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Tory Jackson

Tory Jackson

If you want to understand the pore space bill recently passed by the Legislature and signed into law by Gov. Doug Burgum, the story actually starts in 2017 at the North Dakota Supreme Court.

In Mosser v. Denbury Resources Inc. the court unanimously held that the state law requiring oil companies to compensate landowners for damages applies to the use of pore space.

Pore space is a cavity or void beneath the surface of the land. The owner of the surface owns the pore space, even if the minerals underlying the land are owned by someone else. Oil companies use pore space for the disposal of salty wastewater that is a byproduct of oil drilling. Pore space also can be used for temporary storage of natural gas or injection of carbon dioxide to enhance oil recovery.

Prior to the Mosser decision, it was unclear whether the damage compensation law applied to pore space. The Supreme Court reached the correct legal result in the Mosser case by applying the law to the use of pore space, providing clarity for landowners and oil companies. But that was only the beginning of the story.

The oil industry is not accustomed to losing in North Dakota. But with enough money and political clout, there’s a simple way to overcome a loss at the Supreme Court — appeal to your friends in the Legislature and the executive branch to change the law in your favor. That was how the pore space bill was born.

Despite what industry representatives and politicians claim, the new law had nothing to do with providing legal clarity or protecting landowners. The Mosser decision could not have been more clear. If an oil company wants to use a landowner’s pore space, they must pay for the privilege. The oil industry didn’t like that result, so they convinced the Legislature to strip away private property rights from landowners.

The new law overturns the Supreme Court decision by amending the damage compensation law to exclude payments for the use of pore space. Oil companies are no longer required to pay landowners for injecting substances beneath their land. Landowners are prohibited from bringing legal claims if wastewater injected into a disposal well on adjacent property migrates into the pore space beneath their land.

Oil companies now have a nearly unfettered right to use pore space free of charge for carbon dioxide injection, saltwater disposal or any other operation authorized by the Industrial Commission. Landowners cannot prevent those activities or demand payment (subject to a very narrow exception for pre-existing contracts between surface owners and oil companies).

Luckily for landowners, there is still hope that their private property rights will be restored. The oil industry and its political allies appear to have overplayed their hand. The new law has serious constitutional problems.

Article 1, Section 16 of the state constitution provides that “private property shall not be taken for the use of, or ownership by, any private individual or entity.” The pore space beneath the land is the private property of the surface owner. The Legislature has taken the private property of landowners by allowing oil companies to use pore space free of charge.

The new pore space law likely will be challenged in court. A landowner whose pore space is used by an oil company without compensation has a strong claim for overturning this unconstitutional taking of private property.

Hopefully this story will end where it all began — with a restoration of private property rights by the North Dakota Supreme Court.

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Tory Jackson is an attorney and writer. His legal practice involves real estate and business matters, with a particular focus on historic rehabilitation projects. He holds degrees from Bismarck State College, the University of Virginia and Harvard Law School. He lives in Bismarck, where he was born and raised.

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