South Dakota’s Achilles Heel

South Dakota’s surface water drainage governance is an absolute mess. You can’t put a fence around field drainage but you sure can create angry neighbors by field drainage. The state has authorized study commission after study commission, and created agency upon agency to address water management: Conservancy Districts, Water Development Districts, Water Project Districts and Water User Districts. The first state Supreme Court case dealing with a dispute over surface drainage occurred in 1910. And law disputes keep on coming. Many years ago when I was a kid, Ka Squire of Aberdeen took my dad and me up in his plane in a wet year and showed us the amazing picture below— overflowing sloughs, potholes, creeks and streams. I looked down at water everywhere and asked him, where does this water go? “On the neighbor’s property,” he said. So it is today in any wet year. Nothing has changed. The state still provides no functional, practical surface water management.

Prior to 1985, water drainage law slowly adapted through a series of court cases. In 1985, the Legislature codified drainage standards in the hopes of creating guidelines for landowners and counties to follow. Under the little-used 1985 law, counties are given wide discretion in how to apply the law. In a failed effort, the 1985 law gives each county the option of managing local drainage issues and/or adopting a county-wide drainage plan. Yet the truth is most counties have not developed drainage plans or drainage management rules. Modern technology and topographic data would have allowed counties to write comprehensive drainage plans and then create good drainage ordinances. But such was not to be the case.

The current attempt to fix this long-standing problem passed this year. Based on yet another authorized study started in 2012, the legislature this year passed Senate Bill 2. Senate Bill 2 created a task force to define boundaries for nine new Water Districts, establish procedures and protocols, and get pilot projects operational.

Originally, Senate Bill 2 provided the proposed new elected Water Districts with the ability to tax, create drainage plans and approve drainage projects. Such substantial terms did not make it in the final version of Senate Bill 2. So, “What is the point?” Special interests and lobbyists obviously got ahold of this bill and gutted it. Without the ability to create comprehensive plans, approve drainage projects, including installation of tile drainage systems, how will new Water Districts solve current disputes or fix drainage problems? Why continue to lollygag around? Drainage has been a problem in the state for over 100 years.

Establishing individual Water Districts is not unique to South Dakota. Other states with delicate water-use issues have utilized such a system for many years. The experiences of neighboring states of North Dakota and Minnesota provide an interesting contrast to the current problems in South Dakota.

North Dakota in particular has an especially comprehensive regulatory scheme in place. For example, its rules require that a person secure a drain permit before draining a pond, slough or lake which has a watershed area comprising eighty acres or more. North Dakota also prohibits the granting of a permit to drain water until an investigation discloses that the quantity of water which will be drained will not flood or adversely affect downstream lands. North Dakota has specifically addressed the issue of tile drainage. The state allows tiling of up to 80 acres without permit, and places burden on water district or downstream landowners to demonstrate State-wide significance or adverse effects.

North Dakota has uniformly codified requirements to be considered in evaluating whether to grant a drainage project permit, such as the volume of water to be drained, the impact of the flow on the watercourse, potential adverse effects, the project’s impact on flooding problems in the project watershed, and more. In North Dakota, it is clear that drain permits may only be issued if the Water Board’s investigation reveals the water flowing through such drain structure will not flood or adversely affect lands of downstream landowners.

Creating both a real, authorized, local governing body as well as drainage guidelines are necessary to fix drainage problems. There are plenty of modern court cases showing that drainage conflicts continue. A new drainage roadmap has been in order since the failed 1985 law was put in place. The conditions followed in North Dakota serve as a model. Yet, that is not to say that South Dakota should simply copy the plan followed by its northern neighbors. However, the comprehensive and uniform nature of North Dakota’s scheme – specific, clear guidelines with permitting power vested in Water Districts – is needed.

Senate Bill 2 lacks teeth. It has been 30 years since the prior failed 1985 law was passed. Too much time and too many studies have been taken. The new Water Districts should be given authority to write water plans, write water ordinances, grant or deny permits and function as a real agency, or not exist at all.

South Dakota’s first in-situ leach uranium mining project application is pending before the authority of several federal and state agencies. Many regulatory issues have not yet been decided.  I address an issue given little notice:  What is a mining permit applicant’s obligation and capacity to offer financial assurance for the operation, safety and closure of the mine if it is approved?

My concern with any large natural resource project is the risk of socializing the expense of any possible environmental cleanup as a cost paid by the taxpayer. “Superfund” is a federal environmental law under which the government supervises cleanup of contaminated mining and industrial sites. The polluter is financially responsible for the cleanup.  However about 30% of Superfund sites are orphaned sites where no responsible party is available to pay for cleanup. Without adequate financial assurance terms in place by a mine operator to pay for a possible cleanup, the taxpayer may have to step in to pay.

A mine operator’s financial capacity comes into play in the matter of abandoned mines, orphaned mines, spills, costs of water reclamation, decontamination and closure or decommissioning of a mine.  Many mine operators address financial assurance requirement by using surety bonds.  A surety bond is an insurance company’s guarantee of an applicant’s performance under a permit.  An applicant must prove adequate financial resources for reclamation, spills and final closure. Nevertheless several mining operations in the US have been closed with unresolved environmental and groundwater issues exceeding the costs of the financial assurances posted for the operation.

The approval of financial requirements is done by an intermarriage (I call it a challenging marriage) of federal and state agencies. In the case of uranium mining it will be the NRC/EPA and the SD DENR. The relevant agency establishes the financial assurance requirement based on the applicant’s disclosed information and then the agency’s own analysis of the adequacy of any proposals.

It is important that agencies have competence in determining the financial assurance of a permit holder in view of the long term risks involved in mining operations. It is up to state and federal regulators to impose financial assurance standards with effectiveness.

Do specialized environmental agencies have the staff resources to conduct adequate review of financial assurance issues? In a 2001 report on the NRC’s oversight of nuclear power plants, the federal watchdog agency General Accountability Office (GAO) concluded that the NRC (Nuclear Regulatory Commission) did not always adequately verify the owners’ financial qualifications to safely operate power plants. In 2006 the GAO criticized the EPA for not holding mining operators financially accountable for cleanup issues. In 2011 the GAO criticized the BLM in a letter to Congress for not properly considering hard rock mining operators’ financial assurances needed to cover reclamation costs. In a 2012 report on the NRC’s supervision of nuclear power plants the GOA asserted that the “NRC’s formula may not reliably estimate adequate decommissioning costs.” In this report the GOA also stated, “NRC officials told us that their staff resources are limited and that they lack the financial expertise to evaluate compliance with investment restrictions. . . However, weaknesses remain in NRC’s oversight of decommissioning funds that could leave the public and environment vulnerable.”  And in a 2012 GOA report on uranium mining the GAO expressed concern over the BLM and NRC’s ability to determine the costs of reclamation.

The jurisdictional boundaries between the NRC as the lead agency and the state of South Dakota  over specific regulatory issues in the pending Dewey-Burdock in-situ uranium mining applications has not yet been formalized.  Both have authority over various financial assurance issues.  Because these issues are significant but not easily resolved between agencies we have the ‘challenging marriage’ to which I earlier referred.  South Dakota for example has legal authority to require a performance or damage bond, and can require as a condition of a permit financial assurances guaranteeing performance of cleanups. The NRC and BLM also both have financial assurance requirements for mines.

What is a remedy?  I suggest the following:  The agency with designated authority over an applicant’s financial assurance requirements shall evaluate in writing all financial assurance documentation using an agency-designated non-party (Consultant) with recognized experience in the areas of financial assurance. This designation shall be a condition of any permit or license. The costs incurred by the agency in contracting with the Consultant shall be paid by the applicant.

David Ganje of Ganje Law Offices in Rapid City practices in the area of natural resources, environmental and commercial law.