David Ganje Archive - Attorney Blog | Natural Resources, Commercial Law

Author Archive

Here are my most recent posts

Memo to Commission on Wind Farms

Posted on: September 8th, 2018
by David Ganje

To: Campbell County Commissioners

From: David L Ganje attorney // 605 385 0330

Re: Campbell County’s prospective comprehensive plan, temporary zoning ordinance and proposed Campbell County Wind Farm Phase 2

Date: August 15^th 2018

By way of introduction, I represent Campbell County landowners Larry and Bea Odde and Donna Rossow.

Wind farms are a significant structural and economic part of a county. Each county naturally has the right to encourage the development of privately operated wind farms. A county, by virtue of South Dakota law, may also have the obligation of watchful care over wind farms within its borders. My clients are certainly not opposed to wind energy projects. My clients are however concerned about property rights and protections, wind energy ordinances, and Campbell County’s consideration of infrastructure projects.
Infrastructure is described as physical improvements in a county such as road systems, water systems, bridges and some utilities. This includes physical structures that are essential to a community. Infrastructure has environmental, social and economic benefits as well as costs to a county. One does not usually think of private business as owning and operating infrastructure, yet it does. Privately owned infrastructure includes wind farms and electrical utilities. A wind farm is private infrastructure. Infrastructure does not consist of a small business enterprise which would only affect a piece of property off in a corner somewhere. Due to infrastructure’s broader effect on a county, it is subject to more than just private property rights. A wind farm is private enterprise with public consequences. Commissioners have the right, and a legal duty, to oversee the planning, development and maintenance of certain infrastructure within a county.
The state of North Dakota regulates the siting of a wind energy facility greater than 500 kW. That is not the case in South Dakota. The South Dakota Public Utilities Commission (PUC) does not regulate the legal siting terms and conditions of a wind energy facility producing under 100 MW of electricity. In SD a “wind energy facility” is defined as a system designed for or capable of generation of 100 MW or more of electricity. A wind energy facility is the same thing as a wind farm. The county commission will take notice that neither the existing Campbell County Wind Farm Phase 1, nor the proposed new Phase 2 equal 100 MW of electrical capacity generation per the developer’s information. Phase 1 and Phase 2 are both outside of the PUC’s siting authority. This leaves only one lead agency to oversee and manage the project siting process for a wind farm in Campbell County: the Campbell County Commission.
Wind energy projects, also known as wind farms, create a number of siting issues. The physical placement and configuration of wind turbines, roads, fences, collection lines and the like must be considered. Relevant questions include a project’s impact on existing land use, a neighbor’s land use, and the environment. For example, authorizing a wind farm in close proximity to a residence may create a claim for inverse condemnation or a regulatory taking of private property. A regulatory taking, that is, a taking by government rulemaking, may occur if a land-use regulation “goes too far.” The commission is challenged to create a balance between private property rights and the government’s power to regulate in the public interest.
Campbell County is naked. The county has no comprehensive plan and has no zoning ordinances. A comprehensive general plan lays out the physical development of the county. In South Dakota a comprehensive plan is required for the purpose of protecting the development of the county; to protect the county’s tax base; for planning land use that will make adequate provisions of transportation, roads, water supply, drainage, sanitation, education, recreation, or other public requirements; to reduce governmental expenditure; and to conserve and develop natural resources. Zoning ordinances are adjunct to, and must be in accordance with, a county’s comprehensive plan. Without a comprehensive plan zoning ordinances cannot be adopted. The only exception to this restriction is the passage of a so-called emergency temporary ordinance.
The Phase 1 Campbell County wind farm became a public matter in approximately 2010. At that time the county did not have a comprehensive plan, a wind energy ordinance or a procedure for obtaining special use permits. The Phase 1 wind farm became operational in December of 2015. At that time the county did not create a county comprehensive plan, wind energy ordinance or a procedure for obtaining special use permits. A new proposed Campbell County wind farm referred to as Phase 2 has been proposed since approximately March of this year. Yet, at this time the county still does not have a comprehensive plan, a wind energy ordinance or a procedure for obtaining special use permits. The county commission in July of this year hired a consulting agency to help write a temporary ordinance or comprehensive plan. It is of concern that Campbell County with its natural and physical features does not have wind energy regulations on the books.
My clients may have believed that Consolidated Edison Development, Inc. operates Phase 1. Department of Revenue papers received by the County Auditor in April of 2018 indicate that Campbell County Wind LLC is the entity paying taxes on Phase 1. A company that owns or holds property under a lease and who operates the same for the purpose of furnishing electricity is the party that pays taxes. A November 2015 federal filing by Campbell County Wind Farm, LLC reports that Campbell County Wind Farm, LLC is a Delaware limited liability company and that it “will own and operate” a 98 MW wind energy project located in Campbell County, South Dakota.
One South Dakota official was recently quoted as saying that wind energy development in the state is a “gold rush.” I wonder whether that state official understands the connotation of a gold rush. A gold rush creates huge challenges and can leave a government with a bucketful of problems. In a gold rush there are often no established rules or laws in the area and no established infrastructure to deal with the influx of activity. A comprehensive plan as well as zoning ordinances, if written fairly, create good rules of the road. A gold rush is like a community with no road signs, no speed limits and no traffic rules. Thinking of zoning ordinances as writing a traffic code for the county makes sense. A plan and ordinances can be written to protect people and property, and to keep things moving smoothly. A plan and ordinances should establish county oversight, safety, uniformity and a road map which wind farm operators can read and follow.
Campbell County in July outsourced to a consulting agency the preparation of a wind farm zoning ordinance. I understand the county wishes to adopt an emergency and temporary ordinance. While commissioners will be the ones to formally adopt any ordinance after normal county public notice procedures, it is respectfully submitted that the process would be well served by requiring that the consultants themselves seek public input from landowners and residents at the early drafting stage, rather than wait until final ordinance readings. Letting another party write your local laws may be somewhat akin to letting a stranger use your credit card. Please consider that lawyers as a group are said to be the second oldest profession. But now that I think about it perhaps consultants as a group are really the second oldest profession– not lawyers. The commission will of course be the government body taking final ownership of the local zoning and planning law and its effects on the county.
When poor wind farm government oversight is in place, real operational consequences arise. In a workshop a few years ago a speaker at the Michigan Association of Planning discussed problems a wind farm created in Altamont Pass California. Apparently the older technology wind turbines caused a great number of bird deaths. The turbines were shut down in 2015. I do not here suggest or imply that this would be the case with Campbell County Wind Farm Phase 1 or Phase 2. Rather I provide the speaker’s comments on possible wind farm oversight issues. The presentation indicated that there was no environmental analysis before turbines were first installed; that there was a fragmented regulatory scheme letting the government avoid responsibility for solving the problem; and that the industry avoided taking responsibility and did not address the Altamont problem proactively.
South Dakota has no state environmental regulations on the siting of wind turbines. And, except for language in projects which may be under the joint jurisdiction of the PUC and local governments, wind power siting and permitting processes varies by county. Suggested guidelines are provided in a jointly issued statement by the state Game, Fish and Parks and the state Bat Working Group Organization. The following issues should be considered in a permit application: 1) Land Use 2) Natural and Biological Resources 3) Noise 4) Visual Resources 5) Public Interaction 6) Soil Erosion and/or Water Quality 7) Health and Safety 8) Cultural, Archaeological, and Paleontological Resources 9) Socioeconomic, Public Service, and Infrastructure 10) Solid and Hazardous Wastes 11) Air Quality and Climate.
Local laws are best tailored for each county. Lincoln County is different than Walworth County. And, yes, Walworth County may be different than Campbell County. The Walworth ordinance dealing with wind energy says that a decision to grant a wind permit is an administrative matter. It is not. The South Dakota Supreme Court in 2009 ruled that a conditional use permit application (a common process for wind farm approval) is quasi-judicial. Such ordinances are subject to a constitutional due process of the law review. This requires that a county be visibly fair to all parties affected by the permitting decision. Wind farm permits are exceptional permits because one might get approval in an area where regular zoning rules would not allow it. Due process in South Dakota requires a.) reasonable notice to all parties effected, and b.) an opportunity to be heard at a meaningful time and in a meaningful manner. The current ordinance fails on both counts.
The challenge for the county is to not create a chilling effect on new wind energy development and yet to protect the community, property owners, property values and the environment. One method occasionally used to write a new zoning ordinance is problematic. This problematic method is the adoption by a county of ordinance language based on that of another or several other sister counties. Adopting boilerplate central resource terms for suggested ordinance language is also not the best answer. In 2009 the PUC published and placed on the web a recommended general model wind farm siting ordinance. In an opinion piece on wind ordinances I previously critiqued part of the PUC recommended model language. Several months later the PUC withdrew the model ordinance.

I respectfully suggest the commission regard in a comprehensive manner, and help the public understand, any proposed ordinance as well as related land use issues effected by any proposed plan. Uncertainty among landowners and residents often leads to controversy. The particular language of an ordinance is always where the rubber meets the road. I look forward to looking at the proposed ordinance language from you and your consultants. Part of my job is to help my clients ask better questions. This memo is given for discussion purposes and is not intended as a complete assessment of any legal matters considered. If you would like to discuss the memo or have any questions please feel free to contact me. Thank you.

Are acts of God acts of man?

Posted on: September 2nd, 2018
by David Ganje

Man imposes his laws upon man. James Madison tells us that laws should not be overly voluminous or overly incoherent. Good luck on that score. I used to carry around the written U.S. tax code in law school for our tax class. I figured carrying around the tax code was good enough such that I did not feel compelled to go to the gym for exercise. That was before computers when law codes were written on heavy papyrus rolls.

Man by law has made a law of ‘an act of God.’ An act of God or what is also called a ‘force majeure event’ is an event beyond the control of parties to a contract which may prevent completion of the contract. And importantly an act of God may be grounds for cancellation of the contract. An act of God clause is the adult business version of the dog ate my homework. Wouldn’t an act of God be a good defense in criminal court? Boy, I sure could have used it for myself in juvenile court.

How a contract party is to deal with a surprise event is written into the agreed upon terms of the contract. In contract writing an event that is not a part of the contract obligation but affects the ability to complete the agreement is the so-called an act of God clause. These clauses also go by the fancy name of a ‘force majeure clause.’ Such clauses are a man-made road map showing what to do because of an unplanned event. This type of clause is a little bit like putting the genie back in the bottle after it has been out on the town partying too much. One finds these clauses in wind energy agreements, right-of-way agreements, easements, oil and gas leases and general construction contracts.

Under some clauses, government rules which prevent a party from completing the contract may constitute grounds for a party’s legal non-performance of the agreement. So this is one situation in which you can legitimately blame the government.

What are these magical “events” which will excuse a party from completing a contact? There are as many possible events as man can devise in his mischievous little mind. An act of God event is simply whatever the agreed upon contract says it is. This is man-made law. Here is an example of an actual agreement: “The term ‘force majeure’ shall be Acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, riots, epidemics, lightning, earthquakes, explosions, accidents or repairs to machinery or pipes, delays of carriers, inability to obtain materials or rights of way on reasonable terms, acts of public authorities, or any other causes. . . not within the control of the [contracting party] and which by the exercise of due diligence [the contracting party] is unable to overcome.” Looking at this clause, I will provide the reader with a few comments. First, it is written by someone rushing a bunch of ideas into a clause. It’s a little too shot-gunny. It is overbroad and needs focus. And it was written by a lawyer who has not experienced a tornado, flood or a debilitating blizzard.

No question. An act of God clause is one of several underappreciated stepsisters (that’s an East River expression) when parties and their attorneys draft and negotiate an agreement. Usually in a transaction parties give energetic attention to ‘The Money’ or to the conditions of contract performance, not realizing that an act of God event can cause equal if not greater trouble. How quickly money throws one off the scent. It’s the old story of greed outstripping prudence. The scope of an act of God clause depends on the specific terms of the agreement, so pay attention my honorable readers. Do not avoid focused common sense in the early stages when negotiating and drafting any agreement. Otherwise an uninsured accident is just over the next hill. An act of God is a peril outside of man’s control.

WATER RIGHTS AND WATER LAW WORKSHOP

Posted on: July 30th, 2018
by David Ganje

The Rapid City office of the United States Geological Survey (USGS) Dakota Water Science Center is hosting a public workshop on South Dakota water rights and water law. USGS has invited attorney David Ganje to give the workshop. The program will be held on September 18th at 10 a.m. Mountain time at 1608 Mt. View Road, Rapid City, SD 57702. The workshop is open to the general public. Admission is free but phone reservations are strongly recommended as space is limited. Reservations may be made by calling 605 385 0330.

The leviathan in the Missouri

Posted on: July 30th, 2018
by David Ganje

It is good to be vigilant when dealing with a leviathan of a bureaucracy. It is better however to be pointed with them, carry a big stick, keep notes and exercise financial purse strings. The U.S. Army Corps of Engineers, as a government agency, has been in existence since 1802. It is now and forever shall be. It is a federally created ‘regulatory monopoly.’ The Corps is in effect the world’s largest civil engineering firm. This agency of the Department of Defense is the nation’s largest single producer of hydroelectricity. Hydropower plants and dams are authorized by Congress under the Flood Control Act of 1944, commonly called the “Pick-Sloan Act.” The Act authorized the managing of the Missouri River to provide for flood control, navigation, municipal and industrial water supply, recreation, and hydropower generation.

At the time of Lewis and Clark, the Missouri River was diverse. The river had many channels along with widespread bars, islands, and shallow sloughs. It had natural levees, backwater lakes, oxbows, sandbars and dunes. The Missouri was wide and shallow. A hundred years ago it measured about 2,546 miles in length but now has about 200 miles less due to damning and channelization. Along the Missouri River today the Corps operates a total of 36 generator units capable of producing approximately 2.4 million kilowatts of power.

In an editorial this month Senator Mike Rounds expressed concern about the Corp’s flood management practices. He indicated he will be keeping a close watch on the Corp’s flood control management. This is a polite way of addressing a hardcore problem. The Corps is akin to a government highway department – it is good at constructing highways but is often out of its league when administering the highways, creating good rules of the road, or at establishing operations without causing damage to property owners or the environment. The Corp’s problems are devilishly more serious than the senator suggests. In 2016 the GAO, in a report on the Corp’s operations, concluded that the extent to which the Corps has reviewed or revised current water control manuals is unclear because the Corps did not document its own reviews. The GAO report also concluded that the Corps has revised some water control manuals but that various divisions and districts do not track consistent information about revisions to its manuals, and the extent to which operating manuals have or should be updated is unclear.

The Corp’s own ‘outside consultants’ report that historically the Corps was focused on construction of dams, levees, navigation channels, and other infrastructure. But that future Corp’s operations should be focused on (1) operating, maintaining, rehabilitating, and upgrading existing infrastructure, (2) re-allocating reservoir storage and releases among changing water demands and users, and (3) providing some degree of ecosystem restoration and ecological services in heavily altered riparian and aquatic ecosystems. I submit that the Corps has not yet read this memo by its consultants. By way of example, after preliminary motions a Court of Claims judge this year properly ordered a case to go forward brought by farmers, landowners, and business owners who claim a taking of their property without just compensation in contravention of the Fifth Amendment. This lawsuit is based on actions by the Corps on the Missouri River. The plaintiffs allege that the Corps has changed its management of the river and that the changes caused flooding of their properties.

The Corps has a tendency to do what it pleases unless there is hell to pay. South Dakota has used its disproportionate clout in the recent past to send messages to this leviathan. Controlling the purse strings was the key. Money usually is. A material example of this is the Corp’s continuing attempt to control and manage what it calls ‘surplus water’ in the Missouri River. This is a self-defined quantification of water that does not exist in federal legislation or under the common law of waters in this country. It is an attempt by the Corps to acquire control over water that otherwise belongs to the states and Indian tribes. For a look at my extensive critique of the Corp’s past efforts to grab control of surplus waters see my letter to the Western States Water Council found on my website: lexenergy.net

More than mere vigilance will be required, or what you may have now won’t be no more. Congressional oversight by way of eliminating funding for projects or by way of de-authorizing a project is a good way to manage a federal agency. The risk to upper basin Missouri River states and Indian tribes is that once a quantity of water is regulated and defined by the Corps as surplus water it becomes that much harder to later reinstate the original legal as well as declared beneficial uses of that water. A Prussian general when once asked to notice the beauty of a river nearby, turned and replied ‘an unimportant obstacle.’ The Corps is big brother with all of big brother’s flaws.

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

Arbitration – always look a gift horse in the mouth

Posted on: July 12th, 2018
by David Ganje

Mandatory arbitration is a court of last resort. When one arbitrates under mandatory arbitration there is no appeal, or even a right of reconsideration of the matter by the arbitrator if something went wrong. One’s legal rights to challenge a final arbitration decision are very limited. The arbitrator’s decision is almost absolute.

I know. I have sat as an arbitrator and have represented parties in arbitration.

Arbitration is defined as an alternative to litigation in which the parties are required to put their dispute before an arbitrator. The arbitrator, for good or ill, and without the benefit of a black robe, makes the final decision on the dispute. If one’s agreement contains a mandatory arbitration clause, you can’t go to court. (There are minor exceptions, but we will save that for another sermon).

Mandatory arbitration clauses can be found in easements, real estate contracts, water rights agreements, some mineral rights contracts, business agreements, and are often found in a public contract, that is, a contract with a government body or agency. An arbitration clause is sometimes buried in the agreement’s terms particularly in consumer agreements. Consumer agreements containing arbitration clauses, as described by an old labor leader, are akin to negotiations between a lion and a lamb in which the lamb wakes up the next morning in the stomach of the lion.

I find it commonplace for parties, and their attorneys, not to seriously consider the issue of arbitration when negotiating the language to be placed in an agreement. Big mistake. Never approach a goat from the front. Never approach a horse from the rear. Never approach an arbitration clause from any angle unless you and your well-seasoned counsel, have weighed the pros and cons while in a sober state of mind. Arbitration is a shortcut to justice, but there are many pitfalls, cliffs, dark places and precipices along the way.

South Dakota statutory law enforces and encourages arbitration clauses. And regarding the legitimacy of arbitration the state Supreme Court stated as recently as this year, “The plain language of [state law], being clear, certain and unambiguous, does not provide for a right of appeal from an order compelling arbitration.” The South Dakota Supreme Court some time ago gave its official blessing to arbitration as a dispute resolution process: “This Court has consistently favored the resolution of disputes by arbitration.”

Arbitration is faster and less expensive than litigation. These are its two most compelling attractions. But one rolls the dice in arbitration in that one can never be sure of the wisdom, fairness and competence of the sole judge of the affair – the arbitrator. In some arbitration clauses the parties have a right to agree upon a particular arbitrator. Arbitration itself is a private process meaning it is not a public event. This can be advantage in several situations.

So what are problems with arbitration? I have already painted a pretty colored picture in this piece, but will here elaborate a bit more.

No appeals are allowed. In small-dollar conflicts the costs of arbitration are not always justified. The rules of evidence in arbitration are a bit loose and that can be problematic. A pre-hearing exchange of evidence between the disputing parties is not as well managed as it is in litigation. If an arbitrator does not carefully follow the relevant law dealing with the problem, the decision of that arbitrator will still stand as a final decision.

Judges are a bit different. A judge is constantly looking over his or her shoulder. A judge is, or at least should be, always considering the consequences of a decision from the point of view of another court — the appellate court.