We've had the North Dakota Supreme Court's opinion in Wilkinson v. Bd. of Univ. & School Lands, No. 20220037 (Nov. 10, 2022), in our queue for a while because it isn't exactly the clearest opinion we've come across. It is relatively short, so that's not the issue. But it is cryptic and poorly written, and each time we steeled ourselves to understand and digest it, we got distracted by some bright shiny object and put the opinion aside. But we've always meant to post it, and now that 2022 is winding down, we figured we better get on with it.
So let's see if we get this right (we're still not entirely sure we did, so feel free to comment if your read of the facts and the court's analysis differs from ours). Here goes.
Wilkinson's predecessors-in-title owned land in the Missouri River, and conveyed most of their interests to the federal government to build a dam. But the owners reserved the oil, gas, and mineral rights, and over the years leased those rights to others. Apparently, there was some uncertainty about title and the location of where Wilkinson's rights ended and the State's began, because in 2009, the State Land Board entered into its own oil and gas leases with oil operators for the same properties. The Land Board leases contained disclaimers of any government warranties that the property it was leasing was, you know, property it actually owned.
Wilkinson sued the Land Board to quiet title, and later added constitutional and section 1983 claims, asserting that the Land Board's leases of the mineral rights to oil operators of what was Wilkinson property was a taking. Later, in one of the case's interlocutory trips to the North Dakota Supreme Court, the court confirmed that despite the disputed properties being in the bed of the Missouri River, the plaintiff owns the minerals, and these are not State sovereign lands.
But after remand and a bench trial, the trial court dismissed Wilkinson's claims, concluding the Land Board was not liable for physical invasion or a Lucas-style total taking, even though the Land Board conceded that after the Supreme Court's decision, the plaintiff owns the disputed minerals and that this property has value. And if there was a taking, it would owe compensation. Slip op. at 8.
That "if" carried a lot of water, because the North Dakota Supreme Court affirmed the dismissal. The court concluded the Land Board had not committed a taking because (and here's where the opinion really spirals into difficulty for us) the "State did not cause a physical taking of the plaintiff's minerals. While the State's leases [with the oil operators] included legal descriptions of property that was ultimately determined to be the plaintiffs' property, the State did not warrant title to the property ... By themselves, the leases neither invaded the property nor legally authorized a physical invasion or occupation of the plaintiffs' property." Slip op. at 12.
The court rejected the owner's argument that the government is liable for a taking by issuing mineral leases to third parties whether or not the government actually asserts title. Here, the Land Board expressly refused to warrant title to the leased minerals in its leases with the oil operators (here, pay us rent even though we're not really sure we own what we're renting to you). Additionally, the court concluded the owner was not harmed by the Land Board's leasing the minerals to others. After all, the court concludes, the Land Board leases didn't prevent Wilkinson from also leasing the property:
Additionally, the plaintiffs fail to demonstrate the State's leases interfered with any of their property rights. Recall, the plaintiffs entered into leases on their property in 2009. Because the Lippert Well continues to produce, the plaintiffs' leases concerning Section 12 remain active. Unlike in [two distinguishable cases], the State's overinclusive leasing activity of disputed interests did not cause the plaintiffs to lose other leases or interfere with the lessees' operations. Therefore, the intervening events of the State entering into leases with oil operators in 2010 and 2011 did not interfere with the plaintiffs' negotiations concerning bonus payments and royalty rates.
Slip op. at 14-15. "Overinclusive leasing activity" is a pretty slick spin on it, no?
The Land Board didn't acquire possession or otherwise seize Wilkinson's minerals, it simply allowed others to do so to the extent of whatever interest the Land Board might have had in the minerals (which turned out to be nothing, if we're reading this correctly).
The court distinguished a recent opinion in which it concluded that allowing third-party oil and gas operators to invade an owner's property by fracking constitutes a per se taking. See "Shades Of Mahon From North Dakota: Fracking Statutes 'constitutes a per se taking.'" That case was different:
In [that case], the State, acting in its sovereign capacity, reallocated property rights through legislation, eliminating the core of a longstanding property right in pore space--the right to exclude others. Here, the State acted in its proprietary capacity by issuing leases. The State's leases did not warrant the State's title to the leased property, nor did they diminish the interest of any other property owner. Through the leases, the State acted in its capacity as a landowner to release any claims it may have to the mineral interests. By entering into the lease agreements, the State did not purport to alter the rights or obligations of others who may have claims or interests in the property.
Slip op. at 16.
Despite the Land Board engaging in overinclusive leasing activity (selling something that it didn't own is how we'd phrase it), "[a]t no point in time has the State prevented or hindered the plaintiffs' ability to exercise the primary incident of mineral ownership, issuing oil and gas leases, which they have done throughout the years. The plaintiffs have received bonus payments and, upon resolution of the title dispute, royalties owed to them." Slip op. at 16-17.
The court also rejected the Lucas claim because the "plaintiffs do not assert they received below market rates in leasing the minerals. As noted above, it was not the lease but the underlying title dispute that triggered the suspension and escrowing of royalties. The plaintiffs do not argue that the State is obligated to pay just compensation every time royalties are subject to suspension or escrow under applicable statutes or rules. Accordingly, we conclude the State has not committed a regulatory taking." Slip op. at 18.
What to make of this decision? Maybe the court was motivated by the seeming lack of great harm to Wilkinson, who knows. But if we're reading the facts correctly, the government inviting others to share in what turns out to be private property sure does seem like a taking, even if the government quitclaims any interest and even if the compensation isn't significant. (Ms. Loretto could not be reached for comment.) And maybe the court also believes that the government renting out property it doesn't actually own is something like "normal planning delay" and something that we expect.
What's your read of this one?
Wilkinson v. Bd. of Univ. & School Lands, No. 20220037 (N.D. Nov. 10, 2022)
