provisions of the North Dakota State Constitution, including Article X, Sec. 18

Transcription

1 STATE OF NORTH DAKOTA COUNTY OF CASS IN DISTRICT COURT EAST CENTRAL JUDICIAL DISTRICT Paul Somm, Marvin Nelson, Michael Coachman, Charles Tuttle and Lisa Mlarie Omlid, each onbehalf of themselves and all other similarly situated tax payers of the State of North Dakota, Court File No. Plaintiffs, vs. The State of North Dakota, The Board of University and School Lands of the State of North Dakota, The North Dakota Industrial Commission, The Hon. Douglas Burgum, in his official capacity as Governor of the State of North Dakota, and the Hon. Wayne Stenehjem, in his official capacity as Attorney General of North Dakota, COMPLAINT Defendants. Plaintiffs, for their Complaint in the above-referenced action, state and allege as follows: INTRODUCTION 1. The State of North Dakota ives awa $ 1.96 billion and receives nothin in return. a. Effective April 21, 2017, the North Dakota Legislature passed N. D. C. C. Sec (the "Act" or " "), unlawfully transfemng approximately $1. 96 billion in cash and State-owned sovereign lands from the citizens of the State of North Dakota to a small group of private parties in western North Dakota. This giveaway violates multiple provisions of the North Dakota State Constitution, including Article X, Sec. 18 (prohibiting the gifting of State resources without receiving return value); Article I, Sec. 21 (Equal Protection); Article IV, Sec. 13 (prohibiting laws benefiting a single group or locality); Article XI, Sec. 3 (providing that all flowing nvers shall forever remain the _1 1

2 property of the State); and Article I, Sec. 18 (prohibiting most retroactive laws). The Act also violates the Public Trust Doctrine, which holds that all state resources are held in trust for the benefit of the public. The unconstitutional law transfers $1. 96 billion of mineral rights and royalties to a select group of private parties in western North Dakota. b. Plaintiffs bring this action as citizens and taxpayers of the State of North Dakota, seeking a declaratory judgment that N. D. C. C. Sec is unconstih-itional and seeking an injunction prohibiting execution and enforcement of the Act. The purpose of this lawsuit is to preserve $1. 96 billion in resources for the people of the State of North Dakota. c. As the North Dakota Supreme Court explained in Spryncznatyk v. Mills, 592 N.W.2d 591 CN.D. 1999), the State currently owns all minerals up to the current Ordinary High Water Mark ('OHWM") of the Missouri River, as affected by the Garrison Dam. The Act creates an unprecedented giveaway of State resources to a small group of people and corporations along the Missouri River. According to the Fiscal Note accompanying SB 2134 (the bill that became the Act) (Attached as Ex. 1) the State will give away $205 million in royalties, going back to These amounts are identified as $18, 657, 007 in royalties currently held by oil producers awaiting detennination of the rightful payee; $87,663, 214 in repayment of bonuses and royalties already collected by the State since 2006; $69,316, 160 total to be collected in the biennium; and $29,406,000 in royalties that would otherwise be collected in the next biennium. In addition to giving away this $205 million in royalties, the Act gives away ownership of perpetual mineral ' The Act (N.D.C.C ) indicates in its definitions section that: As provided by S.L. 2017, ch. 426, Sec. 4, this section is retroactive to the date of closure of the Pick-Sloan Missouri basin project dams. The Ordinary High Water Mark determination under this Act is retroactive and applies to all oil and gas wells spud after January 1, 2006, for purposes of oil and gas mineral and royalty ownership

3 rights to 108,000 acres, worth an estimated $1. 76 billion, the exact value of which will be proven at trial.3 d. This giveaway comes at a time when the State can least afford it. The same legislature that authorized this giveaway in 2017 also made large budget cuts and tenninated property tax buy-downs that have been in place since 2013 of approximately $200 million annually. This highlights the direct transfer of resources from the taxpayers of North Dakota to the select group. 2. How the Giveawa Works a. Under the Equal Footing Doctrine, which is well-settled law of the State of North Dakota and the United States, and under Chapter of the North Dakota Cenhzry Code, the State of North Dakota owns as sovereign lands all rights to minerals beneath navigable bodies of water, up to the OHWM as it changes over the years. These sovereign lands are held and managed for the benefit of all people in the State and for their use.4 b. These sovereign lands include all mineral rights under that portion of the Missouri River known as Lake Sakakawea. Lake Sakakawea was created by the constmction of Garrison Dam, part of the Pick-Sloan Missouri River Basin Project Dams constmcted between Fort Berthold and the Montana border in the 1940s and 1950s. Before the Act, the State had a sovereign interest in oil and gas rights from the existing OHWM of Lake Sakakawea, all the way down to the historical Missouri River channel as it existed in Exactly $205,042, This value is estimated by using Ex. 1, p. 5 to calculate the per-acre monthly royalties from the 25, 000 acres, then applying that amount to 108,000 acres and assuming a market value equal to six years' royalties. 4 See State ofn. D. v. Mills, 523 N.W.2d 537 (1994)

4 c. The Act would unlawfully transfer these sovereign lands, but the State Legislature cannot legally give them away. In Reep v. State, 841 N. W. 2d 664 (N. D. 2013), riparian parties argued that N.D. C. C. Sec granted them mineral rights in the Shore Zone. 5 The North Dakota Supreme Court concluded that the State owned the mineral interests under navigable waters upon statehood in 1889 under the Equal Footing Doctrine and that the enduring language of the Anti-Gifit Clause in N.D. Const. Art. 10, Sec. 18 constitutionally precludes the legislature from making a gifit of the State's mineral interests to upland owners. N.D.C. C. Sec gives away even more than N.D.C. C. Sec , by disclaiming all rights to 108, 000 acres of sovereign lands between the historical OHWM of the Missouri River and the current OHWM of Lake Sakakawea. d. In conti-avention of well-settled law and the North Dakota Constitution, the Act attempts to redefine the OHWM. Under N. D. C. C. Sec , the Department of Mineral Resources is to determine the OHWM of the Missouri River, but requires that it be set presumptively as determined by the "Corps Survey, " which is defined as "the last known survey conducted by the Army Corps of Engineers ("ACE" or "Corps") in connection with the ACE's determination of the amount of land acquired by the Corps for the impoundment of Lake Sakakawea and Lake Oahe... " In other words, the Act sets 5 The Shore Zone is that area between the OHWM, and the Ordinary Low Water Mark, as they may change from time-to-time. 6 The North Dakota Supreme Court explained this principle in Reep "We conclude that the State owned the mineral interests under the shore zone of navigable waters upon statehood in 1889 under the equal footing doctrine; and that the enduring language of the anti-gift clause now found in N.D. Const. Art. X, Sec. 18, precludes construing the language now codified in N.D.C.C. Sec as a gift of the State's mineral interests under the shore zone to the upland owners. Thus, ownership of mineral interests under the shore zone may be different for individual upland owners. If the chain of title reflects the State granted its equal footing interests to upland owners, those upland owners take to the low watennark, subject to the public trust doctrine and except where the deed provides otherwise. If the State is not in the chain of title for the upland owner's property, the anti-gift clause precludes constming N.D.C. C. Sec as a gift of the State's equal footing interests to upland owners. We affirm but our decision does not preclude an upland owner from taking to the low watermark if the chain of title establishes the State has granted its equal footing interest to an upland owner _1

5 the 2017 OHWM of Lake Sakakawea presumptively to be the same as the OHWM of the Historical Missouri River channel, as it existed in e. The Fiscal Note (Ex. 1, p. 5) acknowledges a giveaway of $205 million related to 25, 000 mineral acres. But the actual giveaway under the Act is much larger than 25,000 acres. The Act affirmatively disclaims its perpetual rights to all minerals under Lake Sakakawea, a total of about 108,000 mineral acres. The State owns all mineral rights under its navigable waters, including all area covered by Lake Sakakawea. The Garrison Dam changed the OHWM of the Missouri River, adding 108, 000 acres between Fort Berthold and the Montana border, the area affected by the Act. Under the Equal Footing Doctrine and N.D. C. C. Sec (1989), the State is the owner of all mineral rights under Lake Sakakawea. The Act gives away its perpetual mineral rights to these 108, 000 mineral acres now below the OHWM of Lake Sakakawea. f. The Act creates a giveaway of $1. 96 billion of State resources to a small group of private parties, in violation of North Dakota law. To help fund this giveaway, the State eliminated property tax buy-downs that had been in place since Relief Sou tb Plaintiffs Plaintiffs seek judgment from this Court as follows: a. Declaring that N. D. C. C. Sec is unconstitutional under the North Dakota State Constitution; b. Enjoining the State of North Dakota and all Defendant State officials from further implementation or enforcement ofn. D. C. C. Sec ; 7 108,000 acres is calculated by subtracting 15,000 acres in the Historic Channel from 123,000 acres of Lake Sakakawea in the affected area. In all, the dam added about 330,000 acres to the Missouri River. Lake Sakakawea covers a total of around 368,000 acres. 8 83,000 acres, plus 25,000 acres acknowledged by the Fiscal Note _1

6 c. Awarding Plaintiffs' costs and attorney fees pursuant to the common fund doctrine, the private attorney general doctrine, or as otherwise allowed by law or equity; d. Any such other relief as the Court deems just and proper. NATURE OF ACTION 4. This action challenges the validity of Section of the North Dakota Century Code (the "Act") under the North Dakota State Constitution. The Act unconstitutionally gives away State-owned mineral interests to 108, 000 acres underneath the OHWM of the Missouri River/Lake Sakakawea, and above the Historic OHWM and gives away over $205 million in payments, in violation of the Constitution of the State of North Dakota. 5. The Act gives away the State's sovereign mineral ownership of the riverbed segments inundated by the Pick-Sloan Missouri River Basin Project Dams ("Subject Lands") between Fort Berthold and the Montana border. The State affirmatively gives away its sovereign ownership interest in 108, 000 acres of mineral rights held by the Board of University and School Lands between the currently existing OHWM of the Missouri River/Lake Sakakawea and the historical Missouri riverbed channel. The Act goes retroactively back to 2006 for purposes of giving away oil and gas mineral rights ownership and royalties to private parties. 6. The Fiscal Note for the Act acknowledges a cash give away of $205,042, related to leases on 25,000 acres (Ex. 1, p. 5). The Act, however, gives away mineral rights to 108, 000 acres in perpetuity, so the giveaway is far higher than $205 million is unlawful and unconstih-itional for the following reasons: a violates the Public Tmst Doctrine and the Anti-Gift Clause of the North Dakota Constitution, Article X, Sec

7 b violates the Privileges and Immunities Clause of the North Dakota State Constitution, Article I, Sec. 21 by arbitrarily affecting the substantial property rights of upland land owners differently along the Missouri River as opposed to other navigable bodies of water in the State of North Dakota and for leases prior to c violates the North Dakota State Constitution, Article IV, Sec. 13, because the Act is a local or special law that impermissibly benefits a particular locality and private individuals. d violates the North Dakota State Constitution, Article XI, Sec. 3, which provides that all flowing streams and natural water courses shall forever remain the property of the State for mining, irrigating, and manufacturing. 8. Plaintiffs challenge the constitutionality of this giveaway of public resources. Plaintiffs seek redress for the denial of their constihitional and statutory rights in the form of a declaration that is unconstitutional and an injunction prohibiting enforcement of by any of the Defendants. PARTIES 9. Plaintiff Paul Sorum is a taxpayer and resident of North Dakota with a residential address of th Ave South F, Fargo, North Dakota Plaintiff Marvin Nelson is a taxpayer and resident of North Dakota, with a residential address of 5071 Hwy 281 East, Rolla, North Dakota Plaintiff Michael Coachman is a taxpayer and resident of North Dakota, with a residential address of 405 Barrett Avenue, Larimore, North Dakota _1

8 12. Plaintiff Charles Turtle is a taxpayer and resident of North Dakota, with a residential address of 19192nd Street Southeast, Minot, North Dakota Plaintiff Lisa Marie Omlid is a taxpayer and resident of North Dakota, with a residential address of 1325 North 21st Street, Bismarck, North Dakota Defendant the Honorable Doug Burgum ("Governor Burgum") is: the Governor of the State of North Dakota; the head of the North Dakota Board of University Lands (the "Land Board"); and a member of the North Dakota Industrial Commission. The Office of Governor Burgum is located at 600 East Boulevard Avenue, Bismarck, North Dakota The North Dakota Constitution obligates Governor Burgum to ensure that the laws of the State of North Dakota "are faithfully executed." N.D. Const. art. V, Sec. 7, cl. l. Governor Burgum is named as a Defendant to this action solely in his official capacities. 15. Defendant Honorable Wayne Stenehjem (the"attorney General") is: the Attorney General of the State of North Dakota; a member of the Land Board; and a member of the North Dakota Industrial Commission. The Office of the Attorney General is located at 600 East Boulevard Avenue, Department 125, Bismarck, North Dakota "The Attorney General is the principal law officer of the state with duties and authorities coextensive with the public legal affairs of the whole community. " North Dakota State Board of Higher Education v. Jaeger, 815 N.W.2d fn.d. 2012). The North Dakota Century Code authorizes the Attorney General to "[i]nstitute and prosecute all actions and proceedings in favor or for the use of the state which may be necessary in the execution of the duties of any state officer" and to "[ajttend to and perform any other duties which from time to time may be required by law. " N.D. Cent. Code Sec , The North Dakota Cenhiry Code also authorizes the Attorney General and his assistants "to institute and prosecute all cases in which the state is a party,

9 whenever in their judgment it would be for the best interests of the state to do so. N.D. Cent. Code Sec The Attorney General is named as a Defendant to this action solely in his official capacity and in his role as Chief Legal Officer of the State. 16. Defendant Board of University and School Lands ("Land Board") administers oil and gas interests in sovereign lands. The Act requires the Land Board to "implement acreage adjustments, lease bonus and royalty refunds, and payment demands as may be necessary relating to state-issued oil and gas leases. " The Land Board consists of the Chairman, Governor of North Dakota, Doug Burgum, the North Dakota Secretary of State, Alvin Jaeger, the Superintendant of Public Instmction, Kirsten Baesler, the North Dakota Attorney General, Wayne Stenehjem, and the North Dakota State Treasurer, Kelly Schmidt. The Land Board's office is located at 1707 North 9th St, Bismarck, ND Defendant Industrial Commission conducts and manages, on behalf of the State, certain utilities, industries, enterprises and business projects. The Act requires the Industrial Commission to adopt a final position on the location of the historical OHWM of the Missouri River, based upon recommendations from the Department of Mineral Resources. The Industrial Commission consists of Chainnan Doug Burgum, Governor, Attorney General Wayne Stenehjem, and Agriculture Commissioner, Doug Goehring. Its office is located at 600 East Boulevard Avenue, Department 405, Bismarck, ND JURISDICTION 18. This Court has jurisdiction over this matter pursuant to Article VI, Sec. 8 of the North Dakota Constitution and N. D. C. C. Sec because the matter concerns laws of the State of North Dakota that affect property and rights of residents and taxpayers of North Dakota

10 19. Plaintiffs' claims for declaratory and injunctive relief are authorized by N.D.C.C. Sees and , and North Dakota Rules of Civil Procedure, Rules 57 and Plaintiffs, as tax payers, have standing under North Dakota law to challenge the constitutionality of because it violates the North Dakota Constitution and directs and allows State officials to unconstitutionally dispense of State property. Herr v. Rudolf, 75 N.D. 91, 96-98, 25 N.W.2d 916, (1947) (holding a tax payer had standing to challenge a statute that authorized an agency to dispense of State property in violation of the Anti-Gift Clause); Teigen v. State, 2008 ND 88, 749 N. W.2d 505 (tax payers had standing to challenge a statute as unconstitutional pursuant to equal protection, anti-gift, and special law); Billey v. North Dakota Stockmen's Ass'n, 1998 ND 120, P7, 579 N.W.2d 171 ("Any state taxpayer has standing to challenge a statute on the basis the state funds are being unlawfully dissipated. ") (quoting Danzlv. City of Bismarck, 451 N.W. 2d 127, 129 (N. D. 1990)). 21. The State District and Supreme Courts of North Dakota have sole authority to consider and decide the questions at issue here. VENUE 22. Venue is proper in this distnct under North Dakota law, because Plaintiffs and Defendants reside in the State of North Dakota and because any North Dakota State Court is a proper venue for determining this action. BACKGROUND FACTS 23. The Missouri River is navigable and runs through the State of North Dakota from the western border with Montana through the southern border with South Dakota. The State obtained sovereign title to the bed of river from OHWM to OHWM of the respective banks when _1 10

11 North Dakota became a State of the Union in Under law, the State owns the mineral rights up to the current OHWM of Lake Sakakawea for the Public Tmst. 24. Sec of the Act unlawfully gives away rights "to any minerals above" the OHWM of the historic channel, affecting approximately 108, 000 mineral acres. 25. The United States Congress authorized the Garrison Dam Project in the Missouri River pursuant to the Flood Control Act of The Corps then acquired by purchase or condemnation surface rights to approximately 340, 000 acres for the dam project. The Act affects approximately 108,000 acres between Fort Berthold and the Montana border. 26. In the earlyl950's, to determine compensation for acquisition of surface rights, the Corps conducted surveys and prepared segment maps to determine the OHWM prior to constmction of the dams. The Corps acquired title to land expected to be inundated by the expanding river. This area extends from the historical OHWM of the Missouri River up to the expected OHWM after flooding caused by the dam. 27. In 1989, the State Legislature enacted N. D. C. C. Sec that provides for sovereign land management. N. D. C. C. Sec defines State sovereign lands as "those areas including beds and islands lying within the OHWM of navigable lakes and streams. " This includes that part of the Missouri River now known as Lake Sakakawea. 28. Under North Dakota law, the State owns mineral interests under navigable waters (including Lake Sakakawea) from OHWM to OHWM. 29. The State of North Dakota owns all mineral rights, including oil and gas, below the OHWM of Lake Sakakawea. 30. In 2017, the North Dakota Legislature enacted , which gives away to private parties the State's interest in oil and gas rights from the existing OHWM of Lake _1 11

12 Sakakawea, all the way down the OHWM of the Missouri River channel in The Act also requires oil companies and the Board of University and School Land to give the riparian landowners all oil and gas rights, royalties and bonuses currently being held by third parties. The Act changes the black letter definition of OHWM from the existing OHWM to, presumptively, the OHWM as it existed prior to the dam. The State is giving away its interests to approximately 108, 000 mineral acres currently below the OHWM of Lake Sakakawea, between Fort Berthold and the border of Montana. 31. The 108, 000 mineral acres gifted away by the Act consists of approximately 123,000 acres of Lake Sakakawea between Fort Berthold and the Montana border, less approximately 15,000 acres below the historic OHWM of the Missouri River channel. It includes the 25,000 acres acknowledged in the Fiscal Note (Ex. 1) as affected by the Act and 83, 000 more acres between the historic OHWM and the current OHWM of Lake Sakakawea states that "the state holds no claim or title to any minerals above the OHWM of the Historical Missouri Riverbed Channel..." Prior to the Act, the State owned as sovereign lands all minerals up to the OHWM as it exists today, including the area now known as Lake Sakakawea. By relinquishing claims to minerals owned by the state under approximately 108,000 acres of Lake Sakakawea, violates the North Dakota State Constitution, Public Tmst Doctrine and North Dakota law purports to clarify the OHWM of the Missouri River. However, the Act requires that the process accept, as a presumptive measure, surveys performed by the Corps effective in 1953 to purchase surface rights. The Fiscal Note for the Act acknowledges that 25, 000 leased acres will be given away. The mineral rights are owned by the State. If the J 12

13 OHWM measurement defaults to the pre-dam Corps survey, it would actually give mineral rights to private parties in 108, 000 mineral acres that are now sovereign lands of the State. 34. Further, also deprives the State of mineral rights up to the OHWM of Lake Sakakawea which became sovereign property of the State when the Garrison dam flooded the area. 35. The State's sovereign land interests below navigable waters increases or decreases based upon factors of accretion, reliction, and submergence. 36. The State holds its sovereign lands in trust for the public only applies to a local portion of the Missouri River between Fort Berthold and the Montana border, and not to any other navigable bodies of water in the State, or other parts of the Missouri River, some of whose channels may have changed due to the dam benefits a limited number of private parties with no benefit to the taxpayers of North Dakota detrimentally affects all taxpayers in the State of North Dakota because the State is giving away public sovereign resources, including public royalty and bonus funds, and perpetual mineral rights. The impact of the Act includes the return of bonus, rent, and royalty already collected; escrowed royalties that are anticipated to be collected; estimated lost future royalties; and the value of the perpetual mineral rights. 40. Between 2017 and 2021, the Act will have a negative revenue impact on the Strategic Investment Improvements Fund, in the amount of $205, 042, The Act affects mineral tracts involving an estimated 108,000 acres and would also affect fature royalty revenue from these lands. The impact includes: the return to mineral lessees of $87,663,214 of bonus and rent; the repayment to operators of $69,316, 160 in royalties

14 collected and anticipated through fiscal year 2017; $29, 406, 000 that would be collected in ; and the forfeiture of claim to $18,607, 007 of presently escrowed royalties and the value of the perpetual mineral rights, which is, on infonnation and belief, approximately $1, 796, 000, In total, the Act gives away in excess of $1.96 billion in state-owned sovereign land and funds. 43. Pursuant to , the State will begin giving these funds to private parties within six months aflter the Industrial Commission determines the historical, rather than achial, OHWM of the Missouri River. In addition, the State Legislature has appropriated "the sum of $800, , or so much of the sum as may be necessary, to the Department of Mineral Resources for the purpose of contracting with a qualified engineering and surveying firm to conduct at limited review of the Corps survey under this act...." has an immediate impact on Plaintiffs, and all taxpayers in the State, because the 2017 legislature also terminated its property tax buy-down program in order to help fund the costs of the Act. Plaintiffs, and all other taxpayers in North Dakota, also face an imminent injury because the State is improperly giving away $1. 96 billion in public funds and sovereign lands to a select group of private parties. 45. The enforcement of has caused, and will continue to cause, irreparable injury to Plaintiffs and no adequate remedy at law exists. herein. COUNT I DECLARATORY JUDGMENT N.D.C.C. SEC VIOLATES THE PUBLIC TRUST DOCTRINE 46. Plaintiffs reallege the preceding paragraphs of this Complaint as if fully set forth 47. The Public Tmst Doctrine requires the State to hold land below navigable water in tmst for the public and precludes the State from giving use or control of public trust land to

15 pnvate parties. 48. The Missouri River, including the section named Lake Sakakawea, is navigable water. 49. The State of North Dakota owns as sovereign lands all mineral rights below the Missouri River, including the section named Lake Sakakawea. 50. By enforcing the Act, Defendants are violating the Public Trust Doctrine by giving away sovereign lands, State-owned mineral rights and royalties below the OHWM of the Missouri River/Lake Sakakawea. 51. The Act substantially impairs the public's interest in the Subject Lands. 52. An actual controversy exists between the parties as to the constitutionality of and its improper enforcement. 53. Plaintiffs have already been harmed by the enforcement of because public funds have been expended to hire a company to make the OHWM determination required by the Act. Plaintiffs also face imminent and irreparable harm through enforcement of the Act because public lands and funds will be given away once the unconstitutional OHWM is determined. Plaintiffs also face imminent harm because the funds required for enforcement of the Act contributed to the State terminating a property tax buy-down program that benefits all landowners in North Dakota. 54. Plaintiffs seek a declaration that violates the Public Trust Doctdne and an injunction prohibiting all State officials from further implementing and enforcing the Act. 55. Plaintiffs are entitled to their attorney fees pursuant to the common fund doctrine and as a matter of equity through the private attorney general doctrine because they are preserving State property through this action

16 COUNT II DECLARATORY JUDGMENT N.D.C. C. SEC VIOLATES ANTI-GIFT CLAUSE OF THE NORTH DAKOTA STATE CONSTITUTION 56. Plaintiffs reallege the preceding paragraphs of this Complaint as if fully set forth herein. 57. The Anti-Gift Clause of the North Dakota Constitution, Art. X, Sec. 18, states as follows: private parties. "... [n] either the state nor any political subdivision thereof shall otherwise loan or give its credit or make donations to or in aid of any individual, association or corporation..." 58. This Anti-Gift Clause prohibits the State from giving public lands or funds to 59. By enforcing the Act, Defendants are unconstitutionally violating the Anti-Gift Clause because they are giving away both public fiinds and sovereign lands to private parties. 60. An actial controversy exists between the parties as to the constitutionality of and its improper enforcement. 61. Plaintiffs have already been harmed by the enforcement of because public funds have been expended to hire a company to make the OHWM determination required by the Act. Plaintiffs also face imminent and irreparable harm through enforcement of the Act because public lands and funds will be given away when the unconstitutional OHWM is determined. Plaintiffs also face imminent harm because the funds required for enforcement of the Act contributed to the tennination of the State's property tax buy-down program which benefits all landowners in North Dakota. 62. Plaintiffs seek a declaration that is unconstitutional and an injunction prohibiting all State officials from further implementing and enforcing the Act

17 63. Plaintiffs are entitled to their attorney fees pursuant to the common fund doctrine and as a matter of equity through the private attorney general doctrine because they are preserving State property through this action. COUNT III N.D.C. C. SEC VIOLATES THE PRIVILEGES AND IMMUNITIES CLAUSE OF THE NORTH DAKOTA STATE CONSTITUTION herein. 64. Plaintiffs reallege the preceding paragraphs of this Complaint as if fully set forth 65. The Privileges and Immunities Clause of the North Dakota Constitution, Art. I, Sec. 21, provides that no legislation shall grant privileges and immunities to one class of citizens that isn't applicable to all citizens is unconstitutional because it impermissibly grants privileges, in the form of payments and mineral interests, to certain private parties along a single local portion of the Missouri River, while not granting the same benefits to other landowners in North Dakota. 67. An actual controversy exists between the parties as to the constitutionality of and its enforcement. 68. The classification contained in is irrational, illogical, and bears no rational relationship to any legitimate government interest. The State currently has a budget shortfall, but is giving away public resources to private parties. The classification also affects Plaintiffs' substantive property rights and there is no rational relationship between the classification and legitimate legislative goals impermissibly benefits a limited number of property owners in a particular local area of North Dakota at the expense of all North Dakota tax-payers. 69. Plaintiffs have already been harmed by the enforcement of because public funds have been expended to hire a company to make the OHWM determination required by the

18 Act and which will benefit only a particular group of private parties along a single portion of the Missouri River. Plaintiffs also face imminent and irreparable harm through continued enforcement of the Act because public lands and funds will be given away when the unconstitutional OHWM is detemiined. Plaintiffs also face imminent harm because the funds required for enforcement of the Act contributed to the termination of the State's property tax buy-down program that benefits all landowners in North Dakota. 70. Plaintiffs seek a declaration that is unconstitutional and an injunction prohibiting all State officials from further implementing and enforcing the Act. 71. Plaintiffs are entitled to their attorney fees pursuant to the common fund doctrine and as a matter of equity through the private attorney general doctrine because they are preserving State property through this action. COUNT IV N.D.C.C. SEC VIOLATES THE NORTH DAKOTA STATE CONSTITUTION'S PROHIBITION ON LOCAL AND SPECIAL LAWS herein. 72. Plaintiffs reallege the preceding paragraphs of this Complaint as if fully set forth 73. The Local and Special Law Clause of the North Dakota Constitution (Art. IV, Sec. 13) provides that the legislature shall not enact any local or special laws, or indirectly enact special laws by the partial repeal of a general law is unconstitutional pursuant to Art. IV, Sec. 13, because it impermissibly and unreasonably creates a law to benefit only a special class of private parties and because it partially repeals N. D. C. C. Sec (3). It also violates Art. IV, Sec. 13, because it only pertains to the distinct locality of the Subject Land along a single portion of the Missouri River, while not granting the same benefits to other landowners in North Dakota J 18

19 75. An actual controversy exists between the parties as to the constitutionality of and its enforcement. 76. Plaintiffs have already been harmed by the enforcement of because public funds have been expended to hire a company to make the OHWM determination required by the Act and which will benefit only a certain class of riparian landowners along a portion of the Missouri River. Plaintiffs also face imminent and irreparable hann through continued enforcement of the Act because public lands and funds will be given away to the special class created by the Act once the unconstititional OHWM is detennined. Plaintiffs also face imminent harm because the funds required for implementation and enforcement of the Act contributed to the State terminating its property tax buy-down program that benefits all landowners. 77. Plaintiffs seek a declaration that is unconstitutional and an injunction prohibiting all State officials from further implementing and enforcing the Act. 78. Plaintiffs are entitled to their attorney fees pursuant to the common fund doctrine and as a matter of equity through the private attorney general doctrine because they are preserving State property through this action. herein. COUNT V INJUNCTION 75. Plaintiffs reallege the preceding paragraphs of this Complaint as if fully set forth is unconstitutional and unenforceable for the reasons set forth elsewhere in this Complaint. 77. Plaintiffs face imminent and irreparable hann through enforcement of the Act because public lands and funds will be given away when the unconstitutional OHWM is

20 determined and as set forth elsewhere in this Complaint. An actual controversy exists between the parties as to the constitutionality of and its enforcement. 78. Under North Dakota Rules of Civil Procedure 65, Plaintiffs are entitled to an injunction prohibiting all State officials from further implementing and enforcing the Act. 79. Plaintiffs are entitled to their attorney fees pursuant to the common fund doctrine and as a matter of equity through the private attorney general doctrine because they are preserving State property through this action. PRAYER FOR RELIEF WHEREFORE, Plaintiffs seeks judgment against Defendants as follows: 1. Declaring the Court's role as the sole branch of government responsible to decide the nature and extent of the public trust. 2. Declaring that N.D.C. C is unconstitutional under the North Dakota State Constitution; 3. Enjoining the State of North Dakota and all Defendant State officials from further implementation or enforcement ofn. D. C. C , 4. Awarding Plaintiffs' costs and attorney fees pursuant to the common fund doctrine, the private attorney general doctrine, and/or as otherwise allowed by equity; 5. Any such other relief as the Court deems just and proper " _1 20

21 HELLMUTH & JOHNSON, PLLC Dated: January 10, ^^~^<_ Terrance W. Moore, ND ID #07746 J. Robert Keena, ND ID #07487 Joseph M. Bamett, ND ID # West 78th Street Edina, Minnesota Telephone: (701) lawfirm. corn lawfinn. corn lawfirm. corn ^-^^ Fiotan L. Dooley, ND Bar # Nor&4ltl Street Bismarck ND Biaml: findoole miul. com Phoae: Ceil: Fax ATTORNEYS FOR PLAINTIFFS _1 21

22

23 FISCAL NOTE Requested by Legislative Council 04/18/2017 Amendment to: SB A. State fiscal effect: Identify the state fiscal effect and the Fiscal effect on agency appropriations compared to funding levels and appropriations anticipated under current law Biennium BIennium Biennlum General Fund Other Funds General Fund Othor Funds General Fund Other Funds Revenues Expenditures Appropriations $(48, 063, 708) $157,778,374 $187, 185, 381 $(29, 406, 007) 1 B. County, city, school district and township fiscal effect: Identify the fiscal effect on the appropriate political subdivision Biennlum Biennium Biennium Counties Cities School Districts Townships 2 A. Bill and fiscal impact summary: Provide a brief summary of the measure, including description of the provisions having fiscal impact (limited to 300 characters). The bill adopts a definition of sovereign minerals within Missouri River reservoirs as within the historical riverbed channel and implements a study to determine this location. The bill directs the adjustment of State leased mineral acres and authorizes refunds of mineral proceeds. B. Fiscal impact sections: Identify and provide a brief dsscription of the sections of the measure which have fiscal impact. Include any assumptions and comments relevant to the analysis. N. D. C. C. ch defines sovereign land to include beds and islands lying within the ordinary high watermark of navigable lakes and streams and assigns management of the oil, gas and related hydrocarbons to the Board of University and School Lands. The State Engineer manages the islands and the bed of navigable waters and all other minerals therein. The State has leased sovereign oil and gas minerals within the estimated historic ordinary high watermark of the Missouri River as it existed prior to inundation by Lake Sakakawea. The revenue is deposited into the Strategic Investment and Improvements Fund (SIIF). For portions of the Missouri River under reservoirs, the bill would define public ownership of the riverbed minerals as the historic Missouri riverbed channel. The bill initiates a study of U. S. Army Corps of Engineers' pre-inundation sun/eys and historic records to determine the acreage and stipulates the adjustment of mineral acreage and associated refunds. The method the Board has used to determine the historic channel and which served as the basis to lease the State's oil and gas rights differs from the area depicted by the federal surveys, thus the bill would Initiate the surrender of mineral acres from previous State claims of the historic and actual river channel. The State would return revenue collected on an estimated 25, 000 acres and relinquish future royalty revenue. The impact includes return of the bonus and rent already collected to lessees of record and the return to operators of royalties collected; reduced claim to escrowed royalties; and lost future royalties estimated upon Biennium (to date) production and prices. The bill also defers to the U. S. Bureau of Land Management's determination of public domain tracts as depicting acres owned by the federal government. Where these nonpatented lands are within the historic ordinary high watermark of the Missouri River, the State has claimed ownership and leased these acres, which are included in the EXHIBIT 1 - Page 1

24 . $ Potential Bonus Repayme. nts Phase I* Phase II** Total Bonuses & Rents Collected $ 2:6,083, , 993, 395 $ 146,076,917 % Impact Bill % % J $ Total 20, 223, , 439,601 87, 6B3,214 Projected Revenues Projected Future Periods Phase. 1*. Phase II** $.$ Received 1, 999, ,094,698 42,094, 227 Escrowed $ l;067;l2:3 7,996,013 9, Total Estimated Revenue T 3,066>652 48,090, 711 $ 51,157,363 % Impact Bill % 56, 20% y $- Total 2, 3?7;700 27,028,308 29, 406, 007 Royalties Collected Phase I* Phasell** $ T Received 8,790, , 492, , 282, 664 Anticipated FY 2017 Collections $ 499,882 10, 023, 675.$ 10, 523, 557 $ $ Revenues 9, 290, , 515, , 806, 221 % Impact Bill , 53% T % $ Total 7,203, , 112,963 69/316,160 Royalties Escrowed Phase I* Ptiasell** Escrow Received $~ 7, 608,180 19, 939,778 T 27,547,958 Anticipated FY 2017 Escrow. Collections $ 311, 244 2,332, 171 $ 2,643, 415 T $ Revenues 7,91-9,424 22, 271,949 30, 191, 373 % Impact Bill % % T "$1 Total 6, 140, , 517, , 657, 701 * Phase I leased (hetween township 153-IQ2 and Hwy 85} ** Phase II teased (between Hwy S5 and Hwy 23.) EXHIBIT 1 -Page 2

25 estimated fiscal impact. Revenue that the State has collected from the acres that the United States has also claimed would be returned to the lessees and operators from which it was received. 3. State fiscal effect detail: For information shown under state fiscal effect in 1A, please: A. Revenues: Explain the revenue amounts. Provide detail, when appropriate, for each revenue type and fund affected and any amounts included in the executive budget. The bill would have a negative impact on the SilF, which collects the proceeds of all sovereign mineral leasing. There is an acreage difference between the federal river survey and estimated historic ordinary high watermark as identified by the Board of University and School Lands in Additionally, the bill would apply a determination of the historic river high watermark west of the Highway 85 Bridge in an area where the Board leased minerals based on the 2009 and survey of the ordinary high watermark. The combined impacts are that the State would repay from the SIIF, revenue it has collected on an estimated 25, 000 acres and would also not receive future royalty revenue. The bill will require forfeiture of claim to $18,657, 701 of presently escrowed royalty. Additionally, based upon Biennium (to date) average level prices and production, the estimated impact on future royalty revenue would be a reduction of $29,406,007 in each of the next two biennia. B. Expenditures: Explain the expenditure amounts. Provide detail, when appropriate, for each agency, line item, and fund affected and the number of FTE positions affected. Based upon the possible reduction of 25,000 mineral acres, an estimated $87,663,214 of bonus and rent, and $69, 316, 160 of royalties collected and anticipated through FY 2017 will be returned to lessees and operators. The Bill appropriates $800, 000 to the Department of Mineral Resources for the costs of a contractor to determine the acreage and tracts within the "historical Missouri riverbed channel" as determined by the Army Corps of Engineers' surveys conducted in connection with its determination of the amount of land acquired for the impoundment of Lake Sakakawea and Lake Oahe; in combination with other historical records. Technical and legal expenditures and the need for additional Department of Trust Land staff to implement acreage adjustments and resulting refunds cannot be determined. An additional mineral title specialist FTE to assist in the correction of leases related to over 400 leases has been requested for inclusion in the budget for the Commissioner of University and School Lands. The requested Mineral Title Specialist would cost an estimated $206,976 per biennium with benefits and overhead, has not been included in appropriation authorization. The Bill appropriates $100, 000, 000 from the SIIF for the purpose of repayments of mineral revenues, and authorizes the Commissioner to borrow up to $87,000, 000 from the Bank of North Dakota and appropriates the amount needed for mineral revenue repayments. C. Appropriations: Explain the appropriation amounts. Provide detail, when appropriate. for each agency and fund affected. Explain the relationship between the amounts shown for expenditures and appropriations. Indicate whether the appropriation or a part of the appropriation is included in the executive budget or relates to a continuing appropriation. Section 2 of the bill appropriates $800, 000 from the SIIF to the Department of Mineral Resources to hire a contractor to study the historic ordinary high water mark. Section 3 of the bill contains appropriation authority to the Commissioner of University and School Lands of $187,000,000 related to refunds of an estimated: $87, 663, 214 of bonus and rent; $69, 316, 160 of royalties collected and anticipated through FY 2017; and $29,406, 007 that could be collected during the time-frame of the study. The total appropriation is $187, 185,381. EXHIBIT 1 - Page 3

26 Name: Lance Gaebe Agency: Department of Trust Lands Telephone: Date Prepared: 04/19/2017 EXHIBIT 1 - Page 4

27 Projected Revenues Based Upon 25, 000 Impacted Acres Oil and Gas Lease Bonus & Rents z hoyalties Collected3 Royalties Collected. Projected Royalties Escrowed Change in Revenue FY FY Z $ (87., 663,214) (69, 316, 160) (29, 406/007) (29, 406, 007) (18, 657/701) $ (205, 043, 082) $ ( , 007} Estimated funds to be disbursed in Q19 biennium, but some maybe disbursed in biennium. Difference between the Corp's survey and the Board of University and schools Lands' estfmgted historic ordinary high water mark. Bonuses collected and held in SflF, to be returned to lessees. 3 Includes projected royalties collected through the end offy 2017, Already collected royalties would be returned to operators. 4 Based upon biennium (to date) average level prices and productio. n. Funds held in escrow accounts at the Bank of North Dakota due to title disputes. EXHIBIT 1 -Page 5