North Dakota AG files cease-and-desist against oil firm

By Nick Rees | Mar 26, 2010

Wayne Stenehjem (R)

BISMARCK, N.D. (Legal Newsline) - North Dakota Attorney General Wayne Stenehjem has announced a cease-and-desist order against an oil and gas company and its principals over alleged violations of the state's consumer fraud law and for failure to respond to a Civil Investigative Demand.

Bakken Exploration LLC is engaged in the business of obtaining or leasing oil and gas rights from North Dakota mineral owners, primarily in Burke, Divide, McKenzine, Mountrail and Williams Counties.

Stenehjem has received complaints that alleged that Bakken Exploration has entered into leases with mineral owners for oil and gas leases that are subject to 30 day sight drafts.

The complaints allege that the company subsequently refused to make payment on those sight drafts, later claiming that it had been unable to verify title. The company also offered excuses for the delay that did no appear to be true before requesting 90 day extensions from the mineral owners.

"Our initial information suggests that Bakken has misled mineral owners in its business activities, including misrepresenting the reasons for delay and nonpayment," Stenehjem said. "Bakken appears to be delaying title verification or simply withholding payment while it is engaged in speculation and looking for the opportunity to flip those leases before it has sufficient financial resources to honor its commitments to the mineral owners. I will take such legal action as necessary to protect these mineral owners from abusive, questionable, or misleading practices."

Parrell Grossman, the director of the Consumer Protection Division, issued a Civil Investigative Demand to Bakken Exploration. The company failed to provide responses as required by law.

"We are very concerned that North Dakota mineral owners are unwittingly agreeing to transactions in which Bakken clouds title to the mineral rights without any compensation to the owners. While these North Dakota mineral owners are tied up with Bakken, they may be losing other legitimate opportunities," Grossman said.

In announcing the cease-and-desist order, Stenehjem warned that Bakken Exploration should not be confused with Bakken Oil LLC, based in Sidney, Montana, which is not subject to any complaints with Stenehjem's office.

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