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Solid Waste Management In The Dakotas

Posted on: September 26th, 2016
by David Ganje

Municipal Landfills in North Dakota

The operation of a municipal landfill, also known as a solid waste facility, involves legal risk, such as damage caused from a landfill leaking or by landfill contamination of groundwater. Modern landfills are created with liners and other collection systems designed to prevent contamination of the ground, groundwater and the air. Despite good practices, in 2003 the U.S. Geological Survey (citing the EPA) opined that “all landfills eventually will leak into the environment.”

In North Dakota municipalities are required, in the event of a spill or leak, to show their financial ability to take corrective action, but only after the event has already occurred. North Dakota does not require municipal landfills to maintain environmental or pollution liability insurance. Consider a landfill just west of Watford City, which was recently found storing thousands of pounds of illegal radioactive material. The costs to clean up a landfill leak can be beyond the financial capability of a municipality if adequate preparations are not made. An operating landfill is not the only party who might be on the hook to pay for leaks. By way of illustration, Grand Forks has promised to indemnify the operator of their landfill from any and all claims, suits or causes of action that arise from the landfill.

To put this liability issue in financial perspective, the cost to clean up a leaking 150-acre landfill next to a drinking water supply in Burnsville, Minn., was recently estimated by the state at $64 million. These clean up events are the type addressed by landfill pollution insurance, but few municipalities seem inclined to carry the insurance. I am not aware of any North Dakota municipal landfill that carries pollution liability insurance. This is akin to riding a motorcycle without a helmet. Landfills in the state are, in many cases, owned and run by cities and counties. Understand that municipal landfills are dutiful in complying with state and federal environmental regulations. State regulators and municipalities are following relevant statutes and rules. That is not the issue. The challenge is the risk of pollution liability, also called environmental liability – no small matter in today’s world, with costs that can reach into the millions.

Municipalities in North Dakota are not necessarily alone when a leak occurs. North Dakota maintains the Municipal Waste Landfill Release Compensation Fund, which would reimburse municipalities for reasonable corrective costs, including labor, testing, machinery, and consulting fees. However, the owner or operator must pay the first $100,000 for corrective action. Moreover, the Fund will not protect owners and operators who are negligent, or who caused the leak through misconduct, at the sole determination of the State. The Fund will not even reimburse for costs incurred through bodily injury or property damage. It is not a catch-all for landfill environmental liability.

If the Municipal Waste Landfill Release Compensation Fund cannot handle the issue, the release might be enough to trigger the State Disaster Relief Fund, which is there to help deal with a variety of issues, including widespread and severe water or air contamination. A problem on the scale experienced in Burnsville could be met with this State fund to help. A $64 million cleanup would however reduce the Disaster Relief Fund to near-empty, as North Dakota has just over $70 million currently in the fund.

Unfortunately for municipalities, when a serious landfill leak that cannot be handled at the city level occurs, the Environmental Protection Agency may become involved, triggering a Federal cleanup. Once the EPA gets involved, costs can skyrocket for everyone, and the EPA will bring suit against every party, including a negligent municipality, involved in the leak to pay for the cleanup costs. Facing off against the EPA in a million-dollar suit is the last place a municipality wants to be. It would be better to be able to handle landfill leaks with insurance, rather than involving other bureaucratic organizations who will use money inefficiently and then demand repayment.

This fund or ‘security account’ held by the state is not a complete answer, but it is a good start. Compare this with South Dakota which leaves municipalities buck naked to the law. South Dakota leaves municipalities at great legal risk. The South Dakota delegating law states that owners or operators of landfills are forever responsible for any pollution or legal problems caused by stored solid waste. The state has no special fund to deal with this issue. South Dakota’s rules allow a municipality to keep a separate fund (money deposited in a bank account, for example) to protect against the costs of a leaking landfill, or alternatively for coverage of such a leak by purchasing pollution insurance. Nevertheless, to maintain a separate fund large enough to cover a landfill leak is beyond the financial capability of municipalities in both states. Brown County, the third largest county in South Dakota, maintains a separate fund in the amount of $240,000. That is not enough money to cover a possible leak. Brown County is one of the municipalities that does not carry landfill pollution liability insurance. This is a problem, especially considering that the Brown County landfill makes a profit for the county. Yet Brown County will not consider pollution liability insurance to protect the landfill.

Just because the North Dakota has some financial support for landfills does not mean that preventative measures should be ignored. Government operated enterprises should not be so callous. The old concept of sovereign immunity (“the king can do no wrong”) is quickly becoming old law. The growing need for landfills is not going away. To the contrary, solid waste is increasing yearly. While North Dakota is more prepared than its neighbor to the south, there are still things that should be done. The State should protect municipal landfills by requiring landfills to hold insurance covering operating pollution events, and municipal landfills should choose to do so whenever possible.

North Dakota is what I tongue-in-cheek call a nuisance friendly state

Posted on: September 19th, 2016
by David Ganje

Because of unique nuisance statutes and case law, North Dakota is what I tongue-in-cheek call a nuisance friendly state. For background on this interesting topic, please see my article in the Bakken Weekly, “Nuisance Laws on the Bakken.” The present article discusses a common defense simply stated as, ‘But I got the permit. Why am I a nuisance?’

North Dakota statutes protect one from a lawsuit in nuisance if another statute grants authority to act in a particular manner. Those statutes are strictly applied to preserve the meaning legislature gave to them. However, in extreme cases the party may yet be subject to a suit in nuisance if the act allowed by statute is performed in a negligent or unreasonable manner. For example, a statute granted the City of Dickinson the authority to operate a sewage system as part of its governmental function. The statute even allowed the city to discharge sewage into any river.

“The offense was so great that a chemist who was called as a witness for the plaintiff testified, without objection, that the hydrogen-sulphide gas, which the city engineer said was the source of the noxious odor, is about 17% heavier than air; that in water it has a disagreeable taste, and that when inhaled it causes nausea; that it is poisonous and will cause headaches if inhaled in sufficient quantities.”

That said, a nuisance claim was successfully brought against the city because the amount was so excessive that it was deemed unreasonable. The court said that “by casting its sewage into the river with improper and insufficient treatment for a long period of time, the city was remiss in its duty and it may not now rely upon its legislative immunity to protect it from responding in damages.”

Let us look at a nuisance lawsuit further. North Dakota derived the statute N.D. Cent. Code Ann. § 42-01-12 that states “Nothing which is done or maintained under the express authority of a statute shall be deemed a nuisance,” from California, and in doing so, North Dakota has determined that if you are conducting business in a district zoned for that type of activity, you are not completely immune from a nuisance lawsuit. Take the famous grain terminal case for example,

“Harmon Motors is located in an area zoned C-2 “a general commercial district,” and GTA was located in an area zoned N-1 “a light industrial district.” No evidence was introduced that GTA was operating in violation of any city zoning ordinance or that GTA was in violation of any health ordinances. For that matter, the Williston zoning ordinance passed in 1970 provides for an exception for those businesses which were in operation when the zoning ordinance was adopted and GTA was in operation when that zoning ordinance was adopted. This, however, is not per se conclusive of the issues.”

The court indicated that even though the ‘offending party’ had been both grandfathered in as well as in compliance with city zoning ordinances, all this did not mean that the offending party was in the clear. In this case North Dakota also considered whether the party making the complaint has “come to the nuisance,” that is, moved into an area where a nuisance-like activity already existed. North Dakota courts gave less favorability to the complaining party and indicated that the burden of proof required to defeat the “coming to the nuisance” doctrine is very high.

The defense of ‘I got the permit. Why am I a nuisance?’ nevertheless goes even further in North Dakota than other jurisdictions. An oil drilling operation had been flaring the excess gas it produced. This caused diminished air quality and excessive odors. But the court in Kartch v. EOG Res., Inc., determined that the drilling operation was not a nuisance because the operators acted within the guidelines set forth in the applicable statute and their practices were customary in the oil industry in North Dakota.
Special consideration is also given to agricultural operations. If the agricultural operation has been in operation for more than one year and was not a nuisance at the time it began it shall not become a nuisance. Additionally, North Dakota recently passed a law that bars other laws from limiting farmer’s rights to “employ agricultural technology, modern livestock production and ranching practices.” This was a necessary modernization to current statutes protecting farmers from surrounding urban developments.

Now to be sure, no legal system would be in proper order without some ambiguity, and as evidenced above there are exceptions to every rule. The takeaway: Just having the permit is not enough. And just being in statutory compliance is not enough. A claim in nuisance could still be successful in court.

David Ganje practices law in the area of natural resources, environmental and commercial law in South Dakota and North Dakota. His website is Lexenergy.net.

Tribal Water Rights – The Road to Securing Water

Posted on: September 8th, 2016
by David Ganje

Tribal Water Rights – The Road to Securing Water
By David L Ganje

“Water is perhaps the most valuable tribal resource remaining and is one of the most significant potential forces of change. The potential size of tribal water rights should not be underestimated.” – Western Water Policy Review Advisory Commission

A Canadian Judge – in making a legal decision — recently recited two important principals of British law, both of which are found in US law. The Judge stated there are two legal maxims, one at common law and the other at the law of equity: First, the law comes to the aid of those who are vigilant, not those who sleep on their rights. Second the legal principle of equity comes to the aid of those who are vigilant, not those who sleep on their rights. Upper Great Plains tribes today must be vigilant in obtaining reserved but yet undetermined water rights. This involves two choices. Litigation or negotiation. In this article I argue that the Upper Great Plains tribes should undertake first, active, public and aggressive negotiation, and then if unsuccessful, litigation to recover water rights. But for the current water rights negotiation by the Standing Rock Sioux tribe, reserve language found in the successful Mni Wiconi Rural Water Supply Project and language found in some tribal water codes, Upper Great Plains tribes have not taken an official position with the BIA claiming reserved water rights. This silence is a mistake. My argument is this: treaties and case law have given Upper Great Plains tribes a property right, which is a right to use and access groundwater and surface water. However Upper Great Plains tribes have not fully sought and claimed that right. Both groundwater and surface water reserved rights must be championed by Upper Great Plains tribes.

While Standing Rock has taken the first step in opening negotiations with the State of South Dakota and North Dakota on the matter of water rights, the US Department of Interior has yet failed to assign a representative from its Indian water rights division to participate in these negotiations. Standing Rock is taking the right action; it is putting on the table the reservation’s water claims and doing it in a serious forum. Standing Rock has not by these negotiations abrogated its claims, and will preserve the tribe’s water rights throughout the negotiations without prejudice to its right to refuse any proposed terms or accept any proposed settlement terms. Having recognized this strategically proper first step by the tribe it is important to disclose the failure of the Department of Interior to participate in the negotiations. The DOI’s failure to participate in the ongoing talks is wrong and contradicts that department’s statutory duties regarding Indian tribes in the US. Interior Secretary Sally Jewell, who has publicly stated the administration’s commitment to resolving water rights, should immediately direct a staff person to actively participate in these water talks.

Some tribes have not yet adopted tribal water codes – legal guides for the tribal community for the management and use of water. Tribes should consider the creation of an official water code as a relevant step to securing water rights. Some tribes may have to amend the tribal constitution in order to properly pass a tribal water code. But it is worth the effort.

Tribal rights to water is a treaty right. It cannot be lost through non-assertion. Indian reserved water rights may be asserted at any time, cannot be lost by nonuse, and are assigned priority dates based on the date for the establishment of reservation. In legal theory the loss of water rights would require abrogation by a tribe or the federal government before the rights could be extinguished. Such an abrogation is in reality irrelevant because this has not and will not happen. Abrogation is not therefore the issue at hand.

It is a mistake to assume that any non-Indian interest group or government agency will make efforts to preserve, advocate for or even address these reserved yet undetermined tribal water rights. The US Army Corps of Engineers (Corps), for example, recognized in congressional testimony in 2004 that the tribes have claims to reserve water rights. Having taken that position, the Corps nevertheless in 2012 proposed a new program to produce revenue for the US government by selling what it called “surplus water” from Missouri River reservoirs. In proposing this new program for the sale of so-called surplus water the Corps created a 204-page report to support its argument for the proposed project. The Corp’s report provided statistics, projections and data but ignored and failed to discuss the existing water rights of tribes. Indian tribes are not subject to the Corps’ general authority to create or impose surplus water regulations.

It has not proven so historically, and it is not to be expected that non-tribal government agencies, whether trust-based or regulatory, have any strong reason to advance tribal water rights. No politician or bureaucrat will seriously address tribal water rights as long as the institution he represents have unchallenged bureaucratic control over water management. The only change preferred by a bureaucracy-in-charge is a change resulting in an expansion of the bureaucracy’s own power. That has been the case, for example, with the slow accretion of non-Indian interests and water demands placed on existing water in the Missouri River. As time goes on there will be less and less water to claim.

The Corp’s recent surplus money project is an example of an agency asserting itself over available water. It matters not whether the available water is called surplus water, water behind a damn, groundwater, or instream flows. A claim was made to the water. The claim did not exist before the Corps did the study and asserted the claim. Had the Corp’s project been successful, that water would have been that much more water taken away and earmarked for management and control by a bureaucracy.
Litigation of reserved water rights is one of the two alternative means to secure water rights discussed in this article. Water rights litigation is a complex, time consuming legal playing field. Much can be achieved, but the time, well known litigation risks and money involved must be kept in mind.

The Crow Creek Reservation recently started water rights litigation in the United States Court of Federal Claims asking for both money damages as well as a request for a ruling quantifying the tribe’s reserved surface water rights to the Missouri River. The Crow Creek complaint calls for money damages, as mentioned, and for a judgment that the tribe is ‘entitled to declaratory and injunctive relief including judgment requiring Defendant (the United States) to establish and measure the reserved water rights held by the tribe, and to quantify the reserved water rights held by the tribe, and to assert water rights on behalf of the tribe and to record legal title to water held in trust for the benefit of the tribe.’

The complaint lists the type of relief that should be requested in reserved water rights litigation. The complaint filed by Crow Creek, however, has problems:

The court in which the complaint was filed does not have full jurisdiction to award the complete relief requested in the complaint. By the reorganization statutes of the Court of Federal Claims is has authority to render declaratory judgments only in matters regarding contract or procurement disputes.
The court is unlikely to get into its main jurisdictional issue: money damages in favor of the tribe. It is unlikely to do this because there is no existing water rights determination or quantification by statute, final decree, or water agreement from which the court could calculate a money damages amount. And, further, the important matter of Indian water rights under the Winter’s doctrine is beyond the general expertise of the Court of Claims.
One of the important requests in the complaint is for injunctive relief. This is also beyond the jurisdiction of the Court of Claims. Bowen v. Massachusetts, 487 U.S. 879, 905 (1988) (“[W]e have stated categorically that ‘the Court of Claims has no power to grant equitable relief.’’
The relevant requests in the Crow Creek complaint are requests for an injunction, for a declaration of rights, for the establishment of water rights and for quantification of water rights. The Court of Claims however has only incidental or collateral jurisdiction over these requests making it unlikely that the court would take on such important, significant and historical remedies.
The complaint does not include a necessary party if it is attempting to finalize tribal surface water rights. The state of South Dakota also has water rights to the river. The state is not named in the lawsuit. The Court of Claims cannot impose duties or obligations regarding water rights or the allocation of the tribe’s claim when a relevant party is not included in the suit.
Any adjudication against or settlement with the United States under the pending complaint would be incomplete as stated in the complaint. Groundwater is an integral part of all Indian reserved water claims. The majority of courts in the United States addressing Indian reserved water rights have acknowledged that Indian reserved water rights also apply to groundwater. The reserved water claims of the Crow Creek reservation, one must assume, also include groundwater. However, the Crow Creek complaint for damages for loss of water resources makes no claim for reserved tribal groundwater rights.

Tribes in the US have found success through water rights negotiations with State and Federal bodies. With an appreciation for the uncertainty of litigation, negotiating is the best first step. Negotiations should be pursued in the following fashion. The master water rights Settlement Agreement should include: an agreement setting forth rights to use and administer waters; and an agreement quantifying reserved water rights for historic and current as well as planned uses; and if there is a specific project planned by a tribe, then that project is to be negotiated and drafted as a separate agreement but integrated as a part of the master Settlement Agreement. Any Settlement Agreement would become effective if the Congress passes a Settlement Act and the President signs the act into law. Once the Settlement Act becomes law, the Secretary of the Interior must execute the Settlement Agreement and the Settlement Contract.

An advantage of multiple party negotiations: actual representatives are present sitting across the table. These face to face negotiations bring out the real differences between the parties without hiding behind silence, animosity or evasive politics. If the negotiated terms do not satisfy the rights of tribes, they are not bound to accept the terms. The final outcome of the negotiations is to be decided by the tribe.

The Snake River Water Settlement Act is a recent example of successful Indian water right’s negotiations. Although the US Senate is not an owíčhota of wisdom and justice, the Senate report discussing the Snake River Water Settlement Act addresses the issue of litigation of water rights versus negotiated water agreements:

“The shortcomings of the general stream adjudication process [this is a fancy phrase for litigation] as a device for water rights dispute resolution have led to an increasing number of agreed-to water rights settlements on streams in the western States where the parties, including Indian tribes, negotiate and compromise among themselves as to quantity, priority dates and other issues, and where the Federal government contributes money to the settlement in order to achieve various goals that could not otherwise be achieved within the confines of a general stream adjudication.”
Sen. Rep. 108-389, at 2-3

The Snake River water agreements provided, among other terms, designated water for a variety of tribal uses on the reservation; recognition of allotment water rights and a due process requirement for tribal regulation of such rights; a right to access and use of springs and fountains on federal lands in off-reservation areas; and instream flow minimums at over two hundred locations. When protecting a people’s rights, it is good to hesitate and think. However, it is not good to hesitate and think and then not act.

Water rights granted to tribes are the most important example in American law of treaty-based reserved rights. Tribes do not however dwell alone in the world of water rights. Tribes should abandon silence on the subject, stick their elbows in the table now and publicly assert their water rights. A tribe cannot secure what it does not itself assert.

But I Got The Permit

Posted on: August 29th, 2016
by David Ganje

Nuisance at law is a legal principal. It describes a wrong committed, and, in modern law, includes a remedy for the wrong. Nuisance is not what we think of when we describe what my Central High School principal expressed in describing my general deportment and behavior. The old English legal commentator Blackstone held that nuisance was an injury to one’ s lands. This is not accurate. A nuisance is not an injury to the land itself. Nuisance is an interference with one’s right to own or possess the land.

As Supreme Court Mr. Justice Sutherland once said, “A nuisance may be merely a right thing in the wrong place –like a pig in the parlor instead of the barnyard.” The law maintains two kinds of nuisances, private and public nuisances. A public nuisance is one that affects the community, neighborhood, or a considerable number of people in an area. All other nuisances are private. Nuisance law and Zoning law both protect property. Each principle relates to the use and enjoyment of property. No one may use his property in such a way as to injure the person or property of another. This is the underlying principle of the law of nuisance.

Now comes the rub for a perpetrator of a nuisance. A perpetrator of a nuisance cannot hide behind an existing zoning law or ordinance. “But I got the permit” won’t work. A property use which complies with a zoning ordinance or controlling statute may still be enjoined as a nuisance. The New York Court of Appeals, in a divided decision, made an important ruling on the matter of nuisance vs. an approved legal activity under the law. The right to sue in nuisance prevailed. Because an activity is an authorized use does not mean it may not also be a nuisance.

The Court stated,

“It is the contention of defendants that the [complained of activity] complies with the Building Code of the city, that the zoning regulations do not forbid the location on and use of the premises. . . , that defendants have procured a permit from the proper authorities for such location and use which constitutes a conclusive adjudication that neither is prohibited by the zoning law, that the issuance thereof is reviewable only by the Board of Standards and Appeals, and that [the relevant statute] makes the permit, subject only to such review, a conclusive adjudication that the erection of the building is in accordance with all provisions of the rules, regulations, ordinances and statutes applicable thereto. . . . Nevertheless, even so, the right of plaintiffs to challenge, in an action in equity, the location . . . and proposed use of the property on the ground that it constitutes a nuisance still remains.”

A use, although authorized by an approved permit or license, may thus be the basis of a suit to enjoin a private nuisance. A city, county or legislative body cannot legalize, that is, immunize, a use from a successful charge in court that the ‘use’ is a public or private nuisance to a harmed party. A court will admit evidence of relevant ordinances or law and will take their language into consideration in a nuisance case. But that information will not be controlling or determinative by the court in its decision. No perfectly drafted or administered zoning law or similar statute can create a bureaucratic environment in which a proper claim of nuisance could not be lodged. Nuisance versus authorized use of property is an area law that will always be in conflict. If one eliminated uncertainty in the law as written, think of all the unemployment that would occur among the bar. Property rights and the use of property are not absolute.

David Ganje practices law in the area of natural resources, environmental and commercial law.

Workouts and Turnarounds before Bankruptcies – 2016

Posted on: August 24th, 2016
by David Ganje

Current bankruptcies are not foreign to the oil patch when the inevitable economic cycles in oil and gas show bankruptcy numbers increasing in the Bakken. There have been two significant prior economic down-cycles in my career that have caused a spike in bankruptcy filings. When I taught bankruptcy law I used a medical analogy: I told the young scholars that bankruptcy filing is akin to surgery, and surgery should always be treated as the last option. In the medical field, a reasonable first option is an antibiotic. Here, the antibiotic is a ‘workout’ or a ‘turnaround,’ each of which are bankruptcy alternatives. These alternatives have value and should be attempted by both creditors and debtors as a viable option, not just a throwaway line. I have successfully represented debtors and creditors in turnarounds and workouts. Resolving “stressed-business” issues out of court makes sense when the option is there.

Financial restructuring and workouts involve working closely with a business’s creditors to create, or ‘workout,’ a plan (often a written contract) to restructure business debts while allowing the business to remain viable. This process allows the business entity to negotiate its debts in a way that retains profitability without involving the court system. This is not as difficult as it might sound – creditors often share the same objective of returning a financially stressed business to good financial health in order to ensure their debts are paid.

A ‘turnaround’ is a separate process from a workout. It may also use the availability of restructuring and workouts, but a turnaround has several other components. A turnaround will generally restructure operational aspects of the business. This may be the solution when the problem lies deeper in the company than lack of cash flow. Where a creditor will not restructure the debts owed to it, a turnaround will be utilized to find alternative financing or new ownership. Another possibility in a turnaround is the sale of ownership or a portion of ownership, which can provide liquidity at the expense of a change of control of the business.

If the company’s goal is to continue in business, particularly under current ownership, then a creditor or a lender workout should be considered. If new ownership, or a sale of the business in whole or in part, is an acceptable outcome so long as the business is preserved as a going concern, a turnaround can be considered as well.

The process of financial restructuring and negotiating a workout with business creditors is something that should be considered to avoid the expenses and bureaucracy related to a bankruptcy proceeding. The chapter 11 bankruptcy reorganization process is expensive and time consuming. The goal of business turnarounds or financial restructuring is to provide a cost effective approach by way of a ‘non judicial/non bankruptcy’ business reorganization, to restructure business debts.
Courtship and finances have something closely in common: timing is everything. When a business is in a stressed situation, neither the business nor its creditors should go in stand-by mode. Negotiations should begin immediately. In both the workout and turnaround, all parties must agree to the terms; both are matters of serious negotiation to be done with all deliberate speed. Bankruptcy proceedings are not the only way to save a business – sometimes a well-prescribed antibiotic can halt the damage and let the healing begin.