UNDERGROUND PIPELINE TRESPASS IN SOUTH DAKOTA

My old law professor way back when held forth that man owns everything from heaven to hell. He meant to tell us that a landowner owns all the skies above and the ground deep below.  He is to be forgiven for this bold utterance because he was, I believe, born before the invention of airplanes.  His comments about ownership rights present an interesting question. What is the ground ‘below’?  Who owns it? Who has rights to it?  Both property owners and easement holders should be attentive to these questions.  Let us take a look.  We will learn that in our world my professor was wrong—a man’s ground is not necessarily his castle. Ah, but education is what remains after one forgets all one was supposed to learn.  To be sure South Dakota law recognizes that the owner of land has the right to the surface and to everything permanently situated beneath or above it. The law states “The owner of land in fee has the right to the surface and to everything permanently situated beneath or above it.”   But let’s take a closer look at underground trespass.

In North Dakota the Supreme Court addressed the issue of subsurface trespass in the modern context of horizontal drilling. In an important case a few years ago a mineral rights owner, the Plaintiff claimant, owned an interest in a quarter section of land. The oil company producer sought an agreement of all interests in the land in order to drill a horizontal well.  The Plaintiff refused to do a deal.  The Plaintiff also told the producer that it would consider any subsurface action affecting its interests as a subsurface trespass.  The oil company petitioned a state agency to ‘force pool’ the Plaintiff’s interest so that the property including the Plaintiff’s claims could be drilled. The agency approved the application. When the well was drilled the Plaintiff sued the producer under the legal theory of underground trespass. The Supreme Court held that in North Dakota the state has created a pro development policy and certain statutory and regulatory powers to promote, manage and develop natural resources throughout the state. The Court said that the state had the right to “impose such restrictions upon private (property) rights as are practically necessary for the general welfare of all.”

Subsurface trespass may still be an enforceable legal claim in situations that do not involve oil and  pooling powers. The Texas Supreme Court just last month found that a neighboring plaintiff claiming underground trespass must prove three things:  (1) entry of the alleged violation; (2) onto the property of another; and (3) without the property owner’s consent or authorization.  In this case the property owner (farmer) failed to show his ‘lack of consent’ and his claim was denied.  Someone wasn’t doing their homework in Texas. Subsurface trespass as a claim is untested in South Dakota but I predict will be upheld in the courts provided there is a showing of some harm to the property owner’s use or ‘enjoyment’ of his subsurface lands.  Pipeline operators, propagators of wastewater, utility companies, developers and surface owners can reduce potential problems in trespass by full disclosure, complete professional research of the legal and geological issues before starting a project, and by placing everything on the table, this means full disclosure, at a very early stage in a project.

Author:   David Ganje.   David Ganje of Ganje Law Offices practices in the area of natural resources, environmental and commercial law in North and South Dakota.

Environmental and natural resources attorney David Ganje of Ganje Law Offices in Rapid City has been invited by Masaryk University in the Czech Republic to provide guest lectures on US natural resources and environmental law during the Spring 2015 term. Ganje’s lecture series will begin with an overview of the three branches of government in the United States. Subsequent lectures will focus on the legal ramifications of pollution control, preservation of natural resources and the issue of toxic chemicals and hazardous waste in the United States. The lectures will be given to law students of the university. Masaryk University is the largest law school in central Europe and is located in the Czech Republic. Ganje has taught as an adjunct professor in both the United States and Germany, and is a frequent keynote speaker at national and international environmental conferences. He practices natural resources and environmental law in New York and North and South Dakota and is a graduate of the University of South Dakota School of Law.

This year New York’s highest court issued a troubling decision that serves to promote a fractured and inefficient regulatory scheme for oil and gas regulation, management and production. In Wallach v. Town of Dryden, the Court of Appeals ruled that the Oil, Gas and Solution Mining Law (OGSML) of New York—a law designed to create a uniform regulatory statewide framework for the oil and gas industry—did not preempt local laws that prohibit oil and gas production within municipal boundaries. The court made this ruling despite the OGSML’s “supersession clause”, the roots of which date back to a 1935 multi-state agreement. In 1981, the New York State Legislature adopted the supersession clause.

Since 1981, New York’s OGSML state statute is intended to supersede “all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries.” But not so, said the Court. The Court reasoned that local zoning regulations, which may outright prohibit “oil, gas, and solution mining” within a local government’s borders, do not fit under the wide umbrella the supersession clause casts. The Court held that local zoning laws do not regulate oil, gas and solution mining industries per se—these local laws only regulate how land can be used. The Court opined that if the New York legislature wanted to prohibit local governments from zoning out the oil and gas industry, the legislature should have ‘stated’ it in the supersession clause.

So why is this decision “troubling”? Two reasons: (1) the Court essentially upheld the right of municipalities to circumvent a uniform, statewide law under the principle of zoning; and (2) instead of having a uniform state standard, the result creates a regulatory checker-boarded nightmare for an interested party, requiring the navigation of particular “zoning” laws among New York’s 932 towns.

The Oil, Gas and Solution Mining Law comprises a body of laws the State of New York enacted to regulate the oil and gas industry. These laws were intended to supersede “all laws . . . relating to” oil and gas regulation. A municipality creating an ordinance preventing oil, gas and solution mining is at odds with the supersession clause. A zoning ordinance or regulation fits within the all-encompassing classification of “all laws”, and zoning-out oil and gas production possibilities within a municipality certainly “relate[s] to” the regulation of the industry. Yet, the Court excludes zoning laws from those laws covered by the supersession clause. Local Governments in New York used this argument to successfully overcome the supersession clause, although it was originally designed to employ a uniform approach to oil and gas regulation in the state. What other unintended exceptions to the rules lie ahead?

The result of the ruling frustrates the uniform regulatory purpose of OGSML and creates an unnecessary patchwork of municipal “zoning” regulations pertaining the oil and gas regulations. Predictability in oil and gas development regulations is not obtained by multiple and overlapping oil and gas laws created by the state as well as local governments. The state’s Department of Environmental Conservation mineral resources staff was created to deal with oil and gas regulatory issues. Instead of looking to one regulating body, those in New York’s environmental, business, and oil and gas industries must now arguably look to 932 different sets of laws. Oil and gas is not found perfectly boundaried beneath certain legally established plots of town, city, and municipal land. Pools sprawl through different veins in a labyrinth beneath the surface. To what end do these different municipal zoning laws regulate one portion of a particular oil or gas reserve that falls within a particular municipal boundary while the other portion of the pool falls into a different boundary? It may be one contiguous oil and gas reserve, but its regulation is split among multiple municipal and state regulated boundaries. Why allow this result when a uniform standard applied by OGSML exists?

The Court left one possible solution to this regulatory nightmare. Since the Court’s reasoning is based on the fact that the supersession clause did not explicitly prohibit municipal zoning laws from excluding oil and gas production within municipal borders, the New York State Legislature could clear up the confusion by adopting language “including land use laws such as zoning” within the supersession clause. This language may bring back order to this complicated regulatory scheme. Until then, let the chaos ensue.

David Ganje of Ganje Law Offices practices natural resources, environmental and commercial law in North Dakota and South Dakota.