Court decision in Bakken Shale ups ante for fracking surface damages in split estate

North Dakota rivals Texas in their lax regulations and drilling friendly elected officials so it is a welcome surprise to learn that North Dakota federal district court judge Dan Hovland considered landowners’ interests in calculating damages in split estate situations.

I hope Texans and Texas courts are watching, particularly in the Barnett Shale where Devon Energy is notorious for handing out wimpy surface damage checks.

In this case Enron Oil & Gas (EOG), a big operator in the oily part of the Barnett and Eagle Ford Shale areas and another company known for undercutting damages to landowners, forced their operations on the land of Frankie and Kristin Kartch in Mountrail County. The Kartchs were paid offered the “standard” amount for surface damages. (I can hear the used-car-hard-sell that came with the check: “Sign the deal now and take the check or we take your land anyway and you get nothing.”)  The Kartches sued EOG for reasonable damages and their suit included the additional damages that come with having shale extraction processes on your land: nuisance, trespass, water contamination and etc.

You can read more about the case HERE where the author has picked out the following three important points.

One extremely important win in this case is the right to recover attorney fees and court costs.

“According to the statute, the determination of damages is to be made by negotiation between the parties. If the parties are not able to agree, the surface owner may sue for damages [citation omitted]. If the damages awarded by the court exceed the amount offered by the developer, the surface owner can collect costs and reasonable attorrneys’ fees. [citation omitted].”

Here is your reality check for the day, Dear Readers: We The People DO NOT have equal access to the courts. I know we are supposed to but–as I have recently learned–when you are up against a corporation with endless money for attorneys and legal fees and a blood lust to squelch all opposition, the average working man in American has no way to compete unless you find an attorney who cares about justice more than money. (There are more of these attorneys than you might think. You can thank the Koch brothers and other huge corporations for the negative rhetoric often spewed by conservative Texas toward attorneys.)

Another important win involves the basis for assessing damages. Enron Oil & Gas, of course, wants the damages to be “capped” on the fair market value of the land upon which the pad site sits and nothing else.

“A surface owner can also collect for “loss of agricultural production and income… lost use of and access to the surface owner’s land, and lost value of improvements caused by drilling operations.”  NDCC § 38-11.1-04{2005).  If the North Dakota Legislative Assembly had sought to cap the compensable damages under NDCC § 38-11.1-04, it could have easily done so. The Court finds, as a matter of law, that compensable damages under NDCC § 38-11.1-04 are not necessarily capped by the fair market value of the surface estate.”

The final point highlighted by the author is the right of the surface owner to elect annual installment payments for the damages. I can see how getting a lump sum payment would create a huge tax burden but considering the whole Ponziesque nature of the shale extraction business and the memories of Enron, this one gives me pause. =)

Unfortunately, the biggest damage to landowners who live with shale extraction–HEALTH EFFECTS–was not addressed in this case. We aren’t there yet. Remember Big Gas is just like Big Tobacco.

Way to go Frankie and Kristin Kartch!