ND state land oil lease auction brings record $158M, most funds will go to public schools

ND oil lease auction brings record $158M

BISMARCK, N.D. — A quarterly state auction for oil drilling rights on North Dakota state land has reaped a record $158 million, most of which will go toward public school funding, figures released Thursday show.

The two-day Land Department auction that ended Wednesday fetched an average $2,967 an acre for about 53,275 acres of land in a dozen counties in western North Dakota’s oil patch, agency records show.

It more than doubled the previous record of $71.5 million, with a per-acre average of $1,214, set in November, said Linda Fisher, a Land Department leasing coordinator.

“Nothing has come close to this,” Fisher said.

Williams County alone bested the previous record set last year for 12 counties, fetching $76.2 million for about 20,000 acres of land, according to the state agency’s figures.

The bids, also called “bonuses,” are one-time payments per acre bid to determine who earns the right to hold the lease. Successful bidders also pay rent of $1 per acre per year for the right to hold the lease for up to 5 years without production.

“If they have not drilled in five years, the land is available again for auction,” Fisher said.

The highest bonus bid in this week’s sale was $12,500 per acre for eight acres in Stark County. The sum paid by Summit Resources Inc. set a per-acre lease record for rights to drill on state land, Fisher said.

“That was a stunner where everyone dropped their mouths,” she said.

The state shares royalty income from producing wells. Most of the lease and royalty income is paid to a pair of state trust funds: The Common Schools Trust Fund, which benefits public schools, and the Lands and Minerals Trust Fund, which is tapped by the Legislature for special projects.

Fisher said the Common Schools Trust will get $96 million in bonus income from the May auction and the Lands and Minerals Trust will get $55.7 million. Smaller state trust funds share in the remainder.

“These go to trust funds that ultimately go to support schools,” said Secretary of State Al Jaeger, who also is a member of the state Land Board, which governs the investment of the school trust fund and oversees the leasing of mineral rights on state land. “Our assets are growing considerably and that’s going to help schools and that’s important.”

The record bids show oil companies have confidence in the state’s oil patch, said Ron Ness, president of the North Dakota Petroleum Council.

“This further validates the size and scope of the play, which is moving to another magnitude of development,” Ness said. “There is $158 million in new wealth in North Dakota but the real winner is education, which benefits us all.”

More than two-thirds of the state’s 1.1 million acres currently is leased for drilling in western North Dakota’s 16 oil-producing counties.

Fisher said the state can only expect a finite amount of funds from future leases.

“These are fun and exciting times,” she said. “But to be honest, our inventory is dwindling.”