by Jacob Orledge, North Dakota Monitor

This article was produced for ProPublica’s Local Reporting Network in partnership with the North Dakota Monitor. Sign up for Dispatches to get our stories in your inbox every week.

Millions of Americans own the rights to oil and gas underground. When they’re approached by an energy company to lease out those rights, they’re offered a cut of the revenue, called a royalty.

“Royalties saved our place,” said James Horob, a farmer in northwest North Dakota, who used oil royalties to rescue his family’s farm from bankruptcy in 2008 and replace equipment that had been auctioned off. “We’re lucky to have what we got.”

However, the royalty income that mineral owners like Horob get can depend in part on the state where they live. In North Dakota, estimates show that in recent years companies have been deducting hundreds of millions of dollars annually to help cover the costs incurred once oil and gas leave the ground on their way to being sold. North Dakota officials have not stepped in to help royalty owners, even though the state, in its own leases, has explicitly prohibited oil and gas companies from taking deductions from government royalty payments since 1979, as the North Dakota Monitor and ProPublica reported this month.

“It’s tough to think that there isn’t some better solution out there than what we currently have,” said Aaron Weber, a Watford City-based attorney who represents mineral owners in North Dakota.

In contrast to North Dakota, at least seven oil-and-gas-producing states have taken either legislative or judicial action to restrict the costs that can be deducted from royalty owners’ checks. Here are the key ways North Dakota differs from these other states when it comes to protecting the interests of royalty owners:

North Dakota Gov. Kelly Armstrong has called the oil and gas industry the “No. 1 driver of our economy” in the state. The industry contributed $32 billion in oil and gas taxes to state and local governments between 2008 and 2024, according to the Western Dakota Energy Association, which advocates for energy-producing communities. That same study found that more than 50% of all local tax collections are tied to oil and gas.

Oil and gas companies owed the state’s private mineral owners, like Horob, an estimated $4.6 billion in 2023 before deductions, according to North Dakota State University research.

Deductions from that royalty income — which can vary greatly by company and mineral owner — are deeply contentious in the state:........

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