Giving Away A Gravel Mine

The strange saga of Roger Lothspeich and the Elkhorn Ranch gravel pit has taken a bizarre turn. Lothspeich, you will recall, is the fellow who bought the “surface minerals” (gravel, scoria, coal and uranium) on a piece of land owned by the U.S. Forest Service directly across the Little Missouri River from Theodore Roosevelt’s ranch home, which is now part of Theodore Roosevelt National Park in the North Dakota Bad Lands.

Immediately, he sent an extortion letter to the Forest Service that said if they gave him a couple million dollars, he wouldn’t go in there and start ripping up the land and creating a mess and disturbance within view and earshot of the Elkhorn site. The Forest Service didn’t bite. Then he tried to get some conservation organizations, who were opposed to the mining project, to buy him out. They said “No” as well.

With nowhere else to go, and with an investment that needed recouping, Lothspeich then applied for a mining permit. The Forest Service said “Fine, first we’ll do an Environmental Assessment.” They did that about a year ago. They outlined the conditions under which mining could proceed. With no other options, Lothspeich agreed with the conditions. Last summer, the Forest Service told him to go ahead and start mining. But first he had to build a road into the mine site, at his own expense. That’s where things stood, by last fall.

But all along, skeptics, myself included, wondered if he really had the wherewithal to do that. That was going to be a costly undertaking. Turns out the skeptics were right. He bailed out. Sort of. But that’s not the end of the story.

What he did was, he essentially gave the mine to Billings County, the county in which it is located. On December 4, 2015, just a month ago, Lothspeich, Billings County Commissioner Joe Kessel and Billings County Auditor Marcia Lamb, signed an agreement turning the gravel mine over to Billings County.

The terms of the deal are indeed clear, but they leave most people shaking their heads in wonder. The county got the right to “mine, remove and transport gravel” from the hillside above the Elkhorn. But first, they had to build a road to the mine site. They did that in November, even though the deal wasn’t signed until December. And then the county’s road crew started digging gravel.  I was there Monday. It’s a good sized operation, but they took a day off to move snow from the county’s roads, so no one was around.

So, now that the road is built, here’s what they get:  the first 60,000 cubic yards of gravel. Free. I checked on the price of gravel yesterday. It goes for anywhere from $8-10 a cubic yard, including the cost of the product and royalties to the landowner. So the deal is worth somewhere around half a million dollars to the county. And all they had to do was build the road, which probably cost them less than $50,000. They already have a crew in place, and they own the machinery, so now all they have to do is pay their men to dig the gravel out of the ground, and haul it away. Under the deal, Lothspeich gets nothing—but he gets out from under having to finance a road and a mining operation. But his payoff could come when they’ve taken 60,000 cubic yards of gravel from the pit.

Then, the agreement says, “if the parties agree to any future removal of gravel, a royalty payment per cubic yard of gravel, and other terms and conditions, will be negotiated between the parties before any further mining.”

On the first 60,000 yards, the deal says, the county is not required to pay a royalty to Lothspeich, as the gravel is being provided “in exchange for (the county’s) improvements to the road leading to the mining site.” So after all the money he’s spent, he gets nothing in return. At least for now.

At first blush, this makes no sense. Lothspeich has spent well into six figures on lawyers and engineers already, plus whatever he paid for the minerals, which he bought from the Connell Family Trust, original owners of the property, back in 2008. The quit claim deed on those minerals in the Billings County Recorder’s office does not list the specific terms of the sale. Plus he’s gone through a lot of trials and tribulations and waves of bad publicity over the past five or six years. Why would he just give it all up for nothing?

The answer has to be he’s betting on a long-term return. I don’t know how long it will take the county to dig out 60,000 cubic yards. I don’t know how much gravel is there, and I don’t think anyone does, but Lothspeich is betting it is more than 60,000 cubic yards, because if there’s anything left, he gets to sell it to the county. And they have to dig it out themselves. Could be there’s a LOT of gravel up there. If so, he gets to sit back and just deposit his royalty checks while someone else does all the work.

How much is 60,000 cubic yards? Well, it sounds like a lot, but in reality it’s only enough to cover a football field about 40 feet high. So if they could find a 4-foot thick vein of gravel up there on the hill overlooking TR’s cabin, they’d have to mine an area the size of ten football fields to get 60,000 cubic yards. The size of the mine site is 25 acres, so those ten football fields would fit nicely over into a corner of that property, with 20 or so acres left over.

But it may not stop there. Lothspeich owns the minerals under the entire section of land—640 acres—in  which the 25 acres is located. His plan has to be to mine a whole lot more 25-acre parcels on that section. That’s been the fear all along of the conservation community, the historic preservation folks, and the tourism industry. The Forest Service, which did the Environmental Assessment, tried to assuage those folks by telling them that the permit is only for 25 acres and it only lasts for three years. Then the mine will be gone.

Except that there are a lot of us who don’t believe that for a minute. I think that the mining will go on for, well, essentially forever. Permit after 25-acre permit. And with it, the accompanying distractions from the aesthetic and historic value of the Park Service’s Roosevelt ranch site.

There’s more to this story. There are lawsuits pending against the Forest Service for not doing a satisfactory environmental review. There are some big-time Washington law firms involved in that and I am trying to find out who is paying them. I will write about that soon. There’s some speculation that Lothspeich’s old Belfield High School buddy from 40 years ago , Jim Arthaud, now chairman of the Billings County Commission and one of the richest men in western North Dakota,  has been personally involved in this deal, financially, all along. That would be a conflict of interest with his county commission job. There’s talk of ties to the new crossing of the Little Missouri River, a project which has been stalled just as long as the gravel mine was.  There’s a lot of money floating around the Oil Patch right now, and I don’t trust those big money boys out there. I’ll keep looking. The legal proceedings are underway in a courtroom in Washington, DC right now. When I know more, so will you.