North Dakota landowner groups and the state’s oil and gas industry remain sharply divided over a complex energy bill up for a vote in the House this week.
Supporters of Senate Bill 2344 say it provides necessary clarity for issues involving pore space, or the cavity or void in underground rock formations. The bill has impacts for saltwater disposal wells, enhanced oil recovery and temporary storage of natural gas to reduce flaring.
But opponents continue to call it a “taking of private property rights” and say it strips landowners of legal rights.
House members will consider amendments to the bill on Wednesday. Rep. George Keiser, R-Bismarck, who will carry the bill on the House floor, said even though the legislation is complicated, he believes members will be well informed.
“I think they’re going to understand this legislation more than they do a lot of legislation simply because lobbyists for both sides are working so hard,” Keiser said.
The North Dakota Petroleum Council says the bill is necessary to clarify issues related to pore space after a North Dakota Supreme Court decision in the Mosser v. Denbury Resources case. 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.
Ron Ness, president of the Petroleum Council, said that ruling opened the door for adjacent landowners to make claims that they, too, should be compensated for saltwater injected into their neighbor’s disposal well because it might migrate into their property.
The Bakken Backers, affiliated with the Petroleum Council, said in an “action alert” to members that trial lawyers will be the only winners if the bill fails.
“Without passing SB2344, trial lawyers will swamp western North Dakota to file lawsuits against oil and gas producers and injection well operators,” the alert read. “They will pit neighbor against neighbor, and our courts will be clogged with unnecessary lawsuits.”
But opponents of the bill say the concern about neighbors making such claims is overblown. Landowners would have the burden of proving that saltwater injected into a neighbor’s disposal well migrated into their pore space more than a mile underground.
Energy industry leaders also say the bill provides certainty for projects that use carbon captured from North Dakota lignite plants to enhance oil recovery. The bill also addresses the temporary storage of natural gas underground, which the North Dakota Industrial Commission is researching as an alternative to flaring.
Gov. Doug Burgum, chairman of the Industrial Commission, said he supports creating regulations that advance carbon capture, enhanced oil recovery and natural gas storage.
“We’re interested in having a stable tax and regulatory environment and a clear legal environment for which people can operate in,” Burgum said. “We create the framework so that the conditions for success can be achieved between the landowners and the people in the energy industry.”
Agriculture Commissioner Doug Goehring testified in support of the bill. The third member of the Industrial Commission, Attorney General Wayne Stenehjem, told the Tribune he was reluctant to comment on the bill because some have raised the potential for a constitutional challenge. If the bill passes, Stenehjem’s office would be tasked with defending the law.
“The Industrial Commission supports some kind of solution to provide research and a legal framework for carbon capture and storage and enhanced oil recovery, but we did not act on that specific bill,” Stenehjem said.
The Northwest Landowners Association distributed a flyer to legislators this week calling the bill a “government overreach” that strips landowners of their right to be compensated for the use of their pore space.
Derrick Braaten, a Bismarck attorney who represents landowners, said the bill creates an “impossible situation” for landowners by taking away their legal remedies.
“If the operator doesn’t compensate them for the pore space, usually the threat is eventually that the landowner is going to bring a lawsuit,” Braaten said.
But the bill removes the potential for bringing such lawsuits, Braaten said. The bill changes the definition of land in the Surface Owner Damage Compensation Act to exclude pore space.
It also adds language to the Subsurface Pore Space Policy that says injection or migration of substances into pore space to facilitate oil, gas or other mineral production “is not unlawful and, by itself, does not constitute trespass, nuisance, or other tort.”
The North Dakota Farmers Union also opposes the bill, primarily due to concerns the language could take away landowners’ rights, said lobbyist Kayla Pulvermacher.
“We’re trying to stand up for landowners,” Pulvermacher said. “The more I learn from both the opponents and the supporters, I get more skeptical of what the bill may actually do.”
Amendments to the bill approved by the House Energy and Natural Resources Committee last week made clear that the bill can’t be used to impair existing contracts. Another amendment clarified that the bill can’t be construed to modify who owns the pore space, which is the surface owner.
Some landowners said those changes improved the bill, but the Northwest Landowners Association, North Dakota Farmers Union and the North Dakota Grain Growers Association oppose it even as amended.
Some North Dakota Stockmen’s Association members have been satisfied by the amendments, but other members remain concerned with the bill, said Julie Ellingson, executive vice president.
Braaten said landowners are concerned that they will have no legal claim to be compensated for their pore space after existing contracts expire.
If the law is approved, Braaten said he expects someone will file a lawsuit against the state alleging that it violates a section of the state constitution that says “private property shall not be taken or damaged for public use without just compensation.”
“If I don’t, I’m sure someone will,” Braaten said. “I know that I’m going to have numerous clients who will be asking me that.”
In addition, the state could face lawsuits from landowners who claim inverse condemnation and sue the state for damages because the state took away their right to sue operators, Braaten said.
Meanwhile, there’s already one active lawsuit that could be affected by the outcome of the legislation.
Continental Resources filed a complaint last September in U.S. District Court against Rick and Rosella Fisher related to a saltwater disposal well in Bowman County. The complaint asserts that the Fishers are not entitled to compensation for use of the pore space under their land. The disposal well was drilled for the purpose of disposing produced water from wells in a unitized oil development operated by Continental.
In a previous lawsuit involving the two parties, Judge Daniel Hovland ruled in 2015 that the company had the right to conduct disposal well operations within the unit. He also ruled that Continental must compensate the Fishers for any damage to their pore space if the well is used. Hovland interpreted the definition of land in North Dakota’s surface owner compensation statute to include pore space.
The bill being considered by lawmakers would specifically exclude pore space from the definition of land in that section of law.
Department of Mineral Resources data shows Continental Resources began injecting saltwater into the well last October.
The Fishers have filed a counterclaim against Continental arguing the company is required to pay the landowners for use of the pore space. Christina Wenko, attorney for the Fishers, declined to comment on the case.
Lawrence Bender, attorney for Continental Resources, has testified in support of SB2344, though he said his testimony is on behalf of the North Dakota Petroleum Council, not Continental Resources. When asked how the legislation could affect the case, Bender said he does not comment on active cases.
Roger Kelley, a lobbyist for Continental Resources, said he wasn’t aware of the lawsuit until this week and could not comment on the case. Kelley said the company supports the position of the Petroleum Council on the legislation.