Hospital set to lease N.D. mineral rights for oil exploration

By Allison Arthur of the Leader
Posted 2/10/15

Jefferson Healthcare and Grace Lutheran Church of Port Townsend have approved leases with an oil company in North Dakota to explore mineral rights bequeathed to them in 2000.

Lucille Eggert, who …

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Hospital set to lease N.D. mineral rights for oil exploration

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Jefferson Healthcare and Grace Lutheran Church of Port Townsend have approved leases with an oil company in North Dakota to explore mineral rights bequeathed to them in 2000.

Lucille Eggert, who moved to Port Townsend in the 1940s with her husband, Arnold, died in 2000, and willed the hospital $75,000 and mineral rights under 80 acres she owned in Burke County, North Dakota. It wasn't until 2008, after oil was found under the Bakken reserve, that the Jefferson Healthcare started getting inquiries from interested oil companies.

Hospital commissioners recently received an offer they liked.

The board voted 4-0 with one abstention on Feb. 4 to lease those 80 acres of mineral rights to Land 4 Energy Group for $36,000 for three years with provisions for another $36,000 and a three-year lease after that and royalties should oil be found. Commissioner Matt Ready abstained.

Grace Lutheran has signed a lease, but details were not available because the pastor was unavailable, according to a church spokesperson.

BENEFIT, CONCERN

Commissioner Tony DeLeo of Port Hadlock, who had taken the lead in researching Eggert's donation, said it was the best deal the public hospital district has seen since it discovered the potential value of the mineral rights.

“This is a sweeter oil, a cleaner oil and it will allow us to do some things in the community that, with reduced reimbursements for health care, would be difficult to do,” DeLeo said Monday. He said he has a few ideas where the $36,000 could be used, but that the board would make any decisions after a discussion.

Both DeLeo and CEO Mike Glenn both said Eggert had instructed that her assets be used for the good of the community. And they believe they are complying with her request.

Public watchdog Tom Thiersch of Jefferson County questioned the logic of the hospital district going into the oil business and noted the Bakken reserve was discovered after Eggert had died.

“I'm questioning the wisdom of a hospital district that is looking out for the health of the community as part of its mission statement to in any way contribute to the addition of more oil trains coming into the state of Washington, and the addition of more tanker traffic in the Strait of Juan de Fuca,” Thiersch said during public comment, after the board had taken action.

LETTER TO INSLEE

Thiersch followed up his public comments on Feb. 4 with a letter Feb. 5 to Gov. Jay Inslee, who has expressed concerns about the safety of moving oil through the state via old and unsafe rail cars.

In a June 2014 directive Inslee asked state agencies to assess safety issues and the “relative risk of Bakken crude with respect to other forms of crude oil.”

In that letter, Thiersch told Inslee that if the lease the hospital has with the oil company goes through, “the oil that is produced will very likely end up on an oil train going through Washington.”

“I would like to see all public agencies in Washington encouraged to follow the lead of institutions such as Harvard University, which is divesting all of its endowment investments in the fossil-fuel industry,” Thiersch wrote in a letter to Inslee.

“There still may be time for your office to influence the signing of the lease,” Thiersch wrote.

As of Monday, Feb. 9, Glenn said the hospital district had not heard from Inslee's office.

“It's a complicated issue,” Glenn acknowledged before the commissioners voted.

Asked to elaborate on the decision, Glenn said, “The environmental and socio economic issues associated with fracking added to the complexity of this decision.”

Glenn also said he thought the board had gone through a deliberate process and he agreed with the decision.

DeLeo, who noted that the underlying property owner also entered into a lease with the oil company to access the land, said he understood the political issue of oil dependence.

“Personally, reducing our dependence on fossil fuel is very important, but until we can, developing oil resources within the U.S., keeping the revenue generated here at home and reducing our need to purchase oil from politically volatile areas, can help build our economy,” he said.

DeLeo said replacing coal-fired facilities with cleaner burning, low-cost natural gas systems “will be a step forward in our quest for a cleaner, healthier environment.”

BAKKEN RESERVE

If oil is found, the public hospital district could receive three-sixteenths of any profits as royalties, according to the lease. No one knows what that might translate to in dollars.

In 2013, the U.S. Geological Service indicated as much as 7.4 billion barrels of oil could come out of the Bakken reserve.

As production has declined in Alaska and California, North Dakota as of 2014 was the second largest oil-producing state in the U.S., behind only Texas, according to the Wall Street Journal.

The national publication also reported Jan. 1, 2015 that the price of North Dakota sweet crude was $29.25 a barrel, the lowest level since December 2008 and well below $136.29, a record set in 2008.

That the price of gas and oil has dropped and the hospital received such a good offer was surprising to DeLeo.

“We're not sure why they offered this,” he said of the deal, which was better than anything offered before.

Lands 4 Energy is based a joint venture between a Fort Worth, Texas company and an energy company based in Tennessee, according to its website.

RIGHTS RESERVED

Although Eggert sold 320 acres of North Dakota land to a man who had leased the property from her family for years, she kept the mineral rights.

In addition to the hospital district and church in Port Townsend, a nursing home and another church in North Dakota also share the mineral rights under those 320 acres.

In his research DeLeo discovered that the property is close to a freeway and rail and close to the Dakota Prairie Refinery, which is in Stark County, three counties below Burke County.

Several years ago, DeLeo also learned that a woman in Port Angeles has a well in the same area and “is getting checks regularly.” She declined to tell him how much.

DeLeo also discovered earlier that if no action is taken on the mineral rights within 20 years, the rights would revert back to the original property owner. He said Monday the healthcare system had renewed its claim on May 16, 2013.

Eggert came from Lignite, N.D., and moved to Port Townsend in the 1940s with her husband, Arnold. The two did not have children.

A scholarship at Port Townsend High School also is named in her honor.

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