A gas storage bill that industry advocates say would help advance a petrochemical industry in North Dakota — and which is on Gov. Doug Burgum’s desk awaiting a signature — appears to be gathering potential legal opposition from Northwest Landowners Association.
Troy Coons, chairman of the non-profit entity that represents landowners in northwestern North Dakota, characterized the bill as reprisal of the 2019 pore space bill, and said that the association is reviewing its options, including legal ones.
A judge earlier this year ruled the 2019 bill unconstitutional, because it would have taken property from landowners for oil companies without just compensation.
Coons said NWLA at first supported the new bill, because the original version did create an opportunity for landowners to get just compensation for their pore space. But as things progressed, a number of amendments were added, which turned the bill into what he described as a “hoghouse mess.”
The new bill offers “equitable” compensation to landowners, as determined by the North Dakota Industrial Commission. Coons said the problem with that is that NDIC is already on record as saying it’s not economically feasible to pay landowners for the use of their underground storage, or pore space.
“Equitable compensation is an undefined legal term that we asked for them to define, and we asked them to define it as (what) the court systems already know. What’s called ‘just compensation,’ which is used a lot in eminent domain,” Coons said.
The bill that advanced was ultimately a version that did not define equitable compensation, which Coons believes will set landowners up to be at significant disadvantage down the road, if there are disputes about the fairness of the compensation. That’s because state and federal agencies are generally given “deference” in decisions involving their expert opinions when it comes to regulatory processes.
“We need to have unfettered access, without any deference, which is something that’s afforded to every citizen in the country by the U.S. Constitution and the North Dakota constitution,” Coons said. “Our attorney, legislative council, representatives from the Attorney General’s office and three other legislative attorneys all talked to us and or this committee, and they were all on video, that they said it was unconstitutional.”
Pore space, Coons said, is also a surface right, not a mineral right, and NWLA wants to see it treated as such.
“I guess the key point that baffles me is just the flat-out loss of respect for the U.S. and North Dakota constitution, and their oath of office,” Coons said. “You know when we were arguing this and we’d walk around and talk to the legislators, or we did it in subcommittee, I can’t tell you how many times people just looked at me and said so. Yeah OK it’s unconstitutional, well let’s move it forward.”
Ron Ness, North Dakota Petroleum Council, however disagreed that the bill is unconstitutional, and said from industry’s perspective it is similar to other lawful permitting processes the state has set up to govern the oil and gas industry.
“It’s a North Dakota Industrial Commission bill designed to establish a rule or process to permit either cavern storage for the potential opportunity for a petrochemical industry in North Dakota, or to allow a permitting process for oil producers to instead of flaring gas inject the gas for reduced flaring,” Ness told the Williston Herald.
Pore space could also get used to store other things underground, like carbon dioxide, or oil, under the bill. Having the bill could mean the difference between attracting a petrochemical industry or not attracting one, Ness said, and could also be integral to helping prevent future flaring, as natural gas production will only continue to increase in the Bakken as it matures.
Industry advocates say the bill brings forward a chance for land owners who don’t own minerals to get compensation for the use of their pore space.
“That opportunity only arises in terms of someone willing to drive forward with something like a petrochemical industry or gas injection, which is, you know again, for the producer It’s very costly,” Ness said.
Defining equitable versus just compensation is just legal word play, a “red herring,” Ness said.
“These guys are, in my opinion misrepresenting the bill,” he said. “It says very clearly all pore space owners must be equitably compensated.”
The bill also requires that a majority of landowners agree with moving forward, Ness said. Those who don’t agree would still have to be equitably compensated.
Without the bill, North Dakota will continue to lack the underground storage space that has been highlighted as key to attracting a petrochemical industry, based on an EERC study commissioned by the North Dakota legislature.
“You know what, kill the bill,” Ness said. “But look at the potential loss to northwestern North Dakota. There will be nobody who gets compensated for pore space, and the petrochemical industry has said that very clearly.”