Updated October 2026
On October 2, the North Dakota Supreme Court heard arguments in a case that could decide whether a producer can keep deducting transportation and processing costs from royalty checks, and the court has not set a ruling date. Mineral owners say those deductions went from under 2% to over 30% of royalties since 2014, and roughly 300,000 North Dakotans own oil and gas mineral rights.
For anyone buying or selling property in Williston, Watford City, or the rest of the Bakken, the practical answer is this: the ruling will not change your deed, but it can change what the minerals under it are worth and what the royalty income is worth to the family that owns it.
What happened
What did the North Dakota Supreme Court actually hear on October 2?
According to the North Dakota Monitor's report, a group of mineral owners led by Diana Skarphol is asking the justices to overturn a district court's dismissal of their case against Hess. If they succeed, the case goes to a jury trial. If they lose, the dismissal stands.
The dispute is about postproduction costs, meaning what it costs to move and process the oil and gas after it leaves the well. Hess deducts those costs from royalty payments. The mineral owners argue the deductions are commercially unreasonable and say the company uses subsidiaries to inflate the costs. Hess says the owners have not shown damages or proven that its deductions exceed what competitors take.
The court took the case under advisement, so there is no decision date. Current North Dakota law permits this kind of cost sharing, and the article notes that states such as Colorado, Oklahoma, Kansas, and West Virginia restrict or prohibit it more tightly.
The numbers
How big is the gap between what owners say and what industry says is normal?
The figures in the reporting come from different sources, and they do not agree. That disagreement is the whole case.
| Source | What it says about deductions |
|---|---|
| Mineral owners in the case | Rose from under 2% to over 30% since 2014 and are commercially unreasonable |
| Industry groups | Deductions should not exceed 7% to 10% |
| A 2025 investigation | Some companies deduct more than 20% |
| Hess | Owners have not shown damages or that its deductions exceed competitors' |
Even the industry's own suggested ceiling is far below the 30% figure the plaintiffs describe. Whatever the court decides on the legal question, those numbers explain why royalty owners are paying attention and why buyers of mineral interests should too.
Property impact
Does a royalty ruling change what my Williston or Watford City property is worth?
Not directly. A home, a shop, a commercial building, or a quarter section of land is valued on its own market, and I covered what actually moves those prices in what is driving North Dakota property prices. A royalty ruling is not on that list.
The indirect effects are real, though, and they differ by who you are.
Mineral and royalty owners who sell property. If your royalty check is part of what funds your next move, a lower net payment changes how much you can carry, and how patient you can be on a sale. At Proven Realty we have seen sellers with royalty income wait out a slow offer and sellers without it need to move. The deduction rate shifts that balance.
Buyers of land and acreage. When you buy land in oil country, find out whether minerals transfer, are reserved, or sit with someone else. My guide to buying land in North Dakota walks through why that question comes first. A pending court case is one more reason to ask it early.
Investors and operators. Commercial and industrial demand in the Bakken follows activity, not royalty disputes. But a ruling that changes how producers account for costs is the kind of development I watch when advising on commercial deals, the work my Crexi Platinum Broker recognition and Institutional Investment Services certification exist for.
The bigger picture
Why does this case matter beyond the Bakken oil patch?
Oil and gas income reaches far past the people who work the wells. Roughly 300,000 North Dakotans hold mineral rights, which is a large share of the state. Those checks pay mortgages, fund farm operations, and get inherited and split among family members who often live elsewhere.
The state has also been investing in the long run for the Bakken, which I wrote about in the push to unlock more barrels from the Bakken. More production over time only helps owners if the share that reaches them is fair, and that is the question now in front of the court.
Because the court has not set a date, the honest planning posture is patience. Plan around the law as it stands today, which permits these deductions, and treat a ruling either way as new information rather than a forecast.
Questions
Frequently asked questions
What is the North Dakota Supreme Court deciding in the oil royalty deductions case?
It is deciding whether to overturn a district court's dismissal of a case that mineral owners brought against Hess. If the dismissal is overturned, the case can go to a jury trial over whether the deductions taken from royalty payments are reasonable.
When will the court rule?
No date has been announced. The court took the case under advisement after hearing arguments on October 2, 2026.
What are postproduction costs on a royalty check?
They are the costs of transporting and processing oil and gas after it comes out of the ground. Producers deduct them from royalty payments, and the amount deducted is the heart of the dispute.
How many North Dakotans own mineral rights?
The North Dakota Monitor reports roughly 300,000 North Dakota residents own oil and gas mineral rights.
Is it legal in North Dakota to deduct these costs from royalties?
Current North Dakota law permits this kind of cost sharing. Colorado, Oklahoma, Kansas, and West Virginia restrict or prohibit it more strictly, according to the same reporting. Whether a specific deduction is reasonable is what this case puts in front of the court.
Should I sell my property or minerals before the ruling?
I would not decide on that basis alone. Talk to a licensed attorney about your mineral rights and a broker about your property goals, and use your own royalty statements as the starting point.
Does this affect buying land or acreage in western North Dakota?
It adds a reason to confirm early whether minerals transfer with the land. The ruling itself does not change land values, but the mineral question affects what you are actually buying.
The headline is a courtroom, but the story underneath is simple: in this part of the country, property and minerals are tied together in family finances. I would rather you hear it from me now than find out at the closing table.
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