In Northwest Landowners Association v. State, No. 20210148, 2022 N.D. Lexis 152 (N.D. Aug. 4, 2022), the North Dakota Supreme Court held that portions of Senate Bill 2344 related to pore space violated the takings clauses of the North Dakota and United States constitutions.
In 2019, the North Dakota Legislative Assembly enacted S.B. 2344, which amended and reenacted sections to three existing statutes (N.D.C.C. §§ 38-08-25, 38-11.1-01, and 38-11.1-03) and created and enacted a new statutory section (N.D.C.C. § 47-31-09). The legislation was enacted to clarify the use of pore space.
In S.B. 2344, the Legislative Assembly defined pore space as “a cavity or void, whether natural or artificially created, in a subsurface sedimentary stratum,” and vested the surface owner with pore space ownership (N.D.C.C. §§ 47-31-02 and 03). Section 1 of S.B. 2344 added a subsection to N.D.C.C. § 38-08-25, which allowed an oil and gas operator to use subsurface pore space and denied the surface owner the right to exclude others or to demand compensation for the subsurface use. Section 2 of S.B. 2344 amended N.D.C.C. § 38-11.1-01 to supplement existing legislative findings and add an interpretative provision. Additionally, section 3 of S.B. 2344 amended and adopted a new definition of “land” to “exclude pore space” in the North Dakota Damage Compensation Act, with the result being that a mineral developer would not be required to compensate the surface owner for “lost land value, lost use of and access to the surface owner’s land, and lost value of improvements caused by drilling operations” (N.D.C.C. §§ 38-11.1-03 and 04). Lastly, section 4 of S.B. 2344 barred tort claims, including trespass and nuisance claims, for injection or migration of substances into pore space.
The Northwest Landowners Association sued the state, arguing that S.B. 2344 constitutes a taking because “it strips landowners of their right to possess and use the pore space within their lands and allows the State of North Dakota to directly redistribute that right to others without the consent of or compensation to the landowners.” The district court granted summary judgment in favor of the Northwest Landowners Association and concluded that S.B. 2344 constitutes a taking under both federal and state law because it takes landowners’ property without compensation for the benefit of private parties and also bars landowners from seeking tort remedies. The district court declared the entirety of S.B. 2344 invalid and issued an injunction preventing enforcement of the law.
The North Dakota Supreme Court agreed with the district court and affirmed that S.B. 2344 constitutes a per se taking because it would allow third-party oil and gas operators to physically invade a landowner’s property by injecting substances into the landowner’s pore space without the surface owner’s consent or compensation. Additionally, the court held that the newly-enacted definition of “land” was unconstitutional because it excludes “pore space.” And, finally, the court held that section 4 of S.B. 2344 barring tort claims for injection or migration of substances into pore space was unconstitutional. However, the court declined to find the entire bill invalid, and reversed the district court’s decision to the extent it declared the remainder of S.B. 2344 invalid. Thus, the bill’s definition of surface owner (“any person who holds record title to the surface estate on which a drilling operation occurs or is conducted”) and pore space (as defined above) remain valid.
By invalidating the most significant provisions of S.B. 2344, the North Dakota Supreme Court has cast uncertainty on rights to pore space for carbon capture use and sequestration (“CCUS”) in that state. Clear legislation of pore space can reduce some risk and uncertainty surrounding CCUS projects. For help navigating CCUS projects, please contact John Jacus, Katie Schroder, Katie Roux, or Kathleen Pritchard.