The Pore Space lawsuit hearing April 7, 2020
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Pore Space F.A.Q
- What is Pore Space and who owns it?
Pore space has numerous definitions but, in essence, it is the space between the soil and rock molecules below the surface of the land. Pore space begins just below the surface, and is part of the surface estate. This means that the right to possess, use, lease, and inject substances into the pore space is one of the rights a surface owner has as the owner of the land. This is true even if that pore space is a mile or two below the surface.
- What was SB 2344 (the “pore space” bill) supposed to do?
According to testimony from the North Dakota Petroleum Council presented to the ND House Energy and Natural Resources Committee on March 1, 2019, Senate Bill 2344 was intended to address a concern over “potential class-action lawsuits.” According to the Petroleum Council, “Arguments could be made that adjacent surface owners may have a claim to share … compensation [from their neighbors’ disposal wells] because of a perceived pore space right established … in a ruling by the ND Supreme Court.” It seems the primary concerns relate to the fact that substances migrate and move in the subsurface, and the oil and gas industry is concerned with liability because it did not account for the fact that this causes damage to neighboring surface owners and their pore space. There are also other situations, such as in unitized fields, in which the oil and gas industry simply believes it should not have to pay for use of the pore space. Unfortunately, the solution found in Senate Bill 2344 is to take away all rights of all surface owners to their pore space, except for what is now a completely empty right of “ownership” (i.e. surface owners “own” the pore space still, but have had all important rights of ownership removed by SB 2344).
- What did SB 2344 (the “pore space” bill) actually do?
The bill declared that, if the oil and gas industry is using pore space for certain purposes, it “is not unlawful and, by itself, does not constitute trespass, nuisance, or other tort.” Before the law if, for example, an oil company placed a saltwater disposal on a landowner’s property over his objection, that landowner could sue for trespass to his pore space. He can no longer do that if SB 2344 stands.
Landowners also had a right to sue for oil-development-related damages under Chapter 38-11.1 of the Century Code (commonly known as the Oil and Gas Production Damage Compensation Act). SB 2344 changed the very definition of “land” redefining it to not include pore space, and therefore removed any right to compensation under that law as well.
Finally, to make sure landowners were completely without these rights, Senate Bill 2344 also states the following:
Any other provision of law may not be construed to entitle the owner of a subsurface geologic formation to prohibit or demand payment for the use of the subsurface geologic formation for unit operations for enhanced oil recovery, utilization of carbon dioxide for enhanced recovery of oil, gas, and other minerals, disposal operations, or any other operation conducted under this chapter.
This language, in simple terms, means a landowner cannot even ask for payment for use of her pore space. Although supporters of the law are quick to claim that surface owners still own the pore space, that is a meaningless statement when these other rights have been taken away.
- What does NWLA hope to accomplish with its lawsuit against the State of North Dakota?
NWLA’s goal is the same as it has always been: To stand up for the rights of the landowners of North Dakota. The lawsuit asks the courts to declare the law void and unconstitutional, as if the law was never passed. NWLA will not stop working on this issue even if successful with this lawsuit, however, because the oil and gas industry almost certainly will be back next session with a new version. In the past, NWLA has always attempted to work with government and industry to find solutions and a middle ground. NWLA remains committed to this approach, but with SB 2344, landowners were not invited to the table to discuss resolution of industry concerns. If NWLA is successful, the hope is that the government and industry invite the landowners to the table to have a meaningful discussion about how to address the industry’s concerns.
- Why is this lawsuit important for surface owners?
The primary claims being made in the lawsuit are that Senate Bill 2344 is an unconstitutional taking of private property and violates due process of law. If allowed to stand, Senate Bill 2344 would be an unprecedented taking of private property rights. Surface owners everywhere, whether they are concerned about pore space or not, should be concerned about the precedent this law could set for the taking of other private property rights. NWLA is asking all landowners to stand up and stand together against this attack on private property rights.
- Do some landowners and farm groups support the legislation?
It depends on who you ask. There have been reports that North Dakota Farm Bureau supports the law, but their website contains a policy resolution stating its opposition as follows:
“We support the protection of private property rights against government takings, including the protection of pore space that has been owned by the surface estate in North Dakota since 1877. We oppose any attempts by the government to remove a landowners’ rights to bring claims for trespass, nuisance or other torts and we oppose any attempts by government to take away a landowner’s right to compensation for use of pore space under NDCC.ch.” (https://www.ndfb.org/policy/issues/property-rights)
Other farm and landowner organizations have almost universally opposed the legislation. Although supporters claimed during the legislative session that a group of McKenzie County landowners supported the legislation, in truth, less than half a dozen landowners who attempted to negotiate with the industry for amendments supported the law. And even those few landowners were not happy with the law as passed. They simply attempted to make a terrible situation a little less impactful. In the end, all landowners engaged during the session were opposed to the passage of the law.
- Weren’t there amendments made to SB 2344 that made it ok?
SB 2344 was amended after landowners showed up in force to voice their opposition to the law. The amendments only addressed landowners who have existing contracts, however, and the amendments fail to change the fact that the law is a taking of private property. Unless a landowner had an existing contract for use of his pore space, the amendments change nothing. And even for those landowners who have contracts, a significant risk exists when those contracts end.
- What are the claims being made in the pore space litigation?
The primary claim being made is that the pore space law takes property from private landowners without just compensation, and that because this violates the Takings Clause of the United States and North Dakota Constitutions, the law is void and unconstitutional. North Dakota also has passed some specific limitations on eminent domain, and under its constitution it does not allow takings from a private landowner for the use and benefit of another private entity, such as has been done here for the oil companies. It is also unconstitutional to take private property for the purpose of “economic development,” which is the only practical benefit of the law – it helps the oil and gas industry with development of the mineral resources at a lower cost because they do not have to compensate for their use of the landowner’s pore space.
- What are the rights of oil and gas operators to use the pore space?
Under SB 2344, oil and gas operators have an almost unqualified right to use the pore space for their oil and gas operations without payment of compensation. With respect to the existing state of the law before the law was passed, it is a very complicated legal question, but a few basic ideas set out the majority of rights an oil and gas operator had to use the pore space prior to passage of SB 2344.
Unless a contract is signed granting an oil and gas operator rights to use the pore space, operators have the right to do what is “reasonably necessary” to produce the minerals. Generally speaking, an operator can use the surface estate, including the pore space, as is reasonably necessary to produce the minerals beneath that surface. When land is unitized or pooled, these rights are expanded to the unitized field or pooled spacing unit. If use of the surface estate goes beyond what is reasonably necessary, it becomes a trespass. Even if it does not, prior to SB 2344, Chapter 38-11.1 of the Century Code (commonly known as the Oil and Gas Production Damage Compensation Act) still required compensation to be paid to the surface owner. That is no longer the case under SB 2344.
- Can a mineral operator trespass on my land without paying me now?
Yes, but it really depends on the situation. The pore space has always been part of the surface estate in North Dakota and, indeed, in most or all of the United States. After passage of SB 2344, a landowner cannot demand compensation for use of his pore space by an oil and gas operator for production operations, nor can the landowner bring an action for trespass or nuisance, or other tort, or an action for damages under the Oil and Gas Production Damage Compensation Act.
Supporters of the law have pointed out that a surface owner could still bring a trespass action for the occupation of the actual surface used to access the pore space if an operator were to trespass. While this is technically true, there have been cases in North Dakota where courts have refused to order such trespassers to vacate the property, meaning that in such a situation the landowner may end up being compensated for the surface trespass at most, which leaves him without a remedy for the ongoing trespass to his pore space.
- Can an oil company just come on my property and use it for a disposal now?
To some extent, yes, but while the law is being challenged it is unlikely. Additionally, situations existed where this was true before the passage of SB 2344. Legally, however, in most situations, it is possible for a company to use a landowner’s property for a disposal over the landowner’s objection. A landowner has very few remedies left unless he has a contract, or he can convince a court to order an injunction against the trespasser to his surface.
- How are oil and brine spills related to pore space?
Pore space does not only exist in deep formations. There is pore space just beneath the surface of the land as well. When oil and produced water are spilled onto your land, they seep into the soil. The place in which the oil or water ends up in your soil is actually in the pore space. Although this was not the intent of the law’s supporters, the passage of SB 2344 leaves open the question of whether a surface owner can bring a trespass or nuisance lawsuit arising from such a spill, since this is technically trespass to his pore space.
- Didn’t SB 2344 just put the law back the way it was before?
No. The surface owner has always owned the pore space in North Dakota, and this was recognized by two different federal district court judges, as well as all five justices of the Supreme Court of North Dakota in separate court opinions. Additionally, these courts concluded that surface owners are entitled to compensation under the Oil and Gas Production Damage Compensation Act.
Presumably the oil and gas industry did not believe that operators needed to pay compensation to a surface owner if they were conducting disposal operations in a unitized field prior to the Mosser v. Denbury case. The courts all disagreed. When supporters of the pore space law say they are putting the law back they way it was, what they mean is that they are putting the law back to what they thought it was prior to the Mosser case.
- What was decided in the Mosser v. Denbury case?
The primary issue that was decided in Mosser, and which appears to have led to the pore space law, is whether surface owners can be compensated under Chapter 38-11.1 of the Century Code (commonly known as the Oil and Gas Production Damage Compensation Act) for use or their pore space. Two federal judges, and all five justices of the Supreme Court of North Dakota ruled that, under the law as it has existed since statehood, the surface owners could recover. SB 2344 undoes this and removes the surface owners’ rights to such recovery.
- Can a landowner sue his neighbor because saltwater migrates into his pore space?
Yes, although filing a lawsuit and winning a lawsuit are not the same thing. Over many years, companies have paid landowners for the right to dispose of produced water into the landowners’ pore space. Most of the landowners with contracts for these kinds of operations were paid a rate per barrel of produced water disposed. The contracts were only with the owner of the surface where the disposal facility was located, so if a disposal facility was at the edge of a property line, there is a good chance that the produced water migrated out beneath adjacent lands after it was disposed. Companies that entered into contracts with the owner of the surface facilities had not anticipated that adjacent landowners would have claims for this trespass to their pore space, and it was the concern over potential lawsuits from these hypothetical adjacent landowners that seems to have prompted SB 2344. Although these companies’ concerns over this potential liability are understandable, using the government to strip away a landowners’ rights in his land is not the solution.
- Why should a neighbor get to dictate what happens on another landowner’s property?
They should not. But it is important to understand that when one person uses his land, it can affect how his neighbor uses her land. For example, if someone in town decided to turn their front yard into a garbage dump, obviously the neighbors would object because their property values would go down, and they would not be able to enjoy their own property. The point is that there is always a situation where a person’s use of his own property affects other peoples’ uses of their property. For example, if a landowner has a disposal well, and his neighbor is prevented from using her own pore space because it is being used by her neighbor, that is a trespass the same as it would be a trespass if her neighbor parked a car on her lawn. That said, other states have addressed the issue of subsurface migration through spacing and pooling concepts, and even in North Dakota, these concepts are applied to create units for sequestration of CO2. No one is arguing that a landowner with a contract should not get paid according to that contract, and no matter what a neighbor claims, a contract is a contract.
- Doesn’t SB 2344 prevent a lot of lawsuits?
As explained above, it is true that adjacent landowners may have claims for trespass to their pore space when they have disposal wells sitting on adjacent property. This has always been the case, though. And even if the rulings of various courts came as a surprise to the companies operating these disposals, the first ruling on these issues occurred in 2014, and there have not been any such lawsuits to date.
- Do disposal operators still need to negotiate contracts?
It depends on the circumstances, and while the law is being challenged, it appears that most companies prefer to do the right thing and work with the landowners. Legal arguments can be made, however, that disposal wells can be operated without a contract or permission of the surface owner, and because a surface owner no longer has the right to bring a trespass action for trespass to pore space, ejecting a disposal company may be impossible. The situation is more likely to come up with a holdover tenant in a saltwater disposal lease than a new disposal well, but the concern over this possibility was expressed by landowners during the session. While amendments were passed in response to this concern, it remains possible for a holdover tenant in a disposal lease to continue operating. Currently, however, the risk the arises as a result of the lawsuit by NWLA seems to be significant enough that companies are not taking such extreme actions.
- Landowners don’t get paid when airplanes fly overhead, why should they get paid when space is used thousands of feet below the surface?
If airplanes interfere with use of a landowner’s property, there is an actual trespass or nuisance. If the airplanes are authorized to do so anyway, courts have held that it is a taking of private property that requires just compensation. See, e.g., United States v. Causby, 328 U.S. 256 (1946). With respect to the pore space deep below the surface, the question is simply whether it is owned by the surface owner (it is), whether someone is trespassing, and whether there are damages. In western North Dakota, the commercial reality is that use of the pore space is very valuable; which is precisely why the oil and gas industry asked the North Dakota Legislature to take those rights from the landowners and give them to the industry. Even the most prominent scholars in oil and gas law have recognized the right of the surface owner to compensation for use of his pore space in situations that are not “reasonably necessary” for production of minerals beneath that surface estate. See Patrick H. Martin and Bruce M. Kramer, Williams & Meyers, Oil and Gas Law, Volume 1, § 222, p.339 (2018).
Your generous donation is allowing the NWLA Board to proceed with legal action against the State of ND asking the Pore Space legislation be declared unconstitutional, void, and of no effect. Braaten Law Firm is the legal counsel and has agreed to discounted rates; however, many hours have been, and will continue to be spent working on this issue. Monetary donations are used not only for legal counsel, but also marketing materials, educational outreach, and travel costs for the NWLA volunteer board.
Thank you for your support!