Property rights lawsuit faces test in court Friday as energy companies intervene

Attorney Derrick Braaten asks a question June 11, 2024, in Bismarck during a hearing on the Summit Carbon Solutions project. Braaten also represents landowners in a lawsuit that challenges state laws related to carbon dioxide storage. (Kyle Martin/For the North Dakota Monitor)

A lawsuit brought by North Dakota landowners that challenges state laws related to underground carbon dioxide storage faces a crucial test this week.

A district judge in Bottineau will hear arguments Friday in a lawsuit filed against North Dakota by the Northwest Landowners Association, who say they’re working to protect the pore space of private landowners. Companies such as Summit Carbon Solutions are seeking to lease pore space, or the voids or cavities in underground rock formations, to permanently store CO2 captured from energy facilities.

Attorneys representing North Dakota and the landowner group have filed motions for summary judgment, in effect asking the district court judge to rule in their favor without going through a trial. 

Multiple energy companies with a financial interest in CO2 storage projects have intervened in the case. Minnkota Power argues in court documents that an adverse ruling in the case, combined with proposed environmental regulations, pose an “existential threat” to the continued operations of the Milton R. Young coal power plant north of Bismarck. 

The North Dakota Farm Bureau, meanwhile, is listed as a plaintiff and supports the landowner group’s arguments. 

The district court’s ruling is expected to be appealed to the North Dakota Supreme Court regardless of the result. 

‘Unconstitutional’

The Northwest Landowners Association alleges the two laws regulating use of pore space for underground storage in North Dakota, passed in 2009 and 2021, are unconstitutional. 

A key provision contained in both laws is being challenged by the group. That provision allows the North Dakota Industrial Commission to forcibly include the pore space of nonconsenting landowners in a proposed storage project if the owners of at least 60% of the project area have already consented. Nonconsenting landowners are guaranteed to be “equitably compensated,” as determined by the Industrial Commission. 

The North Dakota Constitution requires a property owner receive “just compensation,” as determined by a jury and precedent, if their private property is taken or damaged for public use.

The landowner group asserts the discrepancies between the law and the constitution — namely that the law does not require “just compensation” and has the Industrial Commission decide payment instead of a jury — make the laws and resulting permitting process unconstitutional. 

“This blatant attempt to bypass constitutional and other safeguards for private property is arbitrary,” the association stated in a court filing, later adding, “This finding is not a suitable replacement for just compensation and the safeguards guaranteed by the constitution of North Dakota.”

The state, as well as the intervening energy companies, are defending the laws and asking the court to grant summary judgment in their favor. 

The state and energy companies assert the process, known as amalgamation, is similar to the pooling and unitization of oil and gas resources. Both processes are necessary, the state argues, because “both exist as underground reservoirs that do not cleanly correspond with surface boundaries and are likely to have shared ownership by multiple individuals.”

“The State may facilitate development of a shared resource to protect the interests of all owners and the public at large, even if that means limiting some owners’ ability to use (or not use) the resource,” the state wrote in a court filing.

The oil and gas unitization process in North Dakota is handled by the North Dakota Industrial Commission.

The landowner group also alleges other parts of the law are unconstitutional, such as granting the North Dakota Industrial Commission the power to suspend the legal requirements for a CO2 storage permit for “good cause.”

This, according to the landowners, “allows the commission to essentially rewrite, ignore, or selectively apply the law in any situation based on its own determination of whether ‘good cause’ exists. This is a delegation of a non-delegable legislative power and even if it was a delegable power, it contains no reasonable guidelines for implementation.”

The lawsuit also challenges the constitutionality of separate laws allowing surveys and soil samples to be conducted on private property by entities which may have the authority to condemn. 

Derrick Braaten, an attorney representing the landowners, emphasized in an interview the organization does not oppose the energy industry and wants to find “solutions that allow everybody to move forward in a way that is fair and just.”

“We’re not trying to attack them or their industries. We’re not trying to attack projects,” Braaten said. “We’re trying to protect property rights.”

Financial stakes

Companies with a financial stake in the outcome that have intervened are Minnkota Power, Summit Carbon Solutions, as well as Basin Electric Cooperative and its subsidiary Dakota Gasification. 

The three intervenors have all applied for and in some cases received permits for CO2 storage projects that would involve using pore space from nonconsenting landowners.

Minnkota said in a court filing an adverse ruling would threaten the state’s energy industry and could prevent the company from proceeding with Project Tundra, a carbon capture and sequestration project to reduce CO2 emissions produced by the Milton R. Young coal. 

Minnkota Power has invested $90 million in developing Project Tundra and the Industrial Commission has granted the company three permits for underground storage facilities. Minnkota had said it would make a decision on whether to move forward with construction by mid-2024, but the company recently pushed that back to the end of year or later, The Bismarck Tribune reported.

Summit Carbon Solutions is seeking three storage permits for its $8 billion carbon capture and sequestration project. This project will gather CO2 emissions from ethanol plants in several states and transport the CO2 to North Dakota for permanent underground storage in Oliver and Mercer counties. At least 90% of landowners have voluntarily signed easements for use of their pore space for each of the storage sites. The Industrial Commission’s decision on the permits is expected in the next few months. 

Dakota Gasification, operator of the Great Plains Synfuels Plant near Beulah which produces synthetic natural gas, has also applied for and received a permit for underground CO2 storage using the laws contested in this case. The company is the only intervenor which has begun injecting CO2 underground; Department of Mineral Resources records show 439,000 tons of CO2 was injected from February through April, the most recent public data. 

What’s next

A trial is scheduled for September, though Braaten said there is broad agreement among the parties it will be unnecessary. The judge’s ruling could be issued anywhere from a month to a year after the hearing, Braaten said.

“We all agree this isn’t a factual fight,” Braaten said. “It’s a fight about what the law is.”

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