Attorneys who represent landowners are raising concerns about an energy bill that sailed through the North Dakota Senate, with one calling it a “wolf in sheep’s clothing” that takes away private property rights.
Senate Bill 2344 follows a study that found it may be economically viable to temporarily store natural gas underground as an alternative to flaring.
Supporters of the bill say it removes uncertainty related to mineral developers’ ability to use pore space, or the cavity or void underground where gas would be injected and temporarily stored.
But Steve Easton, an attorney who represented landowners in a case upheld by the North Dakota Supreme Court, said oil and gas companies already have the right to use pore space, and the bill is not needed. The bill would take away the option for compensation for landowners. Ownership of the pore space belongs to the surface owner, not the mineral owner.
In addition to gas storage, the bill also has implications for underground storage of carbon dioxide, enhanced oil recovery operations and saltwater disposal wells.
“This is the oil and gas industry saying we should be able to take the property rights of a farmer and rancher in North Dakota without even paying for them,” said Easton, who served as U.S. attorney for the District of North Dakota in the early 1990s.
The bill also adds a definition of land, specifying that land “means the solid material of earth, regardless of ingredients, but excludes pore space.”
Easton said the words “but excludes pore space” seem innocuous, but is a major shift in North Dakota law.
“A bill like this can be sort of a wolf in sheep’s clothing,” Easton said. “People need to be aware of what’s happening.”
The bill is a response to a North Dakota Supreme Court decision in the Mosser v. Denbury Resources case, in which the court upheld that Denbury had the right to use the ranchers’ pore space for the operation of a saltwater disposal well, but the company had to pay for the use.
Easton, who represented the Mossers, said the bill will change that law.
The bill received no opposition during a hearing before the Senate Energy and Natural Resources Committee on Feb. 1. The bill received support from the oil and coal industries, Agriculture Commissioner Doug Goehring and Director of Mineral Resources Lynn Helms.
Helms told legislators that temporarily storing natural gas underground is already “marginally economic” and paying landowners for use of the pore space would tip the economics the other way. He also said the Supreme Court ruling caused uncertainty that would prevent the industry from moving forward with such projects.
Sen. Jessica Unruh, R-Beulah, the primary sponsor of the bill, said in prepared testimony the purpose of the bill “is to ensure landowners, mineral owners and developers maintain their long existing rights and can produce their minerals, protect their property rights and not be restricted in ways that would overturn these long-held protections.”
Members of the Senate approved the bill unanimously on Feb. 12 after little discussion.
The Northwest Landowners Association plans to testify against the bill on Friday when it goes before the House Energy and Natural Resources Committee. Troy Coons, chairman of the grassroots organization, said the group considers the bill to be “a flat-out taking” of private property rights.
“I think people were not aware of what it truly meant,” Coons said. “It’s going to be a sprint here to get them all aware.”
Bismarck attorney Derrick Braaten said the bill opens the state to a lawsuit.
“This law is going to get challenged the first time it’s used,” he said.
Braaten said he agrees with the idea of temporarily storing natural gas underground rather than flaring, but he doesn't think the compensation issue will prevent companies from working with landowners.
“Surface owners are the ones dealing with flaring,” Braaten said. “Rather than having a flare on their property, if they can have that reinjected and captured later, they're going to agree with that both as a policy but also as someone living next to a giant flare.”
The hearing is at 8:30 a.m. Friday in the Coteau A Room of the Capitol.