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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

Surface Water Rights & Surface Water Drainage, A Modern Problem

Posted on: November 11th, 2015
by David Ganje

Surface Water Rights and Surface Water Drainage, A Modern Problem

Surface Water drainage issues are longstanding issues in agricultural production areas, and have a significant effect on the agricultural economy of a state.  South Dakota, by way of example, has been plagued by surface water drainage problems for decades.  Surprisingly, there is little coherent or efficient planning to meet the challenge.  Instead, property owners and government agencies have witnessed debates, numerous court cases, and the failure of new legislation capable of addressing the issue.  The state has experimented and over the years implemented a smorgasbord of agencies with authority over water issues including the State Water Management Board, County Drainage Commission statutes, irrigation districts, water user districts, water project districts, water development districts, conservation districts, and watershed districts. The results are less than successful when one considers the state’s drainage problems.  There are benefits to water drainage, both environmentally and economically.  However, the road to effective water drainage law and policy remains elusive in South Dakota, partly due to the unwillingness of those in authority to exercise existing rights given to the state’s leaders.

 

Surface water drainage is defined as the depletion of water from a water-logged piece of land.  By draining off excess water, soil goes from saturated to unsaturated, allowing air to better move through the soil, making it healthier.  This can result in a decreased amount of runoff and topsoil loss with water drainage, also improving soil quality.  By making the soil healthier, crops are healthier, more abundant, and typically generate better profits.

 

Water drainage is beneficial environmentally as well as economically.  Studies done by North Dakota State University indicate that there is a 30-50% yield increase in fields that have added tile drainage systems.  This yield change increases revenue, as well as the quality of the land in general.

 

Despite the evidence that supports water drainage systems, dispute about the benefits remain, including the questions: How does one drain the water?  Where should it go?  And how much is too much?

 

A few Water Rights concepts, such as the Civil Law Rule, should be considered. The Civil Law Rule states that a lower estate is responsible for the water that naturally drains across it, and whatever trouble that may come with it – however, an upper estate cannot lawfully do anything to increase this burden.  This means that an upper landowner cannot add to the natural volume of water the lower landowner would naturally receive, or change the course of the water’s flow.  These principles have been demonstrated and applied in numerous court cases.

 

For example, in the 1909 South Dakota case of Boll v. Ostroot, in which the defendant dug a ditch to drain water onto the plaintiff’s lower lands, the court ruled that the defendant could not lawfully discharge water onto another’s land through an artificial channel.  In addition, it was also ruled that one could not change the natural course of the water’s natural drainage path.

 

More recently, the 1985 case of Gross v. Connecticut Mutual Life Insurance Co. held that discharge is allowed over, but not onto another’s land.  The principle is that drainage can flow but not in such a manner as to create a new water depository. The precedents and general guidelines set by these court cases are not enough to combat all of South Dakota’s water drainage issues.

 

Part of the problem lies in South Dakota’s 1985 water drainage statutes which offer guidelines such as when permits are needed, the application process, coordinating precise drainage areas, and so on. The law allows for both creating drainage plans and managing drainage controls.  While this may have been effective in theory, in practice it falls short.  For example, the manpower, data, and resources necessary to carry out all that the ordinance calls for are not widely available and are often given as the reasons for the failure of counties to administer the law.  The more accurate reason is that political leaders at the county level are reluctant to take the bull by the horns and ‘domesticate’ the water drainage issues. In addition, as of July 2012, only 18 out of 66 counties in South Dakota had a drainage ordinance in place, making it nearly impossible for the state as a whole to deal with all the complications that can arise.

 

With all the problems that water drainage and water drainage laws have brought up, what can be done to remedy and alleviate the situation?  Fortunately, there are many options for South Dakota.  To start, a minimum criteria needs to be established for drainage applications to act as a baseline for what is lawful.  Following that, more definitive criteria to evaluate these applications need to be made in order to best protect all parties involved.  Finally, a level of cooperation and consideration among all parties involved needs to be more actively employed.

 

It is evident that water drainage laws have caused hardships and issues in South Dakota for many generations.  However, by employing new standards and better understanding water drainage rights and tactics, South Dakota has the ability to overcome these hardships and improve the land.

Letter to the Editor: A South Dakota Water Lottery

Posted on: October 20th, 2014
by David Ganje

Letter to the Editor: A South Dakota Water Lottery

Posted Aberdeen American News, Farm Forum: Monday, October 13, 2014 9:08 am

by David Ganje

While it has yet to come to the attention of the national environmental and natural resources community, the South Dakota state legislature passed a first-in-the-nation law this year in the field of natural resources. The state will use a ‘lottery system’ for the issuance of certain state managed water permits. The water lottery system is combined with a moratorium on water use for identified water bodies managed by the state. Under current South Dakota law, all water within the state’s jurisdiction is property of the people of the state. The right to the use of water may be acquired by private parties and municipalities by a state-managed appropriation procedure. The state has been historically a first in time, first in right state when granting water use rights. South Dakota’s ‘water management’ jurisdiction does not however apply to Indian Country or on federal lands. Water use in South Dakota is authorized when the state Water Management Board grants a private, beneficial use of the state’s water resources. An example of a private use is an irrigation permit. A water use permit is issued either as a new water use or as a vested water right for an existing water use if it predates 1955.

The new water lottery system comes into play in situations where the state Water Board has determined that an existing groundwater source is ‘fully appropriated.’ A water source is fully appropriated when the state rules that no new or further access to the water should be granted because it would prejudice the ability of the water source to recharge to an acceptable level. The lottery system will not apply to open or unappropriated aquifers. The Water Board under the new legislation can accept water permit applications even for a fully appropriated aquifer. A 30 day application time period will also be set for a fully appropriated aquifer by public notice. The notice gives prospective applicants the right to apply under the lottery system. The applications are then placed in a lottery drawing system. The actual method for drawing successful applicants has not yet been implemented but will be announced in the next several weeks. The ‘winning’ applicants will then have to wait under the state’s five-year moratorium on approval of permits in those instances when the state has made a designation of a ‘fully appropriated aquifer.’

A lottery system for resource development permits has been used in the past, but never by a state for access to state managed water. The U.S. Bureau of Land Management used a lottery system for granting oil and gas leases until 1987 but has not used it since. The state, of course, does not call this new law a lottery system. I do. The new unchallenged law describes the lottery system as a procedure in which, “the board shall create a priority list using a random selection process to be determined by the board.” This new lottery system is an effort to cure problems in past experiences when an aquifer is placed in a moratorium. One cannot criticize the conceptual fairness of the new law. The statutes attempt to treat water permit applicants seeking access to a particular aquifer equally by using the “random selection process” in a moratorium scenario. The law itself has some challenges in its language as well as in its untested procedure. It is soon to be implemented by the state Water Board and the S.D. DENR. The new law is a unique effort by the state to deal with natural resources stewardship issues. In that regard the legislature should be applauded. Will the bar of reason support this brave new attempt at fairness? Time will tell.

 

Tags: Environmental Law, Infrastructure Security, Natural Resources Law, Water Law, Water Regulation, Water Rights, Water Systems Security

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.