Archive for the ‘Water Law’ Category

Leaky Laws – Oil Spill Liability in New York

Posted on: May 26th, 2016
by David Ganje

Pipelines, even privately owned, are a publically regulated transportation and operating system. The question is not whether pipelines are “essential to our society.” Pipelines are already integral to the country: the US had over 1,700,000 miles of oil and gas pipelines in 2014. Operating systems will malfunction. The process for legally authorizing operating systems should not. To paraphrase Norman Vincent Peale, the problem with most publically regulated systems is that they would rather be ruined by praise than saved by criticism.

On September 2, 1978 the U.S. Coast Guard discovered evidence of an oil spill entering Newton Creek in Brooklyn. After launching an investigation, the government found over 17 million gallons of petroleum products that had leaked over a period of decades beneath the Greenpoint area, contaminating more than 50 acres of land. Today, new studies put the spill volume up to 30 million gallons. Cleanup began in 1979, but by 2006 only 9 million gallons had been cleaned up – less than a third of the known spill size. Cleanup continues today, with the aid of the federal government. The spill was designated a Superfund site. No one knows how long the leak existed before it was discovered
The relevant question should be how regulated pipeline leaks will be cleaned up, and who will pay for them. Under both Federal and state laws, the party responsible for a leak is the one responsible for cleanup. Usually the operator responsible prefers to take care of the cleanup themselves. Not only does this help soothe public relations problems resulting from a leak, but it helps the operator control the costs. However, a pipeline operator causing a spill may not always be willing or able to clean up a spill. The liable operator could be bankrupt, dissolved, or simply not have the money. The operator responsible for the Greenpoint spill was still in business and capable of footing the bill for their mistakes. This will not always be the case. Not all spills are flashy and obvious. Cleanup should not wait for years of court cases or bureaucratic lethargy. The money for a cleanup must be there, ready to be used.

New York has the NY Environmental Protection and Spill Compensation Fund (“Spill Fund”), established in 1977 to protect the state against petroleum spills. The fund is financed with a tax on petroleum products moving through the state, and any disbursements from the fund to pay for spill remediation is ideally recovered through penalties assigned to the responsible party. Third parties who are damaged by the spill can also file a claim with the Spill Fund and get their damages paid through the Fund, allowing the Fund to add those damages to the remediation it seeks from the responsible party.

This kind of fund is a good start. However, the fund is simply not large enough to handle the kind of oil spills that are possible in this era of pipelines and oil trains. For the 2014-2015 fiscal year, the Spill Fund spent over five million dollars more than it collected, bringing the fund’s total down to twenty-two million dollars. The fund spent thirty-two million that year. The 2015 state budget raised the cap on the Spill Fund from $25 million to $40 million. But even $40 million is not enough to handle the large spills when a company is not around to pay – in fact, $40 million is not even what the fund would be at if the cap had kept pace with inflation.

This is not to say that New York would be alone in a crisis. Both the Coast Guard and the EPA have trust funds in place to help states and the federal government. The Coast Guard’s fund only applies to spills into navigable waters, and cannot apply to cleaning up spills on land. But it would be there to help if the real disaster happened: a lengthy, voluminous spill into one of the many bodies of water in New York State, like the 2013 Enbridge spill in Michigan that cost more than a billion dollars to clean up. EPA maintains their Leaking Underground Storage Tank Fund for spills on land, but that fund is financed with a tax on motor fuel – a tax paid by private citizens, not the companies causing the damages in the first place.

Petroleum spills are not going away. The New York State Spill Hotline receives approximately 16,000 reports of spills each year, and the NY Dept. of Environmental Conservation estimates that approximately 90% of those reports involve petroleum products. Financial assurances for spills must be required before the damage happens, in amounts sufficient to cover the thousands of spills that happen every year. The legislature needs to create a modern statute addressing financial assurances by the operators for pipeline leaks.

Is the Trump Option Available In SD For Condemnation?

Posted on: February 13th, 2016
by David Ganje

Is the Trump Option Available In SD For Condemnation?

Eminent domain is one of the toughest and most controversial legal powers available to a government, but the South Dakota legislature has so far failed to manage it properly. Eminent domain allows a governmental body to convert privately owned land to another use, often over the objections of the current landowner. The Donald Trump Option is the right of a private party to use eminent domain. This is done by developers, pipeline companies and hotel builders alike. This process is commonly known as a ‘taking’ or ‘condemning the land.’ There are rules, of course. A landowner must be paid “just compensation” for the condemnation of his land. Further, the land that is to be taken may only be taken to further a beneficial public use.

The ability to exercise eminent domain is so powerful that it almost always remains the final legal option. The use of eminent domain is not solely limited to governments. Private parties as well as corporations may exercise the immense power of eminent domain. For example, South Dakota law states that “Any person may exercise the right of eminent domain…to acquire as a public use any property or other rights necessary for application of water to beneficial uses.” Private parties as well as corporations may exercise the immense power of eminent domain.

The law allows a private party to manage water rights by a taking. The statute states, “except as otherwise provided…no person may appropriate the waters of this state for any purpose without first obtaining a permit to do so.” The power of eminent domain may used if the taker puts water to a beneficial use. For this reason, a party may not successfully exercise eminent domain without first having a water permit.

This right to take comes into play when a party seeks access to land he doesn’t own in order to access water. What is a beneficial use? South Dakota law is intentionally vague on this subject. It says beneficial use is the use of water “that is reasonable and useful and beneficial to the appropriator, and at the same time is consistent with the interests of the public.” For courts, this is a balancing test, as opposed to a concrete definition. The question in eminent domain cases, then, is whether or not a proposed use of water fits this vague legislative definition of ‘beneficial use.’ The Supreme Court has implied that it can. As a result, eminent domain cases involving water can span an enormous berth of cases, with those claiming eminent domain seeking water for everything from irrigation to oil extraction.

There is irony in too much of what the South Dakota legislature does. Counties and municipalities are forbidden from using eminent domain for the benefit of a private party. Yet the field is wide open for private parties to use eminent domain for a private party’s benefit.

Whether it is a taking to obtain water rights or land for a pipeline, the matter of ‘just compensation’ to be given to the landowner is paramount. I have advocated in prior blog articles the need to revisit the matter of just compensation. This issue applies to a government or private taking. The ‘valuation process’ should be changed. The SD Supreme Court has stated that the state legislature has the authority to create the method of compensation in a condemnation proceeding. The State Constitution is interestingly stronger from a landowner’s perspective than is the US Constitution on the issue of eminent domain.

State Senator Monroe, or his speechwriter, state that that my argument (and that of 5 states and counting as of 2012) is wrongheaded. He has stated, “We have well established legal mechanisms to compensate property owners and treat them fairly.” Good negotiations by a landowner may result in more favorable compensation. But the playing field should be level between the land taker, who has the power of the law to take, and the landowner. Senator Monroe’s refusal to look at the issue is a belittlement of efforts to protect property rights.

I do not know whether the Senator has had a pipeline run through his property under an eminent domain proceeding. A taking is not a normal market transaction because the landowner has no choice. A landowner can’t walk away from the table. The legal process of taking private property is just as important as the right to free speech, freedom of religion and the protection against unreasonable search and seizures.

There are several problems with South Dakotan condemnation law. The law should be revised to include written disclosures following the requirements of Wyoming law. Wyoming law provides new rights for landowners in all condemnation proceedings, whether initiated by the government or private parties. SD law should require that the taker show the details of the proposed project plan and the written basis behind any compensation offer. An additional provision that should be changed is the legal taking procedure. Currently the procedure does not allow the landowner the recovery of all of his court costs, appraisal costs, expert witness fees and attorney’s fees even in the event he should prevail in the case. This forces landowners to fear spending money defending their own land, something that a citizen should never have to do. SD law should provide that a landowner is entitled to an award of all court costs, appraisal costs, expert witness fees and attorney’s fees if the taker failed to negotiate in good faith, or if the compensation awarded by the court or jury exceeds the amount of money offered by the taker to the landowner. Until then, the playing field will remain skewed in favor of takers.

David Ganje. David Ganje of Ganje Law Offices practices in the area of natural resources, environmental and commercial law in South Dakota and North Dakota. The website is Lexenergy.net

Does Eminent Domain Apply to Water Rights?

Posted on: February 7th, 2016
by David Ganje

Does Eminent Domain Apply to Water Rights?

Eminent domain is one of the toughest and most controversial legal powers available to a government. The doctrine of eminent domain allows a governmental body to convert privately owned land to another use, often over the objections of the current landowner. This process is commonly known as ‘condemning the land.’ There are rules, of course. A private landowner must be paid “just compensation” for the condemnation of their land. I have written several blog articles regarding the matter of just compensation. Further, the land that is to be taken must be taken to further a beneficial public use.

The ability to exercise eminent domain is so powerful that it almost always remains a final legal option left to state and government bodies. In North Dakota, a little-known law allows private citizens to exercise eminent domain. North Dakota law states that “The United States, or any person, corporation, limited liability company, or association [may] exercise the right of eminent domain to acquire for a public use any property or rights existing when found necessary for the application of water to beneficial uses.” Private citizens as well as corporations may exercise the immense power of eminent domain – but only when it comes to using water for a beneficial use.

North Dakota evaluates whether or not a citizen is able to put water to a beneficial use through a permit system. The law requires “any person, before…appropriating waters of the state…, shall first secure a water permit from the state engineer.” There are few sources of water (groundwater, surface water, river water, etc.) within the limits of the state that are not subject to such a water permit. The power of eminent domain can only be harnessed in order to put water to a beneficial use. For this reason, a citizen cannot successfully exercise eminent domain without first having a water permit.

The right of eminent domain may come into play when a private citizen or corporation wants to use water for a beneficial use, but needs access to land they don’t own in order to access water. What is a beneficial use? North Dakota law is intentionally vague on this subject. It says beneficial use is the use of water for “a purpose consistent with the best interest of the people of the state.”

Traditionally the landowner who desires the use of a water source, having first secured a state permit, will negotiate an easement with the landowner who owns the land on which the water sits. But this does not always work out. Such was the case in Mougey Farms v. Kaspari, a 1998 North Dakota Supreme Court case. The plaintiff, Mougey, owned farmland neighboring the defendant Kaspari’s land. Kaspari’s land also bordered the Sheyenne River. Mougey wanted to use the Sheyenne River as a water supply to irrigate his land. To that purpose Mougey approached Kaspari to negotiate a lease of his land in order to build a water transport system connecting Mougey’s irrigation system to the Sheyenne River. Kaspari agreed, the two signed a lease, and the irrigation system was built across Kaspari’s land without incident. The lease began in 1979 and continued for almost seventeen years.

In 1996 Kaspari informed Mougey that the lease would not be renewed, and Mougey would no longer be allowed to transport water from the Sheyenne River to Mougey’s farmland. This left Mougey without a source of water for irrigation. Mougey brought suit with an eminent domain claim against Kaspari’s land – in other words, he brought a suit to condemn the part of Kaspari’s land on which the water pipeline stood, asking for the right to continue piping water from the river to his irrigation system. Though this argument was rejected in the lower court, the North Dakota Supreme Court held that “irrigation of farmland under a perfected water permit issued by the State Engineer is a beneficial use of water consistent with the best interests of the people of North Dakota, which we conclude satisfies the ‘public use’ requirement.” The Supreme Court of North Dakota held that a private citizen could exercise the power of eminent domain in order to condemn part of his neighbor’s land, so long as the condemnation was in support of an approved public use of water.

The law lays out what public uses trigger the right of eminent domain. It states, “oil, gas, coal, and carbon dioxide pipelines and works” and the plants for supplying the above, together with “lands, buildings, and all other improvements” needed to for the purpose of “generating, refining, regulating, compressing, transmitting, or…development and control” are all public uses capable of triggering eminent domain.

The question is whether or not use of water fits a category. Is the use one that supports “generating, refining, regulating, compressing, transmitting,” or “development and control” of oil and/or natural gas? This issue may be considered regarding one of the most important uses of water in the oil and gas industry, hydraulic fracturing. There are parallels that can be drawn between the use of water for irrigation seen in Mougey Farms and the use of water for hydraulic fracturing.

Energy developers and landowners should be aware of this eminent domain statute and the possibility of its use. Both parties need to remember that when water rights are involved in a public use, the prospect of eminent domain is conceivable. The North Dakota Supreme Court teaches us that the ‘eminent domain of water statute’ allows individuals or companies to acquire for public use property when found necessary for using water for beneficial purposes.

David Ganje. David Ganje of Ganje Law Offices practices in the area of natural resources, environmental and commercial law in South Dakota and North Dakota. The website is Lexenergy.net

Illinois Association of American Water Works Recognizes Ganje’s Water Workshops

Posted on: September 19th, 2014
by David Ganje

Illinois Association of American Water Works Recognizes Ganje’s Water Workshops

The Illinois Section of the American Water Works Association (ISAWWA) has recognized David Ganje of Ganje Law Offices for his recent workshops given for the Association. David Ganje recently presented two specialized workshops to the ISAWWA on the subjects of water law and water security. The Association wrote letters of appreciation to Mr. Ganje for the work and will use the presentations in future workshops.