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Natural Resource Issues in Modern Real Estate Deals

Posted on: May 25th, 2022
by David Ganje

Download the Natural Resource Issues in Modern Real Estate Deals presentation.

natural resource issues in modern real estate deals

More action needed to protect mussels

Posted on: March 24th, 2022
by David Ganje

From South Dakota News Watch 3/23/2022

Since Faltys’ study was published, the state’s only specific action to protect freshwater mussels has been a 2020 state administrative rule that bans commercial and noncommercial harvesting of freshwater mussels. State regulations allow people to pick up empty mussel shells, but not those of endangered or threatened species.

Chelsey Pasbrig, a GFP aquatic biologist, said in an email that her agency is concerned about the decline of freshwater mussel populations in South Dakota, and it is aware they are among the most endangered animals in North America.

“GFP has begun collaborations with other states to explore the option for augmenting populations with propagated individuals; however, this is in its infancy” she wrote. “Kaylee Faltys’ study provided us a snapshot of the status of freshwater mussels in South Dakota; however, future research and monitoring is likely needed.”

Pasbrig added that no current mussel monitoring efforts are underway in South Dakota.

“Unfortunately, the professor at SDSU who could assist with this expertise is since retired, therefore future monitoring and research efforts have not continued at this time. There are endless questions that exist regarding the status of freshwater mussels in S.D. and across the country; however, limited resources both financially and staffing exist,” she wrote.

Since at least 1995, the GFP also has sponsored mussel research by a retired University of Sioux Falls faculty member and a retired departmental wildlife biologist, among others.

Pasbrig says the department currently addresses water quality issues that may be contributing to decreased mussel abundance and diversity through the Conservation Reserve Program, the James River and Big Sioux River Conservation Reserve Enhancement programs, the EPA 319 non-point source watershed projects and riparian buffer programs. The state agency also recently expanded its private lands habitat program and aquatic habitat program, which partner with landowners and other conservation entities to improve habitat, Pasbrig says.

GFP did not respond to follow-up questions asking for figures on the net numbers of additional landowners and acres in the expanded private lands habitat and aquatic habitat programs. A request for the number of stream miles of riparian buffers created in the last several years also was not answered, but previous reporting by News Watch has showed that state efforts to encourage implementation of agricultural buffer strips has been extremely slow to catch on.

The U.S. Fish and Wildlife Service declined to comment on its role in monitoring and protecting freshwater mussels in South Dakota at this time.

Faltys and others have called for further research and monitoring of freshwater mussel populations in South Dakota.

“Our research … suggests that the statewide unionid structure is changing quickly, thus adequate conservation strategies are needed for the future survival of this group,” Faltys said.

Biske, of the Nature Conservancy, agrees that “more can be done” in South Dakota to monitor and conserve existing freshwater mussel populations

But under the two major federal acts pertaining to water, the Clean Water Act and Safe Drinking Water Act, individual and groups of South Dakotans do not have the right to take legal action against ag-related nonpoint source polluters, says David Ganje an Aberdeen native who practices natural resource and commercial law in South Dakota.

However, when endangered species are involved, government entities have the right to intervene to protect the endangered species, although this is rarely done, he said.

Individual states do have the power to regulate non-point source pollution and protect wildlife, should their policymakers choose to do so. South Dakota law states that both South Dakota’s waters and wildlife are the property of all South Dakota residents.

Ganje points to Wisconsin as a state that manages non-point source pollution well, with a published 5-year, 110-page plan. Wisconsin’s approach results in better surface water quality, despite intensive farming and industrial activity. Its most recent report states that 83% of its waters are healthy, 13% are impaired and 4% are being restored. South Dakota’s corresponding numbers are almost reversed: 78% of stream-miles are impaired in some way, while only 22% are healthy. Lake acres are 85% impaired and only 9% healthy.

Wisconsin also has a strategy to reduce phosphorus and nitrogen pollution from fertilizer applications.

“If over time those parties in society [agricultural, manufacturing, construction industries] are put in the limelight, invited to meetings, having the DENR/DANR sit down with them and say ‘What can we do as a group? What should we do? These numbers are getting worse and worse and worse.’ You know, there might even be some press that shows up to some of those meetings. That’s how you change this stuff,” Ganje said.

Water Law Revision Recommended

Posted on: September 14th, 2021
by David Ganje

South Dakota is in a state of drought, breaking century long records for extreme dryness. June 2021 has been the driest June in South Dakota over the past 127 recorded years, according to the government monitoring site, drought.gov. Another report from SDSU revealed that as of February of 2021, 89% of South Dakota was in some level of drought, with 50% being in severe drought or worse. As of August 2021, 100% of the state is facing abnormally dry conditions, while 92% of the state is experiencing moderate drought or worse, according to the U.S. Drought Monitor.

The governor of South Dakota declared a state of emergency in 2021 in response to the widespread drought conditions in the state. A recent news article indicated that all of South Dakota is suffering from drought conditions ranging from abnormally dry to extreme levels of drought.

The US Army Corps of Engineers estimate that the runoff amount for the year 2021 may be the 10th driest year since 1898, in the Upper Missouri River Basin, which constitutes the Missouri River water above Sioux City.

Mark Sweeney, a professor at the University of South Dakota, was recently quoted as saying, “Things like this should make us focus more on making sure we have plans in place for really severe droughts in this state so ultimately the economic impacts can be minimized to the best extent possible.”

The state has the legal authority to shut off water rights in times of emergencies. Historically the DENR, now known as the DANR, has issued orders to shut off junior surface water rights permits (based on a permit date or prior vested legal authority) in roughly 3 or 4 basins (A “basin” is “a natural or artificial land surface depression with or without perceptibly defined beds and banks to which surface runoff gravitates and collectively forms a flow of water continuously or intermittently in a definite direction.” Shut off orders have also been issued for irrigation rights. Most shut off orders direct water rights holders to stop using water are temporary. However, the current drought may very well result in more of this type of government action. From my experience I know that the staff of the DANR understands that this powerful ‘policing tool’ is not to be undertaken lightly. The DANR understands the importance of these water rights permits whether current, vested or otherwise legally created.

My objection is with the current legal process by which a shut off order should be issued, and under what fair processes such a decision can be made. The shut off procedure has never been considered by the state’s highest court. The current shut off procedure needs real change.

Due process rules and regulations of the state – which apply to other administrative contested matters – are not included in the South Dakota law which grants the chief engineer of the DANR the right to shut off a permit holder’s water rights. Current law states that the state’s chief engineer on his or her own, and without a hearing, may, after appropriate investigation, issue an order to shut off or limit a person or permit holder’s use of surface water or groundwater, or order them to plug or otherwise control a well. The current law is intended to protect those water rights of another user who has higher or earlier priority rights or to cause a user to discontinue the use of water to which that user has no legal right. The shut off law provides no rights to the user by way of advance notice and by way of providing the user with a description of the problem at hand. Nor does the law offer an opportunity to contest the ‘decision’ of the engineer or have a public hearing on the matter before the agency or before the state Water Management Board.

Courts in other jurisdictions have recognized that “once rights to use water are acquired, they become vested property rights. As such, they cannot be infringed by others or taken by governmental action without due process and just compensation.” At a minimum, the government must provide notice and opportunity for hearing appropriate to the nature of the action and reasonably calculated, under all the circumstances, to give parties notice of the proposed action and afford the water rights holder an opportunity to present arguments, objections, and facts. These safeguards should be placed in South Dakota law.

South Dakota Paralegal Association talk

Posted on: October 3rd, 2020
by David Ganje

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

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

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

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

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

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

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

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

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

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

davidganje@ganjelaw.com

The leviathan in the Missouri

Posted on: July 30th, 2018
by David Ganje

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

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

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

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

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

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

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