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South Dakota Real Estate Rights

Posted on: May 24th, 2021
by David Ganje

In this opinion piece I discuss the recent case of a South Dakota farmer criminally convicted for setting drain tile on land subject to a federal wildlife easement. The defendant was charged with destroying real property of the United States because he drained and caused to be drained, without the authority and permission of the government, lands under a federal wildlife easement. The law referred to is the so-called disturbing protected wetlands law. In this Brookings County case the U S Attorney at the behest of the US Fish and Wildlife Service indicted the farmer for setting drain tile on land subject to an existing wildlife easement under which easement rules tiling was a prohibited act. The farmer was convicted after a jury trial, but not on the charge in the government’s indictment. The farmer has appealed the case. The appeal is pending.

The jury found the defendant guilty of an offense lesser than that charged by the filed criminal indictment. The farmer’s defense suggested he thought he had approval from the government to do the tiling after he had requested approval. The jury found the defendant guilty of “disturbing protected wetlands of the United States.” The jury did not find the defendant guilty of the indicted charge of knowingly disturbing protected wetlands of the United States.

I do not presume to pass judgment on whether the defendant was guilty of criminal charges. I opine here on the process. Prosecutorial discretion refers to the recommendation of an agency and a prosecutor’s decision to charge out a crime. Even though the Constitution does not declare who may prosecute or under what circumstances, the U S Supreme Court opined that a government’s decision to prosecute or not prosecute, whether through civil or criminal process, is a decision left to the government’s absolute discretion.

How was the public interest served by pursuing a felony indictment and conviction in this case? Protected wetlands law is a valuable, modern environmental management tool. There are important benefits to modern land-management and waterfowl production laws. Similar land preservation laws have been in effect since I was a kid. I have seen the worth these agricultural and environmental programs provide. Nevertheless the true merit of such laws and the defined prosecution of a case under such laws are separate matters. South Dakota real estate rights should run both ways.

A prosecuting attorney considers the recommendation of an agency and has the legal authority to decide whether or not to bring criminal charges, to determine the nature of any charges and to give a sentence recommendation after a conviction. This legal authority is one of the most significant powers held by the executive branch. In our society a prosecutor does not have to justify to the public its reasons for deciding to proceed or not proceed in a criminal matter.

In prosecuting a criminal case, among the factors a prosecutor considers is whether the public’s interest in a problem could be addressed by other available civil or regulatory remedies. The government may weigh and implement other non-criminal remedies in deciding how to proceed.

After the conviction in this case the prosecutor said that requiring the defendant to restore the wetlands sends an important message. One cannot fault a prosecutor who is attentive to environmental issues. Yet in the Brookings County case the jury did not find a knowing violation of the law. Could the message have been sent by other means? Could a required wetlands restoration and a civil proceeding have been taken against the farmer? Could the government have enforced its rights civilly under the legal terms of the easement? I am want to paraphrase a famous American admiral: It is better to sin against God than to sin against a bureaucracy.

South Dakota Paralegal Association talk

Posted on: October 3rd, 2020
by David Ganje

I’ve been asked to speak at the meeting of the South Dakota Paralegal Association in October. The Association official asked me to speak about environmental and natural resource issues affecting real estate transfers.  I am honored to speak at the upcoming virtual meeting of the Association. The topic presents contemporary issues and is worthy of the readers consideration.  I will here provide some of my talk on this subject.

Purchasing title insurance on a land deal gives specialized protection to the policy holder.  However, title insurance does not cover mineral interest ownership and does not provide protection on environmental problems that exist or may arise from ownership of the purchased land.

In practice real estate sales and transfers do not often follow a careful procedure, and do not use careful language when environmental and natural resource issues are involved.  I have observed this in both East River and West River transactions.  The standard sales agreement (the suggested official contract) provided by the South Dakota Real Estate Commission is not helpful.  Language in the agreement disregards the party’s ownership rights because mineral interests are not addressed.  And the matter of reserving or selling mineral rights reflects even more mistakes.  The wording in this standard state commercial and agricultural agreement leaves the grantor at risk because mineral interests are not described in the transfer sections of the agreement.  When one gives a warranty deed to land in South Dakota he gives a ‘warranty’ of his ownership of the surface and all that lies below it. That’s a pretty powerful warranty.  Homework should be done before giving such a warranty.  This is further compounded by the fact that title insurance does not cover mineral interests, and indeed some title companies will not search or report mineral interests on a written title policy.  Wyoming, Colorado and Montana have addressed the issue of mineral interests in official forms.  South Dakota has not. I have publicly advocated for such a change in the state’s standard agreement for some time now.  The reader will observe that my influence over state issues is quite underwhelming.

The purpose of Wyoming’s mineral disclosure law, according to the President of the Wyoming Realtor’s Association, was to avoid the unpleasant surprise encountered by buyers thinking they owned mineral rights only to find that a third party would appear on their land, and start digging on the property. By making the buyer aware of the possible severance of mineral rights, Wyoming’s disclosure law allows a prospective purchaser to make a more informed decision when purchasing real estate whether commercial, agricultural or residential.

Underground trespass.  What is it?  Not easily defined, the law came into existence before air travel and fracking for minerals.  It is discussed arcanely in this manner:  The Second Restatement of Torts follows old English law and states, “a trespass may be committed on, beneath, or above the surface of the earth.”

How does underground trespass occur on the plains?  Without belaboring a lot of examples, underground trespass might occur from underground pipeline leaks, leaking or corroded underground storage tanks, active oil operators infringing a bit too far under unleased property, a so-called disposal well’s ‘waste fluids’ migrating beyond its permissible subsurface boundaries, and so forth.

Is a man’s subsurface his castle?  Maybe.  A Nebraska Court addressed the issue of underground trespass.  The court held that the operator of an injection well could be liable if the damaged party could show that fluid migration harmed the damaged party’s ability to produce oil.  The North Dakota Supreme Court separately ruled that a claim in underground trespass may be trumped by a properly obtained force-pooling order from the state authority which oversees gas and oil operations.  In the North Dakota case it must be noted that the claimant property owner did not allege any actual damage to his interests.  And a West Virginia court, in a case that was finally settled and dismissed, ruled that subsurface horizontal fracturing for minerals very close to a Plaintiff’s property line was to be considered underground trespass.  The lesson is that modern society and the laws that follow will consider the issue of trespass on more than just the surface of property.

Caveat Emptor is for fools. When buying and selling real estate, the buyer and seller must over disclose and over investigate the property.  For example, I require that a buyer of property, which includes mineral interests, state in writing that he researched the value of any mineral interests. This forces the parties to investigate the matter.   When selling real estate do not allow for laziness to become a deal breaker.  Over-disclose.  In fact: Disclose. Disclose.  Surface water rights (and landowner obligations) are another illustration.  A new landowner may be obligated as a so-called downstream landowner to accept an existing drainage project from an upper landowner.  But actual surface water drainage may not currently run on the land, and in doing a sale of the land the parties may be blissfully ignorant of the water rights of an upper landowner who is allowed by law to run water onto a lower landowner.  Surface water drainage issues are also not disclosed in the standard South Dakota residential sale disclosure form.  Doing a real estate deal is not a time for puffery.  A real estate transaction is not the same as a first date when one suggests to the new date that he is “a professional baseball player.”   Disclose and be truthful.  The world will work better.

David Ganje practices law in the area of natural resources, environmental and commercial law with Ganje Law Office. His website is Lexenergy.net.

David L Ganje
Ganje Law Offices
Web: lexenergy.net
605 385 0330

davidganje@ganjelaw.com

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

davidganje@ganjelaw.com

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

Date:    August 15th 2018

 

 

 

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

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

South Dakota’s Approach To Condemnation

Posted on: December 2nd, 2016
by David Ganje

The use of eminent domain (condemnation) is a modern legal problem. Condemnation is the taking of property for a public and in some cases a private interest. Condemnation is a legally sanctioned sword. My argument in this article is not that eminent domain as a concept is wrong. My argument is that in its present state, as a legal vehicle attempting to provide fairness, eminent domain is a lemon in need of repair on both sides. This law allows a governmental body – and a private business – to convert privately owned land to another use, often over the objections of the landowner. Traditionally in a legal taking a landowner receives “market value” for the land taken. This often includes money for reduction in agriculture output or for the loss of other productive use of the land.

While eminent domain makes sense under a public utility easement paradigm, how does this process apply when a pipeline easement on a landowner’s property is the “transportation vehicle” for a commodity? How does one calculate “fair market value” when millions of dollars’ worth of product are flowing across privately-held land? Candidate Trump said, “I want the Keystone pipeline, but the people of the United States should be given a piece, a significant piece of the profits.” South Dakota law does not take this into consideration. Condemnation of one’s land involves forced negotiation required by law, and sometimes involuntary litigation. Is a one-time payment for an easement fair compensation? Is the condemnor (developer or government agency) required to provide its plan of work and operations to the condemnee (property owner) so the owner can evaluate this information? This would create a fairer playing field in negotiations. South Dakota law does not provide for this. Should the landowner be granted his expenses and attorney’s fees in a trial and for an appeal if the final award given is greater than the last ‘offer’ made by the condemnor? Or if a mistrial is called which is not the fault of the landowner? South Dakota law does not provide for this. Is the condemnor required to provide written disclosure of its calculations and basis for a proposed offer for the property? South Dakota law does not provide for this. In a federal condemnation, even if a landowner does not formally answer the condemnation lawsuit the landowner may still present evidence of the value of his land and may participate in the distribution of awarded monies. South Dakota law does not provide for this.

The law of condemnation brings out a curious inconsistency in the character of the state. South Dakota is a strong property-rights and individual-rights state. Aside from the important and unique relationships of Indian reservations to the state and to the federal government, private property in South Dakota is a hallowed right. State laws are vigilant in protecting one’s real estate and other property from intrusion, reduction in value as well as protecting the right to use the property for any lawful purposes. The state Constitution, like the federal, directs that, “Private property shall not be taken for public use, or damaged, without just compensation. . .”

Thus we get to my puzzlement. South Dakota has done very little to modernize eminent domain laws. This is not a case of the emperor having no clothes. This is a case of the emperor having no vision. The takeaway is that state leaders have no appetite for changing the status quo.

In modern vernacular ‘trending’ means that which is currently popular in social media, however in common English it means that which is changing or developing in a certain direction. The word ‘trending’ applies to the painfully slow but observable changes in the law of eminent domain. Unfortunately these changes are not coming from South Dakota political leaders. The state’s recent passage of a voluntary mediation statute for condemnation cases does nothing to address the substantive changes needed.A national trend has started toward balancing the sacrifices a property owner makes when business or government does its eminent domain dance. Courts, and over time other state legislatures, will continue to correct the ills of eminent domain when it is used as a legal sword. South Dakota must cultivate a fairer system for the taking of property.

Brownfields: A Calculated Risk Missed by Tribes and South Dakota

Posted on: December 2nd, 2016
by David Ganje

The EPA defines a brownfield as “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) mandated that the purchasers of property are liable for any contamination on this property regardless of when they acquired a site. However, CERCLA also created a defense known as the “innocent landowner defense” that can only be used if “appropriate due diligence” was conducted prior to the acquisition of the property. Appropriate due diligence has been exercised if an environmental site assessment (ESA), a thorough investigation of a site’s current and previous owners, has been prepared.

ESA’s have an average cost of about $4,000 for a small business acquisition and can vary depending on variety of factors specific to the job. The typical businesses that leave behind brownfields include gas stations, dry cleaners, railroads, oil refineries, liquid / chemical storage facilities, and steel / heavy manufacturing plants. Typical hazardous materials they leave behind include hydrocarbons, solvents, pesticides, heavy metals such as lead, and asbestos.

What is so dangerous about leaving these brownfields alone? Many of these brownfields are abandoned commercial properties and tend to be an eyesore in the community. Not only can this lead to decreased property values in surrounding neighborhoods, but the property can also pose serious health risks for new tenants and their neighbors.

Once a brownfield has been identified, the EPA provides two options for cleanup, revolving loan fund grants and cleanup grants. The purpose of revolving loan fund grants is to enable states, political subdivisions, and Native American tribes to make low interest loans to carryout cleanup activities at brownfields properties. Cleanup grants provide funding for a grant recipient to carry out cleanup activities at brownfields sites.

Since the cost of cleanup is considerable, the grants may provide several hundred thousand dollars towards the cost of cleanup. This money comes with strings attached, of course. Among other things, the costs are shared with the property owner, by at least 20 percent, and the brownfield site must be cleaned up within a three-year period.

Entities eligible for the EPA’s brownfield grants and loans include state, local and tribal governments; general purpose units of local government, land clearance authorities or other quasi-governmental entities; regional council or redevelopment agencies; states or legislatures; or nonprofit organizations. If you are not an eligible entity, you may still be able to receive assistance through your state or city.

In South Dakota, the agency that provides statewide brownfield assistance is the Department of Environment & Natural Resources (DENR). DENR receives funding from the EPA for assessments and cleanup and have discretion in how to allocate those funds. For example, a national hotel chain looking to redevelop a brownfield site in South Dakota would not be eligible to apply for assistance through the EPA directly. However, the hotel chain could contact DENR for assistance and DENR could use their funds to perform an ESA or help with the cleanup.

In 2015, Sioux Falls received an assessment grant for $400,000 from the EPA. In addition to performing site assessments, they plan to use the money to update the city’s brownfields site inventory, prioritize sites, plan for cleanups at priority sites, and perform community outreach activities. They, like DENR, also have discretion in performing assessments and have made assessments available to entities who would not be eligible to apply for grants from the EPA.

With these options available to assist with brownfield redevelopment, why do so many brownfields remain untouched in South Dakota? In the last 5 years the EPA only awarded four grants in South Dakota. They gave an assessment grant to Sioux Falls and cleanup grants to Standing Rock Sioux Tribe, Cheyenne River Sioux Tribe, and Lower Brule Sioux Tribe. This suggests that other entities are not aware of the grants available to them, they are dissuaded from applying, or they do not have the structure to run a brownfields program.

Since South Dakota is not small Rhode Island, which is about the size of Brown County, businesses and other eligible entities find it is more economical to buy available land than it is to redevelop a brownfield site. This misses the mark. A brownfield site is many times in an attractive location. A brownfield site is often close to business activity and transportation or the prior owner would not have developed it.

Although the grants and other forms of assistance are “competitive,” grants are awarded based on guidelines. The deadlines for applying for assessment and cleanup grants from the EPA is December 20, 2016, so it’s not too late.

View the original article at FarmForum.net