandoned we want to have the opportunity to see in the future if it's make sense to go back in and if the landowner does not go to the industrial commission and you know complain and say look that has not paid for x number of years or whatever and do something about it it's awfully easy for the industrial commission to just continue to grant them temporarily abandoned that status for a well but once the landowner makes the complaint then they have to they have to act on it and they have to have a reasonable reason otherwise they have to reclaim those locations. The comment essentially reinforces the idea that property owners whether you own mineral rights or you own surface rights property owners are expected to protect their property rights and that is a fundamental concept within our legal system and within our society. So if I am the mineral owner and I've leased the minerals to mineral developer the mineral developer has a producing well obviously that lease agreement continues as long as that well is producing if that well is no longer producing then that lease terminates. Who needs to push the issue as to whether or not that lease terminates is the mineral owner. It's not going to be the state, it's not going to be anybody else. You have the situation where okay you have the wells under the same production agreement if the one well has been abandoned or temporarily abandoned for a period of time you still have the right to make that company come in there and reclaim that location. Yes, that was part of what we were mentioning a few moments ago that even though there are two wells one is no longer producing the second well is enough to continue to hold the mineral lease there is still an obligation to get that first well plucked up and cleaned up. Who often does the well have to produce the whole lease? That was a question that was asked yesterday to quickly do some relearning this morning. The term that we wanted to use yesterday and I couldn't recall it is pain quantities. As long as the well is producing pain quantities the lease continues. Well pain quantities that's not five barrels a day or we haven't specified it, we specified a concept and this is again where the lawyers unfortunately get involved but now you need to take that concept and apply to the situation. Part of determining whether the amount being produced meets the standard of a pain quantity it is economics. What is the value of the oil being produced and what is the cost of continuing to operate that well. And if we've run into a situation where we're losing money because it costs more to operate that well than the value of the oil being produced it's not pain quantities. So there is a profit consideration in trying to apply that concept. The second part then is exactly what you asked and that is how often do we need to have this pain quantities. Unfortunately that should be negotiated with the mineral lease four years ago. We can chuckle about it but it is it might be a sad situation in some cases because we don't have that level of definition within our agreements. And you're going to get sick and tired of me telling me what the ultimate solution is probably going to be. You might end up litigating it. I have heard of an oil company tried to say any production, they were claiming they could hold out location with production salt water. That was changed. There were some amendments to it since. I can see the concept of the whole thing. That different level. A different level. The mineral owners are going to want to protect their monitor and protect their mineral interest very carefully. No difference than the surface owner that leases to a tenant that should keep an eye on what is the tenant doing with your property and you check on it occasionally. It might be a little easier to check on the surface because I can drive out to the edge of the field and look at the pasture, the field and see what's going on. But the mineral owner is going to have to become sophisticated enough or informed enough that they can continue to track what's happening with their mineral developments, the minerals that are being produced. And if they're not comfortable with what's happening, start talking to your tenant. That is the mineral developer. Yes. What's your interpretation of the old lease? The comment is the point of if the wells no longer producing but I still pay you some royalty just so that I can continue the lease. That is provided for in some of the mineral leases. I would again as a mineral owner be very carefully thinking about do I agree with that and do I want that as part of my mineral agreement. My mineral lease agreement. Some situations it might be that some mineral owners said yeah I'm comfortable with receiving a relatively small cash payment on a regular basis even though the minerals aren't being produced and if that ties up the lease, the next mineral owner might look at that exact same term and say I'm no way interested in having that type of a situation. Now that's going to be again up to each property owner, mineral owner, to decide how they want to handle that. They have a spacing unit and half of the people decided they want to take money and the other half don't. So where do you end up? Leases are lost one because not producing and the other ones are still Even one could take it to court, couldn't he? Yeah. The one of the people that wants the lease terminated. I'd have to go in the corner and think about that question. I haven't thought about that. I'll write that one down so I have something to think about that I'm driving up and have a half hour to myself and then I can't comment on it because I don't have enough insight on that one to answer. I'm failing all of your questions. Any other questions? Just when they Greg are, I'm not opinionating the first time or something. We can go to the industrial commission on that, can't we? Contact them. You can contact the industrial commission on these matters. Now there's going to be times when the industrial commission is going to respond and say yes we can put some pressure on the mineral workers because they're not following the regulations that the state has in place as to how the mineral company has to operate. There can be other times when the mineral owner is going to raise a question and the industrial commission is going to say sorry we don't have any authority over that particular issue. So if you're not sure as to whether or not the industrial commission has the authority, contact the industrial commission and let them tell you no. That's fair of them. Yes. Can you tell us about being a participating mineral owner and a non-participating mineral owner? If you only let one, they say a half an acre or an acre and a 1280 spacing and you don't want to lease it. You don't want to lease it. The minerals are going to get developed anyway. So the question then becomes do you want to be a partial owner of the well or do you want to go ahead and enter into a lease and act like any other tenant or any other mineral owner that has leased to that mineral developer. If you decide to share in the ownership of the well, you'll have that small fractional ownership, you are entitled to a royalty payment but you also have to pay your share of the operating costs for that well. Plus a penalty for not having been at the part of that well from the beginning. So there are probably some people in this room. There are probably people throughout the community that have decided to share in the ownership of the well but do your homework ahead of time and make sure you know what you're getting into because there are some costs associated with being a partial owner of the well. Does it work to set up a limited liability corporation and put it in then so you kind of indemnify yourself? Say if things go wrong Should I set up a corporation and put that interest in that corporation that if something goes backwards that I'm protected from liability. Just like any corporation whether for any type of a business. If you develop a corporation and it's underfunded to begin with the courts have the legal authority to pass right through that organization and bring the personal liability right back to you. So you need to at least have enough resources in that type of a business organization to cover your risks up front. So again you need to know what you're doing. You need to get some fairly sophisticated legal counsel to help you some of those questions. Somebody who knows a heck of a lot more than I do. How much more time do you want to spend? How many more questions do you want to ask? We got preliminary division orders for our lots in town which is in section 18 and on the division order it said that it was two sections spacing but it was not 1280 acres. There were 30 or 40 acres missing out of that spacing. Where did those acres go to? Did anybody else notice that on your lot division orders? It was section 18 on the government lots on it. We don't have government lines, we don't have correction lots. We don't have correction lots. Questions? My lot. I don't know. I'm only familiar with the correction line on the top of the Canaan and Hawkeye Townships 15295 and 96 and that adds acres to it. So there's 1400 acres in the 1280 spacing. I would I could see where it could be off a few acres from 1280 acres for a variety of reasons. But if you're beginning to be 30 to 40 acres off I think that's a good signal to ask some questions. It's never the right person that I talk to. They're going to call me back some day. She can go up to the tax director and ask how many acres are in this particular section that you're referring to. That's what we do on our 1280s down there to find out exactly when how many acres are on that 1280. There could be up to 10 acres on a correction line of one section. Your registered tax director, how many acres are in that section? Your county register of deans along with the tax tax authority in your county should be able to help you with some of that as well. Thank you. That's just all the quarter miles. We're not going to be accurate like the quarter miles. They show the line being which is on the north correction line. Other questions? Have we answered your questions? It's been a long afternoon. You people have been very patient. I got a quick question. Is anyone along to reservoir from like