NEW TOWN A Mountrail County rancher is considering an appeal of a recent court decision that he says allows the state to rob him of oil production income and property value.

Arthur Langved lost his initial round July 27 in North Central District Court in his lawsuit against the North Dakota Industrial Commission and Continental Resources.

The state was drawn into a running dispute between Langved and Continental in June 2015 when the Industrial Commission approved Continental’s application to change the spacing units on land on which Langved owns mineral interests. Langved alleges the new unitization is designed to allow the oil company to access state-owned minerals under Lake Sakakawea while his leased minerals largely go undeveloped.

Langved and Continental have been at odds since 2014. That’s when a lease signed by Langved with Diamond Resources in 2004 found its way through a series of transactions into the hands of Continental.

In February 2015, Continental sued Langved in federal court for obstructing its operations, including building a small structure within 500 feet of its proposed well site. Langved says the house was built for hired help. The Industrial Commission determined the house was a ploy to keep Continental off and allowed Continental to proceed with drilling.

Continental later asked the court for a permanent restraining order against Langved, who sought to have the case dismissed. The judge in April ruled for Continental, saying the company has the right to operate on Langved’s property without interference because it holds the lease.

Langved denies attempting to obstruct Continental, instead insisting Continental has had him under surveillance and misconstrued his normal ranch-related activities. In example, he offered a recent letter received from the North Dakota Public Service Commission regarding a Continental complaint stating he violated the North Dakota One Call law by digging on his property. Langved said he was removing fence posts.

Langved, who grew up near Tioga, worked on the discovery well at Tioga in the 1950s and later spent 20 years working for Amerada Hess, first as a roughneck and later in office work. He took a two-year break during that time to serve in the U.S. Army.

Now in his mid-80s, he raises beef cattle on the ranch that he purchased 56 years ago, situated next to Lake Sakakawea between Ross and New Town. Continental is one of five companies producing oil on his ranch. Langved does not own all the ranch’s mineral rights, but he has leased some of the minerals he does own.

The case he took to district court relates to minerals he had leased in a 1,280-acre drilling unit. Continental had drilled three wells in a 480-acre tract in that unit. The re-unitization approved by the Industrial Commission last year separated the 480 acres into a separate unit and attached the remaining acres to other acreage in a larger unit that included the bed under the lake.

Langved and his attorney, Fintan Dooley of Bismarck, framed the case as a matter of the state supporting a spacing structure that generates royalties for itself at the expense of a private owner. Dooley noted Langved’s situation is not unique but is one of many instances in which private mineral owners are seeing their mineral interests diminished due to the unitizations being approved by the state.

With the unitization change on Langved’s ranch, Continental plans to go after the state’s minerals and mine a much smaller portion of Langved’s minerals than originally intended in the lease, Dooley said. Langved is locked into the lease, unable to take his minerals to another leasor because drilling already has occurred.

Dooley also argued Continental has changed its drilling plans from what was settled in the lease, which should void the contract.

Langved’s lawsuit alleged the state’s decision was an unconstitutitional taking of his income and unconstitutional impairment of his contract and surface rights.

The state argued those issues are outside the court’s jurisdiction, which is limited to reviewing whether the Industrial Commission acted within its authority and whether commission findings are supported by the evidence. North Central District Judge Richard Hagar agreed with the state.

State law provides that the commission can change spacing units “when found necessary for the prevention of waste, or to avoid the drilling of unnecessary wells, or to protect correlative rights.” According to the court record, the commission made a finding that the change in spacing will allow more wells on common drilling pads, which will enhance the economics of production and promote the greatest recovery of oil and gas. The calculations showed the original spacing would recover an estimated 36.2 million barrels of oil from 56 wells, while the new spacing would recover an estimated 37.35 million barrels from 42 wells.

As for Langved’s correlative rights, Hagar referred to a 1991 case involving the Industrial Commission in which it was argued the state only has to ensure a mineral owner’s production rights are protected. It need not ensure any particular share of that production.

In addition, Hagar found the commission properly followed its hearing procedures, which Langved had challenged. The case had been heard by a hearing officer, who reported findings to the commission for a decision.

Langved alleged Gov. Jack Dalrymple, a member of the Industrial Commission, had bias because Continental contributed to his past campaign. The judge stated the use of a hearing officer mitigated any perceived political influence.

Langved continues to insist his lost mineral income and the development of an oil pad on his land to go after state minerals under the river are unconstitutional. He has been in dispute with Continental over payment for his surface rights in connection with the new oil pad.

“It was a taking by the state, like it was eminent domain,” he said. “It would be taking my land to put these pads on to develop somebody else’s minerals mainly the state or federal that are out under the lake, without fair compensation.”