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South Dakota – the land of socialized oil and gas production

Posted on: January 29th, 2020
by David Ganje

The truest evidence a state will leave for history is the rule of law under which its people lived at the time. Today some governments have not credibly accepted the need for environmental stewardship as a part of governance. Such a government opposes sober consideration of environmental stewardship and instead promotes economic progress as if the two governing issues must be universally incompatible. The absence of a balanced environmental stewardship by the state is the evidence I submit in this opinion piece. The actual policies and positions of the state on natural resource management is the material evidence upon which the future will judge South Dakota. I will here discuss current experiences as well as ‘new’ proposed bills before the 2020 legislature. These things will look weak and ill-considered by those reviewing the state’s history in 50 or 100 years.

In 2015, 2016, 2017 and 2018 I wrote several different analysis, in editorials and opinion pieces, advocating for financial assurance from permit applicants in order to satisfy the need for clean-up and plugging of closed projects. The point of my diverse written recommendations applied to mining operations, wind farms, oil and gas exploratory and operating permits as well as other natural resource operations requiring government authorization. My arguments were presented in numerous opinion pieces over those years. The pieces were published in various papers and websites throughout South Dakota, and importantly were not found in so-called advocacy or biased publications. The purpose of the pieces was to warn as well as advise government agencies and the legislature of the significance of proper planning and vigilant oversite for licensed and permitted projects. Some call this planning and oversight stewardship. I wrote about abandoned projects, abandoned wells, orphaned wells, projects in bankruptcy and projects underfunded and at risk. In a 2017 piece I discussed examples of businesses shutting down and not cleaning up after themselves. South Dakota like most states requires financial assurance terms for oil well permits, for mining operations, for sand and gravel permits, for wind farms. In my pieces I also reviewed specific regional examples of permits which imposed inadequate financial requirements for the decommissioning or closing of permitted projects. To restate my principle argument – decommissioning of a government-permitted project is the most significant long-term aspect to a government’s permitting authority. Little, really nothing, has changed since the publication of the articles. Now, I am not personally offended by those who ignore my advice; this is not unusual in my line of work. But no man is pleased to have his good advice so handsomely neglected as has been the subject and recommendation of my articles. How has the advice been neglected? Let us look at current practices of the state as well as proposed legislation before the South Dakota legislature.

The first example. Spyglass, an out-of-state energy company, abandoned 40 natural-gas wells in Harding County over the last several years. The state belatedly sued the company because of its failure to clean up the abandoned wells. The company denied liability. These abandoned gas wells, some of them leaking, have been around for a long time. I personally viewed one of them in 2014. Why has not the operator cleaned up the mess? The state DENR says that, “The problem all along has been that the company didn’t have the money to do so.” The state apparently did not properly oversee the financial assurance submitted by the company and, according to the Rapid City Journal, the state of South Dakota will be left holding the bag on the costs of closing up the wells. The paper reported, “Someone associated with [Spyglass] later cashed out $20,000 from the bonds without state government’s knowledge, leaving the state with only $10,000 to apply toward the estimated cost of nearly $900,000 to plug the 40 orphaned wells.” The original amount of bond money placed on the wells was inadequate in the first place – and if the monies were mismanaged as suggested – this compounds the state’s problem. A settlement consent agreement was entered into between the state and Spyglass but the agreement did not seem to remedy the situation. In the current session of the legislature a bill is pending to specially fund the DENR with earmarked state monies so that it might, itself, clean up orphaned wells. I have in the past been successful in my dealings and communications with the South Dakota DENR. The DENR has been accessible and willing to discuss public matters as well as my client’s issues in good faith. Yet on the proposed new legislation I recently contacted DENR twice by email indicating I would like to discuss the legislation. They did not favor me with a conversation. Instead the DENR emailed me that ‘the legislation speaks for itself.’ This is not open government.

Here are the takeaways for my first example: 1. inadequate financial assurance amounts were required at the outset, 2. there was an apparent failure to vigilantly oversee the operator’s deposited monies, and 3. we have a financial bailout by the state to plug wells at taxpayer’s expense because of a private company’s botched enterprise.

The second example. I have devised a new law of physics. It applies to government activity only and is otherwise an anomaly within the laws of physics: Every action taken by government is always a reaction- never an initiated action. In the current session the legislature proposes to increase the bond amount to $50,000 per well. This is a discretionary amount, not a mandatory amount. The proposed amount is a figure that the Board of Minerals may impose. Or the Board may impose a higher amount by its own authority. This would be an increase over current law. The proposal is nevertheless discretionary. The new legislation also allows the board to require a supplemental plugging and performance bond in the amount of $20,000 or such a mount as will guarantee the cost of reclamation. Again this is a discretionary bond. The Board “may require, or may delegate.” The solution to orphaned wells is not difficult to understand. When companies get a permit to drill they should pay a mandatory minimum bond that covers the cost of plugging and reclaiming the well. If the company plugs and reclaims the well itself they get their bond money back. If the company does not plug and reclaim the well for whatever reason, as we have seen there are several reasons, the state will have adequate money on hand to do the work. Between 1997 and 2014 it cost the State of Wyoming $11 million in total to plug orphaned wells, and only $3 million was covered by bonds. The number of abandoned wells in North Dakota grew by 10% in 2018 and 2019 over prior years. How did the South Dakota legislature come up with its new bond amounts? Has the state and its experts looked at the state’s experience with the Wasta SD well and the 40 orphaned Spyglass wells? I have seen no public state analysis on these matters. While of course no two projects and no two wells are the same, does good stewardship suggest that the lesser protection for the state is the better? North Dakota State Mineral Resources Director Lynn Helms very recently estimated that an abandoned well costs $150,000 to plug and reclaim.

Here are the takeaways from my second example: 1. an increase in bond amount is good. But the proposed legislation is not a mandatory increased amount. It is discretionary. That’s a cop out. If you want to address the problem you address the problem, 2. the state has still not addressed the proper financial amount for financial assurances by a developer. The Wasta abandoned well case is a South Dakota financial tragedy. I respectfully refer the reader to media articles on the abandoned Wasta well. The official stated remedial costs to the state could be $2 million if the Wasta project were ever to be plugged. That is way more than the bond filed with DENR. Further, the Spyglass problem of 40 orphaned Wells is a recent development. The state proposes to address Spyglass by budgeting about three-quarters of a million dollars’ worth of state funds. State funds are to pay for something a private business should be responsible for from the get-go. Thoughtful rules of the road at the initial stages of any project will help address future problems of possible project abandonment, closure and decommissioning. This would be good stewardship.

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

Political Higher-Ups ignore infrastructure

Posted on: October 25th, 2019
by David Ganje

Infrastructure includes roads, bridges, dams, and water and sewer systems.  Infrastructure ain’t sexy.  Managing infrastructure does not give a politician much television coverage or publicity. It is not a favorite subject of political leaders.  I looked at the most recent South Dakota governor’s inaugural address and at State of the State addresses going back several years. None mentioned infrastructure. Mistakenly, political leaders do not think they can create their “Legacy” by fixing or improving infrastructure. That is a mistake for all concerned.

While South Dakota ranks relatively high by the conservative and libertarian Reason Foundation for its cost effectiveness in highway management.  This ranking does not cure the long-term problem the state faces with its infrastructure.  The same Research Foundation indicates that over 23% of the state’s bridges are in deficient condition.  And the South Dakota Legislative Research Council (LRC) in a 2010 report stated that with no changes in revenues by the year 2020 19% of state highways would be in poor condition.  The independent American Society of Civil Engineers submitted a 2017 report which stated that over 18% of the state’s bridges were structurally deficient, and that 13% of the state roads were in poor condition.  South Dakota officials do not have a repair estimate for the number of high-hazard dams in need of repair.  They should. Dams are an infrastructure safety issue because spillway capacities may change, because downstream development by man is always ongoing, and because the structure of a dam naturally deteriorates with time.

Infrastructure maintenance and improvements are not subjects political leaders take on as a personal favorite.  In recent years society and perhaps some politicians have recognized the fact that infrastructure is vital to economic growth.  But that alone does not give the issue political and legislative traction.   Infrastructure is not an interesting topic for the media.  Importantly, it is not a headline-grabbing topic for politicians.  The issue is too mundane; the public and politicians see headline issues including hemp and transgender bathrooms as more important.

In Ohio Republican Governor Mike Devine’s state of the state address for 2019 he called infrastructure the unfinished business of the country. Governor Devine stated that it was his job to put before the people a description of unfinished business.  In his annual address he advised, “Let me start with our roads and bridges. We have neglected them too long and we know face a crisis today that must be addressed immediately.”

In a 2010 report the South Dakota LRC stated the obvious and reported that good highways are needed to get farm and ranch products to market and to promote economic development in rural and urban areas of the state.  The report also told the legislature that the, “Lack of adequate highway funding is causing deteriorating highway conditions and increasing highway maintenance costs.”  If one doubts that truism, I suggest you talk to any township supervisor or county commissioner in the state; they will enlighten the reader very quickly on the infrastructure problem.  According to a road industry organization’s (TRIP) 2015 white paper, which gathered information from state township reports, twenty-eight percent of township-maintained roads in South Dakota are either closed or in poor condition.

What should be repaired? What rebuilt?  Where is the state public policy statement with a priority-of-projects list for all to review?  This is too urgent a problem to be buried in some legislative committee report viewed only be a few, with little public input and without any long term attention given to the issue by those holding the bully pulpit.

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

Wind Energy Brief

Posted on: July 12th, 2019
by David Ganje

BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF SOUTH DAKOTA

­­­­­­­_____________________________________________________________________________

                                                                                                EL 19-003

IN THE MATTER OF THE

APPLICATION BY CROWN

RIDGE WIND, LLC FOR A                                                  INTERVENORS’

PERMIT OF A WIND ENERGY                                          POST-HEARING BRIEF

FACILITY IN GRANT AND                                               

CODINGTON COUNTIES

­­­­­­­                                STATEMENT OF THE CASE AND INTRODUCTION

  1.  On January 30, 2019, the South Dakota Public Utilities Commission (Commission) received an Application for a Facility Permit for a wind energy facility (Application) from Crowned Ridge Wind, LLC (Crowned Ridge or Applicant) to construct a wind energy conversion facility to be located in Grant County and Codington County, South Dakota (Project or proposed project). The Project would be situated on approximately 53,186-acres in the townships of Waverly, Rauville, Leola, Germantown, Troy, Stockholm, Twin Brooks, and Mazeppa, South Dakota. The total installed capacity of the Project is claimed not exceed 300 megawatts (MW) of nameplate capacity. The proposed Project includes up to 130 wind turbine generators, access roads to turbines and associated facilities, underground 34.5-kilovolt (kV) electrical collector lines, underground fiber optic cable, a 34.5-kV to 345-kV collection substation, one permanent meteorological tower, and an operations and maintenance facility. On January 31, 2019, the Commission electronically transmitted notice of the filing and the intervention deadline of April 1, 2019, to interested persons and entities on the Commission’s PUC Weekly Filings electronic listserv. On February 6, 2019, the Commission issued a Notice of Application; Order for and Notice of Public Input Hearing; Notice of Opportunity to Apply for Party Status. On February 22, 2019, the Commission issued an Order Assessing Filing Fee; Order Authorizing Executive Director to Enter into a Consulting Contracts; Order Granting Party Status. On March 20, 2019, a public input hearing was held as scheduled. On March 21, 2019, the Commission issued an Order Granting Party Status. On March 25, 2019, Patrick Lynch filed an Application for Party Status. On March 26, 2019, Commission staff filed a Motion for Procedural Schedule. On March 27, 2019, Crowned Ridge filed its Responses to the Motion for Procedural Schedule. On March 28, 2019, lntervenors filed a Response to Crowned Ridge’s Response to the Motion for Procedural Schedule. On April 5, 2019, the Commission issued an Order Granting Party Status; Order Establishing Procedural Schedule. On April 25, 2019, lntervenors filed a Motion to Deny and Dismiss. On April 30, 2019, the Commission issued an Order For and Notice of Motion Hearing on Less Than 10 Days’ Notice. On April 30, 2019, Commission staff and Crowned Ridge each filed a Response to Motion to Deny and Dismiss. On May 6, 2019, lntervenors filed a Reply Brief in Support of Motion to Deny and Dismiss. On May 10, 2019, the Commission issued an Order Denying Motion to Deny and Dismiss; Order to Amend Application. On May 10, 2019, the Commission also issued an Order for and Notice of Evidentiary Hearing. On May 17, 2019, Intervenors filed a Second Motion to Deny and Dismiss. On May 23, 2019, Commission staff filed a Request for Exception to Procedural Schedule and Crowned Ridge filed its Response to lntervenors Second Motion to Deny and Dismiss and, as a part of its response, Crowned Ridge requested a Motion to Strike. On May 28, 2019, Intervenors filed a Reply Brief and Motion to Take Judicial Notice. On June 12, 2019, the Commission issued an Order Granting Request for Exception to Procedural Schedule; Order Denying Motion to Take Judicial Notice; Order Denying Motion to Strike.  The Commission has not ruled on the Second Motion to Deny and Dismiss.  The Commission has jurisdiction over this matter pursuant to SDCL Chapters 1-26 and 49- 41 B, and ARSD Chapter 20: 10:22.  The evidentiary hearing was held, beginning on June 11, 2019, and ending on June 12, 2019, with one Staff witness heard prior to the scheduled evidentiary hearing.  At the conclusion of the evidentiary hearing, a briefing schedule and decision date was set by the Commission.  Intervenors, through undersigned counsel, submit this Post-Hearing Brief.  Applicant is seeking a permit from the Commission to build a wind farm in Grant and Codington Counties South Dakota. As the permit applicant, Applicant shoulders the burden of proof to establish its proposed project satisfies the provisions of SDCL 49-41B-22.  Intervenors do not have the burden of proof to show the proposed project does not satisfy SDCL 49-41B-22.  If there remains a question as to whether the proposed project complies with SDCL 49-4 lB-22, the permit application must be denied. As shown below, Applicant has not satisfied its burden. Therefore, Intervenors respectfully request the Commission deny Applicant’s permit Application.  Citations to facts contained in the record are included in this Post-Hearing Brief and in the Intervenors’ Proposed Findings of Fact and Conclusions of Law which are incorporated into this Brief.

                                                               ARGUMENT

2.     The Legislature intended for an extensive and complete review of a wind farm permit application by the Commission.  The legislature would not have done so if it did not expect its statutory requirements to be a high bar.  In this proceeding, as of the conclusion of the evidentiary hearing, the Application is still, at best, materially incomplete. It is also accurate to say the Application at completion of the evidentiary hearing is unavailable as an understandable proposed project.  See for example the findings set forth in Intervenors’ Proposed Findings of Fact and Conclusions of Law on the issue of due process.

3.      Intervenors’ Proposed Findings of Fact and Conclusions of Law are filed with this Brief as Exhibit A and are incorporated into this Post-Hearing Brief by reference.  The insufficiency of Applicant’s evidence and facts, the unaddressed relevant legal issues in this proceeding, as well as the failure of the Applicant to satisfy legal requirements following applicable siting law and rules under the mandate of SDCL 49-41B-22(1) are presented in detail as findings and conclusions in Exhibit A.

4.      Applicant’s statutory burden of proof under SDCL 49-41B-22 has not been met in this proceeding.  Additionally, ARSD 20:10:01:15.01 is one of the Commission’s Rules of Practice, and it also applies to this matter.  The rule requires: In any contested case proceeding, the complainant, counterclaimant, applicant, or petitioner has the burden of going forward with presentation of evidence unless otherwise ordered by the commission.  The complainant, counterclaimant, applicant, or petitioner has the burden of proof as to factual allegations which form the basis of the complaint, counterclaim, application, or petition. ARSD 20:10:01:15.01  Applicant’s evidence supporting its regulatory compliance obligations are matters within the possession of the Applicant.  The burden to produce evidence is on the Applicant.  Davis v. State, 2011 S.D. 51, 804 N.W.2d 618, 628 (S.D. 2011); Eite v. Rapid City Area School Dist. 51-4, 739 N.W.2d 264 (S.D. 2007); Meacham v. Knolls Atomic Power Lab., 554 U.S. 84 (2008); Dubner v City and County of San Francisco, 266 F3d 959, 965 (9th Cir 2001)  This burden remains upon Applicant regarding all wind energy siting statutes and concerning all wind energy siting rules throughout every stage of the proceeding.  Gordon v. St. Mary’s Healthcare Ctr., 617 N.W.2d 151   The facts and issues regarding the denial of due process of the law raised by Intervenors also reflect Applicant’s failure to meet its statutory and administrative burden of proof in this proceeding.  Wind farm siting laws and the related administrative rules have disturbed Applicant’s efforts to obtain a permit.  The proposed Application, at the completion of the evidentiary hearing, does not meet Applicant’s burden of proof under which this Commission might have approved a permit — even with proposed conditions.  In this matter the Applicant and Staff submitted proposed permit conditions.  As the record reflects, Intervenors were not invited to, and did not participate in, the writing or negotiation surrounding the creation of the proposed conditions.  Under these circumstances the Intervenors do not accept the terms of the proposed conditions.  Applicant must prove to the Commission compliance with all the elements of South Dakota’s siting statutes and each of the applicable siting rules by a greater convincing force of the evidence.  Applicant’s burden of proof is that the “proposed facility will comply with all applicable laws and rules.”  That’s not a maybe. That’s not a might.  The Applicant is not allowed to get kind of close to complying with applicable laws and rules.  An applicant must comply with all applicable laws and rules.  Applicant has not done this.

5.      In this proceeding are the Applicant’s requested 45 db(A) and 50 db(A) sound levels for the proposed project standards which the Commission should approve?  No.  Are Applicant’s requested 45 db(A) and 50 db(A) sound levels supported by the testimony and writings of Staff witness Hessler and supported by the testimony and writings of Applicant’s principle health witness Ollson?  No.  Applicant must prove to the Commission compliance with all the elements of South Dakota’s siting statutes and each of the applicable siting rules by a greater convincing force of the evidence.  Applicant has failed to meet that burden on the issue of health and welfare.  SDCL 49-41B-22(3)   Staff witness Hessler wrote in a 2011 professional article that 40 db(A) is recommended.  Staff witness Hessler testified in a prior 2018 South Dakota PUC hearing that 40 db(A) should be the design goal.  Staff Witness Hessler advised the Minnesota Public Service Commission in a 2011 report that any new project should maintain a mean sound level of 40 db(A) or less. Staff witness Hessler advised the Wisconsin Public Service Commission in a 2012 report that a 39.5 db(A) or less should be used for all non-participating residences. Staff witness Hessler testified in the current proceeding that for many years he recommended as the ideal performance level of 40 db(A).  Staff witness Hessler testified also in the present preceding that he recommended 40 db(A) as an ideal design goal.   Staff witness Hessler acknowledged as his professional opinion that a 40 db(A) for every non participant was recommended.  Staff witness Hessler reported in his pre-filed testimony in this proceeding that anytime sound levels are higher than about 40 db(A) he anticipates complaints with the number of complaints and the severity of complaints increasing exponentially as sound levels approach 50 db(A). Staff witness Hessler told the Commission that 40 db(A) sound level maximums would be better for the public than 42 db(A).  Staff witness Hessler testified that 40 db(A)  would be acceptable to the welfare of the public as a permit condition.  Staff witness Hessler testified in this proceeding that he agreed with a professional article found at Exhibit I – 8 reporting that the level of 40 db(A) is a design goal intended to protect the public.  Staff witness Hessler also agreed with a 2017 professional article at Exhibit I-4 indicating that wind turbine farms designed to a level of 40 db(A) or lower for  non-participating receptors have an acceptable community response.  Staff witness Hessler acknowledged that a report he gave to the Wisconsin Public Service Commission recommended a 40 db(A) level for non-participating residences.  Applicant’s principle health Witness Christopher Ollson agreed that a 2011 World Health Organization noise guideline of 40 db(A) is a health-based limit value.  Applicant witness Ollson acknowledged he wrote in a 2014 professional article recommending that preference should be given to sound emissions of approximately 40 db(A) for non-participating receptors and that this level was the same as the World Health Organization night noise guideline. Applicant’s witness Ollson wrote in a 2014 presentation that noise from wind turbines can be annoying to some and associated with sleep disturbance especially when found at levels greater than 40 db(A).  Applicant’s witness Ollson wrote in a 2014 presentation that preference should be given to sound emissions of 40 db(A) or less for non-participating individuals.   Ollson further testified that the limit of 40 db(A) or less for non-participating was the same guideline as the World Health Organization guideline.  Applicant’s witness Ollson admitted that he had previously testified in a 2014 Canadian wind farm proceeding that 40 db(A) was reasonable and sufficient to protect against human effects.  Ollson also testified he had recommended in a prior application proceeding that best practices include a preference for sound emissions of 40 db(A) or less for non-participating receptors.  In his testimony in this proceeding Applicant witness Ollson acknowledged that he expressed a preference to be given to sound dimensions of 40 db(A) or less for non-participating receptors in a 2014 professional article he had written.  When asked in this proceeding, Ollson stated that he had not changed any of his writings or his opinion on the opinion recommending sound emissions of 40 db(A) or less.  Intervenor’s Proposed Findings of Fact and Conclusions of Law cite to and provide reference to the record on the above statements for each of the two witnesses.  The preceding is substantial evidence, by Applicant and Staff witnesses, against approving Applicant’s requested sound level standards in this proceeding.  Considering this evidence, Applicant has not presented its case for sound standards with a greater convincing force of the evidence.  The Commission cannot and should not approve the Applicant’s requested sound standards for the proposed project.

  •     When one considers the essential information needed to obtain permit approval under wind energy siting law, one appreciates the law’s purpose in requiring that an applicant place before all interested parties a competent and full disclosure as well as a public explanation of how the proposed project complies with applicable siting law and rules and how the project would affect the health, safety and welfare of inhabitants.  Applicant has not met its burden of proof under the administrative rules and under wind energy siting statutes.  By way of illustration, Applicant states that it may agree to move 7 turbines because of the opinion of Staff witness Hessler who recommended to the Commission that 16 turbine locations should be moved.  Staff witness Hessler testified, “The 16 units that I believe are unduly and unnecessarily affecting non-participating residences are circled in black. . .”  (citation for  the record and quotations in this Post-Hearing Brief are found in Intervenors’ Proposed Findings of Fact and Conclusions of law)  The recommendation Staff witness Hessler expressed to the Commission regarding the welfare of inhabitants is not reflected in the proposed minimal acts of Applicant.  Applicant suggested it may move seven of the recommended 16 turbines. “Q. You’re not going to move 16 of them? A. We have agreed to moving seven turbine locations. Q. You haven’t agreed to move 16? A. That’s correct. We agreed to move 7.”  Applicant’s position is far from a commitment to do what is recommended.  And further, Applicant does not represent to the Commission that the 7 turbine sites which it may move are to be withdrawn sites or are to be terminated as project turbine location sites.  Applicant will still maintain those 7 sites as a ‘back up.’  None of this ‘moving of 7 turbines’ complies with the Staff witness’ recommendations.  Applicant is not taking adequate action to protect the health, safety and welfare of project inhabitants.  The Applicant’s several witnesses in this proceeding do not show any dispute or criticism regarding the recommendations of Mr. Hessler that 16 turbines should be relocated.  Applicant’s proposed action does not adequately protect non-participators.  This effort to sway to the Commission is too little.  Applicant is over-careful regarding its own interests at the expense of the project community, the inhabitants and non-participators.  A proposed move of a minimal number of the turbine relocations contrary to the recommendation by Staff witness Hessler does not meet Applicant’s burden of proof regarding the health and welfare of the inhabitants pursuant to SDCL 49-41B-22(3).

7.      The materially incomplete Application is shown by the lack of a full avian use survey report.  Applicant’s purported avian study for the proposed project is found at Appendix E of the Application. The study ended in November of 2017.  See page 58 of Appendix E.  The avian use survey report fails to include a significant portion of the proposed project.  The northeast area of the proposed project was not included in the report.  This unsurveyed project area consists of 15,500 acres of land and 25 proposed turbine sites or alternate turbine sites.  Applicant’s avian survey map, Exhibit A1-E p2, reveals the failure to survey this large northeastern area of the project. The map included with the survey is Applicant’s document filed in support of its assertion that Applicant completed a survey of the proposed project area. The northeastern area of the project was acquired by the Applicant at the end of November 2017 but well over one year before the Applicant formally filed the pending Application.  Application Exhibit A1 p 88 “Cattle Ridge Wind Farm, LLC was acquired by the CRW on November 22, 2017 for inclusion with the Project.”   Applicant did not do an avian use survey report on the northeast area of the proposed project.  The fact that the Application contains no avian use study of the completed project area is confirmed by Applicant witness Sappington’s testimony.  “Mr. Ganje Q. I would refer you to Exhibit A1-E…”  “Mr. Ganje Q. So then no avian study report was done for that portion of the project, was it? Sarah Sappington A. No Avian Use Survey.”  The dashed lines on A1-E show the limits of the survey area.   “Q. I would ask you please to refer to A1-B page 80.  And is the — referring now to page 80 of the exhibit, please. Is page 80 the colored area, the area of interest that was studied by your company?” Sarah Sappington “A. This was studied as of July 2017.  Q. Yes. And does that study area include the northeastern portion of the proposed project that I referred to you in a previous question and showed you on a previous map? A. Are you referring to that northeast portion? Q. That is correct. A. No. This map does not have it.”  The purple area shown on A1-B does not include the northeast area of the proposed project.  And, Figure 1 of the “study area” on page 2 of the Avian Use Survey Report is clear evidence the Application is materially incomplete.  See Appendix E to the Application.  Applicant cannot be granted a permit by the Commission.

8.      In this proceeding the problem of denial of the Intervenors’ due process rights is set forth with citations in the findings and conclusions found at Exhibit A to this Brief.  The lack of due process issue is stark. The issue warrants a review in this Brief.  The right to be informed of, to access, to know and to challenge an Application is not available to Intervenors where material information has not been timely placed on the record – even at the end of the final evidentiary hearing.  Applicant has not implemented a fair and adequate procedure under which Intervenors could understand the facts necessary for the Commission to reach a decision.  Applicant has not followed a fair and adequate procedure necessary for the Commission to reach a decision on the impacts of the proposed project.  Since the day of filing the Application, Interveners have been deprived of adequate information from which to understand, research and challenge the Application under its ever-evolving and materially-changed proposed project. Up to the last day of the hearing substantial and material proposed project changes were submitted to the Commission.  Adequate notice and due process of law do not permit an applicant in such a complicated public siting process to change material facts and technical representations on the final day and at the final hour of the submission of evidence.  Further, the Application is still incomplete in multiple, material respects, and should be denied by the Commission.

9.      Instances of denial of due process. 

9a.)   At the close of the evidentiary hearing, Applicant filed two documents Exhibits: A67 and A68, as so-called updated shadow flicker tables.  The shadow flicker tables list 70 nonparticipating and 61 participating receptors, which are homes, with 4 participants listed as pending. The table is missing 56 of 59 of nonparticipators receptors in Stockholm and Waverly.  Exhibit A1 page 75   And at this late date Intervenors still do not know the participators.  Applicant fails to provide information on who is participating, who is not, and the effects on these receptors.  Of the 131 receptors listed on the table, more than half are non-participators and this table does not include the 56 non-participating receptors in the two towns inside the proposed project.  This brings the total of the non-participators inside the project boundary at 129 vs 61 participating.  In the last 2 days of the evidentiary hearing Applicant submitted exhibits A57, A67 and A68. The exhibits are presented as updated sound and flicker modeling for the proposed project. Except for modeling four receptors in Waverly and one in or near Stockholm, Applicant failed to consider, model or include receptors and residences in the towns of Stockholm and Waverly.  While the proposed project offers setbacks away from the towns of Waverly and Stockholm, setbacks do not address the issue of the effects of sound and flicker on the residences of Waverly and Stockholm.  The Applicant’s modeling buffer zone, as well as the proposed project site, includes the towns of Waverly and Stockholm, but Applicant did not consider, model or include all the receptors and residences in the two towns.  The large number of town residences within the proposed project is identified in the Application.   See Application page 75  Applicant did not do complete sound and flicker modeling for Waverly and Stockholm.  Applicant’s evidence is void of material and necessary information concerning the consequences of sound and flicker on the residents of Stockholm and Waverly.  The lack of relevant and material evidence makes it impossible for Intervenors to evaluate a complete Application which covers 53,186 acres of South Dakota.

 9b.)  Applicant’s astonishing last-minute presentation of Application evidence included Exhibit A55 –Proposed Turbine Drops and Moves.  This exhibit was presented to the Intervenors and the Commission on the first day of the evidentiary hearing June 11th, 2019.  Revealing for the first time in a 6 month application process several proposed turbine drops and several proposed turbine moves.  This last-minute disclosure did not provide adequate and timely notice to Intervenors on a substantive and material aspect of the Application.  Applicant’s Exhibit A55 represents that turbines will be ‘dropped’ from the project.  However the testimony of Applicant witness Wilhelm at the evidentiary hearing contradicts this proposition.  Mr. Wilhelm testified during the evidentiary hearing that, 1. The turbines will not be dropped but will actually be reserved for possible later use, and that, 2. The relocation of the turbines that Applicant offered to move is not to be disclosed.  Applicant provided no coordinates for the turbines to be relocated.  Further, the so-called dropped turbines proposed do not address witness Hessler’s recommended 16 turbine relocations.  The representations of Applicant regarding the so-called dropped turbines, and Applicant’s suggested turbines to be moved, found in Exhibit A55 are misleading at best.  Turbines identified as CRII – 127 and CRII – 129 are included among the so-called dropped turbines.  These turbines are not turbines sites for the proposed project. These turbines sites are part of a different wind farm project altogether.  And, three turbine sites to be ‘moved’ (CR II Alt 3, CRII 126, CRII 133) are not a part of the proposed project. The three turbines are a part of a different wind farm project altogether.  Further, and just as material, Applicant’s proposal found in Exhibit A55 does not move ten of the turbines sites recommended to the Commission by Staff witness Mr. Hessler for relocation.  See Exhibit S1a   Applicant provides no designated placement sites for the ‘moves’ it suggests it would make.  The map produced by Applicant at A55 and the accompanying proposal is an attempt by Applicant to offer something of no relevant value to the legitimacy of the proposed Application in exchange for approval of the proposed project by the Commission, the Intervenors and the affected property owners.  Applicant’s proposal should be labeled a dance of dissemblance.  The lack of relevant and material information makes it impossible for Intervenors to timely evaluate a completed Application which covers 53,186 acres of South Dakota. 

9c.)   Although it is a requirement of the permit process, the Applicant did not timely file documents needed to evaluate the Application and its impacts to the environment and citizens.  Applicant represented from and after January 2019 that no turbines would be placed on grasslands or wetlands.  Application page 79   Applicant’s representation is not true.  On June 4, 2019 Intervenors learned through data request responses in Exhibit A45-3 the matter of missing USFWS easements.  An Applicant may only place turbines on the upland portion of a federal wetlands easement parcel. The maps submitted by Applicant do not adequately reflect the location of wind turbines on parcels designated as federal wetlands parcels.    In this proceeding a reasonable person cannot determine the location of turbines proposed to be located in the 7 wetland parcels.  The lack of relevant and material information makes it impossible for Intervenors to evaluate a completed Application for a proposed project that covers 53,186 acres of South Dakota, without all the required information timely provided. 

9d.)  Applicant misled the parties concerning a claimed, completed Avian Study. The Applicant provided an incomplete Avian Study in which 15,500 acres were not included, although the written Application represents that all such matters are good to go.  And Applicant did not provide biological studies and information concerning native grasslands and mammals. The lack of relevant and material information makes it impossible for Intervenors to evaluate a completed Application for a proposed project that covers 53,186 acres of South Dakota, without all the required information timely provided. 

9e.)  Intervenors’ Second Motion to Deny provides an illustration of the Applicant’s failure to timely disclose and failure to provide proper notice, adequate information and failure to provide Intervenors due process.  In paragraph 14 of the Patrick Lynch affidavit in support of the motion, Applicant’s misrepresentation to the record, to the Commission and to Intervenors is recited. Patrick Lynch Affidavit filed 5/17/2019   The Lynch Affidavit reveals Applicant’s failure to disclose a material fact.  Until Applicant was obliged to respond to the Second Motion, Applicant withheld the fact that it did not have legal access to 25 proposed turbine locations.  In its motion response Applicant did not deny Applicant’s lack of an easement, even though Applicant had represented in its filings from January 2019 until the Second Motion was filed (the end of May 2019) that it had legal access to the 25 proposed turbines. The false representation was made for 4 months of the 6 month application process allowed by law.  Applicant knew the easement did not exist.  And in response to the Second Motion Applicant further admitted there were six expired land agreements; while in a separate disclosure in June 2019 Applicant admitted that there were seven material land agreements necessary for the project. Without knowledge of the location of turbines, the location of easements and collection lines it is and was impossible for Intervenors to understand, research and timely challenge a completed Application. 

10.     Intervenors incorporate by reference into this Brief:  Intervenors’ filed Brief in support of their First Motion to Deny and Dismiss, Intervenors’ filed Reply Brief in support of their First Motion to Deny and Dismiss, Intervenors’ filed Brief in support of their Second Motion to Deny and Dismiss, and Intervenors’ filed Reply Brief in support of their Second Motion to Deny and Dismiss.  Intervenors also incorporate by reference into this Brief Intervenors’ hearing Brief on Intervenors’ Motion to Strike testimony of witness Haley.

                                                CONCLUSION

11.      The Application does not meet the criteria required by South Dakota Codified Laws.  The construction of the project does not meet the requirements of South Dakota Codified Law 49-41B.   Applicant has not demonstrated that the proposed facility will comply with all applicable laws and rules.  Applicant has not demonstrated that the facility will not pose a threat of serious injury to the environment nor to the social and economic condition of inhabitants or expected inhabitants in the siting area.  Applicant has not demonstrated that the facility will not substantially impair the health, safety or welfare of the inhabitants. 

12.      Even if reviewed in the best light (which is not the legal standard for assuring a party due process of the law, and does not comply with Applicant’s required burden of proof) the pending Application is murky, muddled, incomplete and with material information unknown.  The Commission and the Intervenors should not have this many unanswered questions, and the Applicant unfulfilled legal obligations, all at this stage of the proceeding. Because there are so many and because of the significance of the unanswered questions as well as an incomplete Application, the Commission should deny the permit application.  Further, based upon the arguments described in this Post-Hearing Brief and based upon the findings and law described in Intervenors’ Proposed Findings of Fact and Conclusions of Law the Application should be denied.  In addition, the application process in this proceeding has denied and infringed upon Intervenors’ due process rights including their opportunity to be heard at a meaningful time and in a meaningful manner. Mathews v. Eldridge, 424 U.S. 319, 333 (1976). The Applicant has failed to meet its burden of proof under SDCL 49-41B-22 and ARSD 20:10:01:15.01.  The Application should be denied.

Dated this _____ day of __________, 2019

/s/ David L Ganje

Ganje Law Offices

17220 N Boswell Blvd   Suite 130L, Sun City, AZ 85373

Web: lexenergy.net

Phone 605 385 0330

A Wildcatter’s Collapsed Dream is Now the State’s Problem

Posted on: March 31st, 2019
by David Ganje


In this opinion piece I write about public waters and a wildcatter’s abandoned oil well.  The matter did not pan out well for the wildcatter or the state. 

 South Dakota relies on groundwater as one of its main sources of freshwater for domestic, municipal and agricultural purposes.  Groundwater is found in porous subsurface rocks called aquifers.  Aquifers are usually close to the surface. In contrast, oil and gas deposits are usually deeper and are often found several thousand feet below the earth’s surface. Because of this difference in location, oil and gas exploration and production can involve drilling through aquifers to access potential oil and gas production zones.

Oil and gas wells might contaminate groundwater in different ways. One is an event in which an exploration or production well causes separate aquifers to connect; this is particularly challenging where one aquifer may contain useable, potable water and the other contains bad water.   An improperly plugged and non-operating oil and gas well could act as a pathway.  A connection between different aquifers is sometimes called communication in hydrological terms.  A well borehole drilled through a layer separating two confined aquifers represents a possible conduit for the migration of contaminants between the aquifers – if that borehole is not properly plugged. 


The public trust doctrine holds that groundwater and surface water within the state’s jurisdiction must be preserved in perpetuity for the public. The government of South Dakota through its various departments and boards serves as the trustee of this natural resource to maintain waters for the benefit of current and future generations. Neither public nor private interests are allowed to harm waters held in public trust.

The South Dakota Supreme Court in 1964 held that legislation was justified in determining that the public welfare requires protection of the state’s water supply. In a 2004 decision the Supreme Court found the public trust doctrine manifested in the state’s Environmental Protection Act authorizes the state to protect the air, water and other natural resources from pollution impairment or destruction.  In that 2004 case the Court ruled, “In conclusion, the public trust doctrine imposes an obligation on the State to preserve water for public use. It provides that the people of the State own the waters themselves, and that the State, not as a proprietor, but as a trustee, controls the water for the benefit of the public.”


 A public trustee is not a business ‘proprietor.’  The public trustee is required to manage, oversee, preserve and protect a natural resource put under its control.  The public trustee may be any of several different state departments or boards concerning a range of situations.   In a public trust the government’s obligation is protecting waters for the benefit and use of the public.  A trustee’s duty is to preserve and to not abdicate or delegate legal responsibilities.  A public trustee may delegate certain tasks, but not its obligation to protect the resource.  I define a public trustee as a natural resource manager exercising a public conscience guided by equity and the law.  Equity as a principle will not suffer a wrong to be without a remedy.

I present here background in order to discuss the Wasta well issue.  The first matter was described:  the state is trustee of the waters held under the public trust doctrine.  What are relevant supporting statutes and rules which provide a public trustee with remedies?  I will list.  These remedies place financial responsibility on the permit holder, not the state. The state’s Environmental Protection Act is discussed in my prior comments.  In addition the Board of Minerals and Environment (Board) may enforce violations of state oil and gas law, of state oil and gas rules and of its own issued orders.  On the issue of plugging unused or abandoned wells, the operator of a well is civilly liable, if in violation, and is further responsible for plugging a well.  The Board also sets certain statutory performance bonds required of a permit holder.  And by statute “The Board may require additional bond [sic] if the circumstances require.”  The Board has further authority to declare penalties, as well as civilly prosecute a party for money damages and for harm caused to the environment.  This authority is broad and covers all persons and property whether public or private.  And in addition state government, through the DENR, can prosecute an oil and gas permit holder for public nuisance.  The remedies available for a public nuisance are a 1.) a civil money judgment; 2.) a judgment requiring an abatement of the nuisance; 3.) and a criminal prosecution.  The reader will please observe which remedies the state used (and did not use) in addressing the problem under discussion.

A few years ago a wildcatter received its oil and gas exploratory permit.  The company started drilling the exploratory well near Wasta.  The target was the Precambrian formation which lies about 9700 feet below where the deer and antelope play.  In this piece I also refer to the permitted well as the Wasta well. The DENR and the Board were required to scrutinize the applicant’s papers and its background information before considering approval of the permit.  A permit applicant’s competency and the bonding amount are factors the state is obliged to consider.  From the beginning of the process there are questions about the trustee’s due diligence and the applicant’s qualifications. Two bonds were required for the Wasta well all totaling $130,000.  In early papers considering permit approval the DENR stated 1.) the wildcatter submitted no documentation or information substantiating that oil or gas was likely to exist in economic quantities in the locations proposed; 2.) the applicant submitted invalid mineral leases and incomplete application paperwork; 3.) the applicant had no experience drilling oil and gas wells; 4.) the applicant had no experience producing oil or gas; 5.) the applicant did not disclose the identity of a well drilling contractor; 6.) the applicant refused to disclose that oil or gas exists in its target area; 7.) and the state determined the Precambrian formation is a formation from which neither oil nor gas has been found in economic quantities.  This wildcatter was walking on a thin line from the get-go.

Very shortly after drilling began the driller lost drilling fluid circulation in the well, and a drill stem got stuck in the borehole.  In efforts to fix the problem the well borehole collapsed in on itself.  The wildcatter was then unable to access the stuck drill stem.  All efforts came to a standstill, but some surface reclamation was completed.  The well was not plugged following permit requirements and no casing was in place protecting two major aquifers.  Several years later the state began the process of revoking the permit and forfeiting the bonds which totaled $130,000.  Just a few months after the state’s case closed, a remaining investor legally dissolved the wildcatter company. The original principal investors of the wildcatter company, after the project turned sour, vacated or chose not to appear in the jurisdiction.  For those not familiar with legal terms – the original principal investors got the hell out of Dodge before the sheriff showed up.

 In the state’s contested case hearing South Dakota presented two state employees as witnesses.  One was a state hydrologist and the other the state geologist.  No outside experts or specialists were called.  The testimony showed that the Wasta well had not been plugged according to permit requirements, and that no casing was put in place protecting two major aquifers. The hydrologist testified that the upper of the two aquifer is good quality water currently used by well water permit holders.  The hydrologist stated the potential impact of any pollutants or mineralized water going into the upper aquifer was limited.  The witness forthrightly acknowledged that the department did not know exactly what was happening underground at the well site.  The hydrologist also testified there was no baseline water quality data for the area near the well or specifically for the well itself.

The geologist testified that the state does not have any pre-drilling water quality information and does not have post-drilling water quality information for the well site.  The geologist stated, “We have really no ability to make an opinion on pre-drilling versus post-drilling water quality at that site.”  The witness testified the cost of a single new water monitoring well would be about $126,000.  The geologist also indicated because of the slowness of water movement in the good aquifer and because of a dilution effect from any bad water which might be introduced into the good aquifer, the risk to the water-using public was minimal.  And the geologist opined, “We would be ill-advised to spend the money to put in one well which is all the well we have the money for when we don’t know the best depth or best location to put that well.”

After the hearing the permit was revoked and the bond money forfeited.  And the Board decided that:  1.) the cost of an operation to plug the penetrated aquifers would be in excess of 2 million dollars;   2.) the Board did not have sufficient data regarding the lower aquifer to make a precise estimation of water quality; 3.) the well borehole provides a potential pathway for upward flow of water to the good upper aquifer; 4.) it was unknown whether communication “is or may occur” between the two aquifers but that the flow of effected water would be minimal; 5.) and that failure to properly plug the well “still presents a danger of communication” between the aquifers.

Since the hearing the state has not used the bond money or taken other legal or administrative action.  What other remedies listed above were available but not used?  The obligation of the state as trustee is to protect public waters.  Should a demand for perfection in science subvert the trustee’s obligation for oversight and resource preservation?  Should a water monitoring well be drilled only if contamination has been proven? Should other DENR funds be used besides the forfeited bonds to protect and monitor public waters?  Is a public trustee relieved of taking action – except when an established harm is proven?  South Dakota, its leaders and courts over the years since statehood have each spent sweat equity creating a fair system for the use and protection of the waters of the state.  In the Wasta well case the state is sacrificing the good for the perfect.  A public trustee does not fulfill its job by acting only on mathematic principles, or by waiting for scientific guarantees before taking action to protect a natural resource. 

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

Naked In The Wind

Posted on: March 12th, 2019
by David Ganje

Wind energy development is known as green energy.  Green energy is sexy.  Everybody wants to jump on the bandwagon but few want to pay for the ride.   A wind farm produces green energy.  A wind farm itself is not green.  It is steel, wires, underground cabling, electrical components and concrete.  This describes the infrastructure of a government-permitted wind farm.  Larger wind farm projects in South Dakota are subject to PUC jurisdiction regarding the permit application process and wind farm project oversight.  This opinion piece focuses on projects under the jurisdiction of the PUC.  Discussion of projects under the jurisdiction of the various wayward counties is left for another day.

In the eyes of a lawyer, which is not very romantic, when a wind farm contains steel, wires, underground cabling, electrical components and concrete we have potential legal liability.  Wind farm infrastructure is not owned by the landowner.  It is owned by the wind farm operator.  A landowner has no right to control or interfere with a wind farm. Who may be liable and to what extent is always an interesting legal question.  A court calls this the allocation of liability.  It is best not to become involved in a question on the allocation of liability.  General liability insurance coverage is one way in which liability risks are reduced.

The natural desire of a wind farm operator to protect its investment as well as a property owner’s natural desire to protect his land from liability are compatible ideas.  Alas, the state of South Dakota is negligent; it does not require liability insurance coverage by wind farms.  The conflicting and coexisting state policy of both encouraging green energy development and practicing laissez-faire wind farm oversight is dead wrong.   A landowner, farmer or rancher on whose land a wind farm sits is the odd-man-out under the state’s current wind farm permitting process.

A government-permitted wind energy project creating electrical power is the definition of a wind farm.  A wind farm is a public project permitted and overseen by the PUC because of its significant impact on the state and its people.  Wind farm projects have a beginning, a middle and an end.  The beginning is the development and construction stage, the middle is the operational phase and the end is the end.  (The end of wind farm operations, whether by abandonment of the turbines, bankruptcy, or shut down by an operator is ‘The funeral’ of the operating project.)  All three stages offer potential risks arising from claims or accidents related to wind turbines, wind farm operations and wind farm infrastructure.  Importantly, these risks exist whether the wind farm is operating or not.

While I note the chief financial beneficiary of a newly written liability insurance policy is at first glance the insurance agent who wrote the policy, all the same – insurance should have an important role in PUC permitting and in the PUC’s project oversight.  South Dakota law does not require that a wind farm carry general liability insurance.  Wisconsin and North Dakota law require this.  General liability insurance provides two areas of coverage for an insured party, that is, for the wind farm operator.  A general liability policy covers bodily injury and property damage.  Now to be clear, wind farm operators often have some insurance coverage. For example, a wind farm’s lender might require insurance.  Yet when a loan is paid off such a lender’s insurance requirement would end.

I am now obliged to make my case for project-wide wind farm general liability insurance.  If there are one or two sceptics out there among my numerous followers, my honorable readers should know I am not a lobbyist for and do not represent insurance companies.  I propose a correction in the deficient and inequitable policy and practice of the PUC.  The PUC should by law and or policy require project-wide general liability insurance.  In my discussion in favor of insurance coverage I will:  a.) first report the current lay of the land; b.) and then report the lay of the land as it should be.

The current lay of the land:  Is an operator uninsured, underinsured or inadequately insured?  Does the wind farm maintain a level of insurance providing for the type of loss or claims common to an operation?  The PUC has no answer.  South Dakota does not require that a wind farm maintain project-wide general liability insurance coverage.  Both North Dakota and Wisconsin do.  A recent wind farm permit approved in 2019 by the PUC will be used as an illustration.  This wind farm development and operation was approved with 42 permit conditions to be met by the operator.  These conditions were placed on it by the PUC.  None of the 42 conditions required project-wide general liability insurance.  The lengthy official application and approval file shows no indication of such insurance coverage.  Naked in the wind.

The lay of the land as it should be:  A wind farm operator should maintain general liability insurance relating to claims for property damage and/or bodily injury which may arise out of the development, construction, operation and closure of the wind energy project.  A wind farm operator should maintain the required insurance coverage until such time as the PUC authorizes the termination of the coverage.  The amount of coverage and required terms of the insurance should be set by the PUC in the course of its public process when considering a permit application.  The amount of insurance coverage and required terms of insurance coverage should be described in an order granting a permit.  Cancellation by an operator of the required insurance coverage should be prohibited.  Property owners on whose land a permitted wind turbine or turbines are located should be named as additional insureds on the required insurance policy.  The insurance policy should contain an endorsement obligating the insurance company to provide the PUC with at least 30 days prior written notice of any cancellation. No more than 15 days after the granting of a permit but before construction is started the permit holder should deliver a full and complete copy of the required insurance policy to the PUC.  An insurance policy received by the PUC under these provisions should remain a part of the public record, not be sealed, and not be subject to proprietary or confidential claims by an operator.

Conclusion:  The reasoning of government is a most uncertain thing. Will the state demonstrate leadership as well as equity and decide to change the law and its current practice of not requiring general liability insurance?  Come see me in two years and we will cry together.

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