Call Our Firm:   605.385.0330   |   701.355.6885

Commercial Transactions & Litigation, Environmental Law, Natural Resources Law, & Energy Law

Water and mineral rights workshop

Posted by David Ganje - May 30th, 2018

I was invited last week to speak at a workshop sponsored by the Capital Journal newspaper. The purpose of the workshop was to promote a better understanding of water rights and mineral rights in South Dakota. The Journal should be justly recognized for presenting these statewide issues to the public. More than a couple in the audience came forward afterward and asked me to thank the Capital Journal as the sponsor. Over the last few years the legislature has addressed some of the natural resource matters discussed in the workshop, but many issues remain.

The workshop audience consisted of farmers, water officials and professionals. The questions and comments were telling. A number of questions showed an understanding of some of the rules of the road on water rights and mineral interests. Yet a number of questions reflected a public laboring under ever present and always-circulating urban myths which compel us to do things we shouldn’t. Two subjects of note were discussed in the talk which were of particular interest to the audience based on several comments and follow-up questions.

One of the topics discussed was transferring gravel rights and mineral rights. I submitted that many transfers and sales I have observed often do not follow the proper procedure or use the correct language needed to make a good transfer. And the matter of reserving mineral rights reflects even more mistakes. I noted actual transactions in west river deals and east river deals. The standard sales contract provided by the South Dakota Real Estate Commission compounds the problem. The language in this standard agreement leaves the grantor at risk because mineral interests are not addressed. It’s one thing to be a free-trade state but when the state by its own recommended paperwork misleads the residents of the state it is quite a different matter. When one gives a warranty deed in South Dakota he is giving a ‘warranty’ of his ownership of the surface and all that lies below it. That’s a pretty powerful guarantee. Homework should be done before giving such a guarantee, but as I stated in the talk, it is not. 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. The audience by their responses in the workshop acknowledged this was a concern. Wyoming, Colorado and Montana have addressed the problem. South Dakota has not. 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 people who bought property thinking that they owned the rights to minerals 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 severance of mineral rights, Wyoming’s disclosure law allows a prospective purchaser to make a more informed decision when purchasing.

The second problem raised by the audience surprised me. I spent some time advocating the negotiation and compromise of water drainage disputes. These are the common neighbor versus neighbor as well as property owner versus township or county disputes that often occur. I was espousing Lincoln’s admonition to lawyers that it is a better thing to compromise than litigate whenever possible. I discussed water disputes and the use of mutual written easements. An easement is the right to use another property owner’s property for a specific purpose whether that be for a pipeline, for a right of way or for the drainage of surface waters. Another easement use might be granting a landlocked owner access to a public road. There are two general advantages to entering into an easement. The first is the property remains with the owner – title is not transferred. The second is a bundle of rights that together I call time, purpose and boundaries. Of these, ‘time’ was a surprise to me. The audience was misinformed on the question of a time limit on easements. The vast majority of mutual easements in South Dakota may be limited in time. This issue is overlooked or perhaps glossed over in the course of negotiating an easement. Surface drainage problems are a natural reason for considering the use of an easement. The upper landowner may be able to enter into a drainage easement with the lower landowner if the upper owner’s activity does not fall within the specific limits South Dakota has placed on surface drainage acts. Because the placement of a time limit is not well known, a fewer number of people may consider the use of a mutual easement on a drainage issue. To the point, even with a longer term problem such as surface drainage, a lower landowner need not become married to an agreement to allow drainage over his propery. He can place time limits within the terms and conditions of a mutual easement. A time limit will allow the parties to each review the fairness of the deal 3 or 5 years down the road. This makes it a short term courtship rather than a long term marriage. Nevertheless, by the comments in the audience it was apparent that not all knew such limits could be placed in an easement.

Such information shows the value and purpose of a workshop. I appreciated the opportunity to speak on these subjects. The Capital Journal water and mineral rights workshop was an excellent resource for the community and its readers.


Ganje Seminar in Pierre – May 18

Posted by David Ganje - May 23rd, 2018

David Ganje, a South Dakota attorney who specializes in natural resources law led a seminar on mineral and water rights in Pierre May, 18.


Two proposals for managing water sources

Posted by David Ganje - May 14th, 2018

The state Water Management Board (WMB) was created in 1955. The legislature gave authority to the WMB with supervision of the waters of the state, including measurement, appropriation, and distribution of waters. The WMB consists of seven members appointed by the governor.

In this column I argue that the exercise of good water management choices is absent on the two subjects I discuss. I do not challenge the professionalism or commitment of the staff of the Department of Environment and Natural Resources (DENR). Nor do I criticize the good faith of the WMB whose members consist of volunteer citizens of the state appointed with the legal authority to decide who should have and who should be denied a permit to appropriate the waters of the state. I discuss two issues under which the WMB is given leadership with the assistance of the DENR.

Waters of the state are held in trust for the benefit of all the residents of the state, making members of the WMB legal trustees acting on behalf of the citizens of the state. Board members are charged with protecting and managing the state’s water supply for both surface and groundwater.

The following are the two issues reviewed in this opinion piece as well as my proposals. On the first issue the Board should require a permit applicant’s disclosure of past violations or bad acts. On the second issue the Board should require that large-quantity water use applicants provide a report showing that a permit, if granted, will not harm the recharge of the particular aquifer that is to be permitted.

The first problem: Water use permit applications do not require disclosure of past bad acts or of an applicant’s business relationship with other operations that may have had violations of the law. A properly drafted “bad actor” rule would allow the WMB to deny permits to applicants with a record of law violations or who have had poor compliance with other agency directives or rules. The state DENR enforces a law in another area of permitting (concentrated animal feedlot operations, with the acronym CAFO). Under this law an applicant must disclose material information on their permit paperwork. Bad actors cannot hide when making a CAFO permit application. However the WMB has no such rule for water permit applications. It should. The WMB has rulemaking authority to do this.

The second problem is one I have addressed before. It is not new advice. However your humble practitioner’s prior recommendation has fallen on deaf ears. A particular South Dakota statute requires the WMB to determine that the average estimated withdrawal of groundwater by an applicant does not exceed the average estimated annual recharge of water in the aquifer to be used. A circuit court a few years ago ruled that using historical data from existing state observation wells does not fulfill the requirements of the statute. In that case the court said that the statute “requires not only analyzing existing and historic drawdown and recharge to the [permitted] aquifer, but also how the applicant’s [requested] drawdowns will affect the recharge to the aquifer.” The judge ruled that the WMB’s findings which show a draw of 720,000 gallons per day failed to take into account what affect the use of 720,000 gallons per day would have on the particular aquifer. The court noted that a recharge study of the subject aquifer was not included in the permit application. The court reversed the approval of the permit given by the WMB.

And just this year the WMB approved a large-quantity groundwater permit without requiring a recharge study. Such a study should take into account what effect the applicant’s use has on the particular aquifer. The approved applicant in the recent matter would be able use up to 30,000 gallons per hour when pumping. In granting the permit the WMB relied on state observation wells and historical data without a specific report showing what the recharge would be on the identified water source. I previously recommended that a water permit applicant, who will use large quantities of water, provide an aquifer recharge study as a required part of the application process. For a sustainable system the amount of water withdrawn from a particular aquifer should be balanced with the amount of water returned (recharged) by nature to that particular aquifer. The state’s existing water use policy which forbids the “mining” of the public’s water would be better served by requiring this specific water information. The requirement for a recharge study does not exist in the state’s current water code or in WMB rules.

The WMB, as an agent of the people, has general supervision of the waters of the state which includes measurement, appropriation and distribution. The duty of an agent is to guide the events in his control to a good result. The WMB is empowered with authority to establish procedures and criteria for issuing water permits. I have tendered two proposals which should be adopted by the WMB.

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


Well-known Attorney David Ganje to speak at land and water rights seminar in Pierre

Posted by David Ganje - April 26th, 2018

Well-known natural resources Attorney David Ganje will conduct a seminar on mineral rights and water rights in Pierre on May 18th. The seminar is sponsored by the Capital Journal.

Ganje was born and raised in Aberdeen, South Dakota, and handles matters throughout South Dakota related to mineral law, environmental law, oil and gas law, energy law and water rights/water law in his natural resources practice.

Capital Journal Publisher John Clark said Ganje has been writing regular columns in the Journal and other statewide publications. Topics include South Dakota land and water rights, non-meandering waters (including hunting and fishing restrictions), mineral rights, natural resources and property issues. “Now our readers will have a chance to meet David and ask him firsthand about some of these timely topics,” said Clark. “This is a great opportunity to draw upon his wealth of knowledge about issues that affect our livelihoods and quality of life here in South Dakota,” he added.

Ganje graduated from Central High School in Aberdeen and received both his BA and JD degrees from the University of South Dakota. His practice includes representation before local and federal regulatory bodies. In his commercial law and commercial litigation practice, Ganje represents businesses and individuals in trans-actional and business litigation matters as well as serving as local counsel for individuals and institutions.

Ganje has held many teaching positions including faculty of Law Guest Lecturer, Masaryk University, Czech Republic, former Adjunct Professor of Law, Albany Law School, Union University, former Adjunct Visiting Professor, Augsburg University School of Law, Augsburg, Germany, former Adjunct Faculty Member, School of Business and Industry, Northern State University, Aberdeen.

He is a former arbitrator, Commodity Futures Trading Commission, former United States Department of Justice Chapter 7 bankruptcy trustee, consultant to the South Dakota Real Estate Commission as well as the Illinois Section American Water Works Association.

The seminar will be held in the amphitheater 1 at the Ramkota Inn, 920 W. Sioux Ave., Pierre, from 1:00 p.m. until 4:00 p.m. Admission is $20 in advance or $25 at the door. Tickets are available at the Capital Journal. Phone 605-224-7301 for more information.


The problem with wind energy ordinances

Posted by David Ganje - April 12th, 2018

 

This opinion piece discusses wind turbine ordinances in South Dakota. I focus on local (county) ordinance writing and its hazards. I will not discuss other important related issues such as wind energy tax credits, the intricacy of wind easement agreements, state wind development policy or community and environmental risks. Those are left for another conversation. Like all natural resources wind energy is a viable source of energy, and of income. The development of this energy source has ebbed and flowed over the prior twenty years. Yet looking at it in 2018, the state is quickly becoming a preferred site for wind farms.

Why examine ordinance writing? Because counties should abandon their seeming indifference and treat wind energy development with as much serious attention as that given to writing oil and gas production rules or water law. The wind energy economy is here to stay. Under South Dakota law counties have a significant say-so in wind turbine law. The advantage of this? Local leaders get to make local law. The disadvantage? While a good amount of state legislation is done without the benefit of clergy, even less clerical advice can be found in certain existing county ordinances. “Local lawmaking” does not get the attention the public and media give to a state legislative session.

Ordinances governing wind energy systems, which are to be developed within a county, have a wide ranging effect on the local geography and economy. Local participation in ordinance drafting is a great advantage of county lawmaking. This leaves an opportunity for county commissioners to make the public, its local residents, “partners” in this lawmaking. There should be little uncertainty in ordinance language, it should be transparent, and the end product should favor open public participation in wind farm applications.

In reviewing the hazards of ordinance drafting I will put on the table relevant Walworth County ordinance language governing wind energy systems. The problems discussed here are not unique to Walworth County and are found in several of the ordinances of other counties.

The relatively new Walworth ordinance declares that a decision to grant a wind energy systems permit is an administrative matter. It is not. The state supreme court in 2009 held that a conditional use permit application is quasi-judicial and is subject to due process of the law. The county must be palpably fair to all parties affected in any decision to grant an operating permit. Conditional use permits are exceptional as such permits might approve operations in areas where the regular zoning rules would not allow it.

South Dakota’s constitution prohibits the legislature from writing private or special laws affecting only one party. In effect, granting a single wind farm developer approval of a particular project is akin to the county writing a private or special law. Because of this unique power courts have said that applications for such a permit must be subject to due process of the law with all its safeguards.

Due process requires a.) reasonable notice and b.) an opportunity to be heard at a meaningful time and in a meaningful manner. The Walworth ordinance fails on both counts. This ordinance should be rewritten.

a.) Reasonable notice. A public hearing is required on a Walworth County wind energy permit application. But inadequate public notice is provided under the current ordinance. The ordinance states that notice of a hearing shall be published once ten days prior to a hearing on the application in a newspaper in circulation in the affected area. Wind projects are often large in scope and are always important to a community. Is 10 days advance notice by newspaper sufficient for such an undertaking? The state supreme court recently ruled that a ten day advance notice would be sufficient on the facts of the case. But the court stated that the record in the case showed that the complaining party had not raised any concerns about the notice at the application hearing, and did not object to the notice process. The complaining party, according to the court, had not produced any evidence supporting its argument. It would be a fool’s errand to think this case was firm grounds for keeping a ‘ten day notice’ in a county’s ordinance language. Such one-time short notice by publication is an unreliable method of giving notice to the public. The U S Supreme Court has said, “The notice must be of such nature as reasonably to convey the required information, and it must afford a reasonable time for those interested to make their appearance.”

b.) The hearing. The process should provide an opportunity to be heard at a meaningful time and in a meaningful manner. The Walworth ordinance does not furnish sufficient advance notice nor does it require sufficient information for an interested party to prepare for such a hearing. The ordinance requires the applicant to advise adjacent property owners in writing of the “conditional use permit request.” The ordinance gives the applicant no guidance or directives as to ‘what’ information the applicant should give to the adjacent property owners. The ordinance does not require a description of the location of the project, nor does it require that the applicant provide property owners with a copy of the written application. At a minimum an ordinance should require that a notice to adjacent property owners refer them to a filed written application available at the county auditor’s office, include a copy of the application for the review by the affected property owners or cite to a link on the county website where the application is uploaded in full. Each of these is rather simple to do and not expensive for an applicant. This would allow interested parties to be meaningfully informed before the permit application hearing occurs.

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


Be wary of future manure pipeline legislation

Posted by David Ganje - April 4th, 2018

In this opinion piece I discuss the legislature’s animal waste pipeline bill.  The bill as written was untouched by human thought.  During my short-lived career as a juvenile delinquent in Aberdeen my father had more than one occasion to tell me, “David we are seriously disappointed in you.”  My dad was not familiar, one should assume, with the work of the South Dakota legislature.  Otherwise he might have correctly used this reprimand to describe the legislature’s best law-drafting work.

When in high school I did not do my homework.  The excuse was that I was not writing the laws of the state.  The legislature (or the various special interests that influence them) write the laws of the state.  With HB 1184 we have a case of no one doing his or her homework. The bill was about as substantive as a cheap 3.2 beer one might purchase at one of the old bars in Aberdeen.

HB 1184 was fortunately killed in committee.  Be assured however another animal waste pipeline bill will return in the next legislative session dressed in different garb.  One legislator has publically stated he will craft another bill with the same goal.  If history is a guide, I suggest the promised new animal waste pipeline bill will have a good number of the same failings as the killed bill.

Label me naïve.  But I shall never cease to be amazed how quickly property rights are cast into the dust bin of irrelevance when the American dollar makes its appearance.  South Dakota’s economy needs livestock production.  It is not the nature of CAFOS that is discussed in this piece.  It is rather the extent to which legislators and others will go to tip the scales in favor of CAFO operations while disregarding both private property rights and the environmental impact of waste pipelines.

In the bill pipelines would be allowed on or under a road right-of-way which property is often private property.  A property owner’s land may be taken, under proper circumstances, by the government for county or township purposes to make a road.  When these rights-of-way are created other supplemental public rights may arise such as the right to hunt or fish on the right of way, but the property itself is still owned by the property owner.  Creating a right-of-way does not take away the abutting owner’s title to the land.  He pays taxes on that land, can hay it and so forth.  This continued ownership is significant enough to be secured by the state constitution which provides that title to land taken for highways remains with the landowner. SD Const Art VI, § 13.  Yet the bill would have a neighbor’s property available as a ‘public highway’ for another neighbor’s private business purposes all without compensation.  Confined animal feedlot operations are not a public utility.  A legislature should not convert a private business without any public benefit into a pseudo public utility.

What should interested parties look for in a future iteration of the animal waste pipeline bill?  Let me further elaborate by looking at the bill that was not approved.

1.    The language of the bill is short and incorporates itself by reference to another set of South Dakota laws.  This is what I call a piggybacking law.  The bill piggybacks onto the “UTILITY LINES ALONG AND ACROSS HIGHWAYS” law.  This utility lines law is intended to apply to public utilities – not to apply to for-profit, private CAFOs.  The bill would have allowed for condemnation proceedings without following the condemnation rules.

2.    The “UTILITY LINES ALONG AND ACROSS HIGHWAYS” law does not provide by any stretch of the imagination a legal roadmap for overseeing aboveground or underground animal waste pipelines.  This utility law is intended for use by electric utilities, telephone companies and the like.  By way of illustration the law requires that any rule passed per its terms must comply with ‘applicable National Electrical Safety Code standards.’  What in the world does that have to do with overseeing animal waste pipelines?  It should further be noted that any violation of this existing utility law is nothing more than a ‘petty offense.’

3.    How can a private for-profit CAFO meet the definition of a public utility as described by the South Dakota Supreme Court?:  A public utility is, “Any agency, instrumentality, business industry or service which is used or conducted in such manner as to affect the community at large, that is which is not limited or restricted to any particular class of the community.”

4.    The law to which the bill piggybacks has never been challenged in court.  It should be.  It is unconstitutional. The South Dakota Supreme Court has previously ruled that a road, irrigation pipeline and electric cable laid across private property is a trespass because the operator failed to follow statutory procedures to acquire its easement. The Court said the action by the operator constituted a taking of private property without due process of law or just compensation.  U.S. Const. amend. XIV, § 1; S.D. Const. art. VI, §§ 2, and 13.

5.    Will new animal waste pipeline legislation address the environmental impacts of an operating pipeline?  The bill did not.  Why should environmental impacts be considered?  For starters, a neighbor’s private property includes the land, the air above it and the earth below.  Consider the fact that CAFOs often carry a commercial general liability policy.  But since 1970 such policies do not include pollution or environmental spill coverage.  For a discussion on the failures to properly insure for pollution events see:   http://www.lexenergy.net/landfill-liability-re-contamination/    Without question an operator whose waste pipeline leaked damaging material onto another property owner’s land could be liable under the law of trespass or the law of nuisance. I submit nevertheless that if a county commission is going to grant by law a special business easement over another’s private property there should be environmental safeguards.  Should not the statute require the maintenance of environmental pollution insurance? While there will be some unhappy clients to learn this — almost all CAFOs are uninsured for pollution losses.


Dispelling the myth that South Dakota is a private property state

Posted by David Ganje - March 1st, 2018

The legislature is considering a pending animal waste pipeline bill which gives business interests the right to apply under existing statutes to create private animal waste pipelines over other landowner’s private property along rights of way. Concerning property rights the SD Supreme Court has held, “It is universally recognized that an owner of land abutting on a conventional street or highway has certain private rights in the street or highway distinct from that of the general public. . . Right of access is one of these private property rights which cannot be taken for public use or materially impaired without compensation. . . This has long been the settled law of this state.” This new 2018 bill (HB 1184) allows for animal waste pipelines by piggy-backing animal waste pipeline authorization into existing law. These existing statutes give county commissions the authority to take private property for use by telephone companies as well as electrical power companies or municipalities in the course of using and distributing electrical power and telephone services. These statutes have a “public use” basis to their existence. The pending bill specifically allows for the, “laying and construction of force mains to dispose of animal waste.”

The bill is an advocacy piece granting for-profit businesses the use of public rights-of-way for the purpose of transporting waste over another landowner’s property. In the world of business such transportation expenses are accepted as the costs of doing business, and are usually included in an operation’s business plan and cost projections.

The legislature’s problem with this new bill is that public rights-of-way are often on private property. By way of illustration, a property owner’s land may be taken by the government for highway and road purposes. When these rights-of-way are created other supplemental rights may arise such as the right to hunt or fish on the right of way, but the property itself is still owned by the property owner.

Creating a right-of-way does not however take away the owner’s title to the land. This continued ownership is significant enough to be secured by the state constitution which provides that title to land taken for highways remains with the landowner. (SD Const Art VI, § 13.) Yet this bill would have a neighbor’s property available as a ‘public highway’ for another neighbor’s business purposes all without compensation. How the can this bill be considered a property rights law? It cannot. Confined animal feedlot operations are not a public utility. A legislature should not by fiat convert a private business or enterprise into a pseudo public utility.

In 2006 the South Dakota legislature became so concerned about misuse by government agencies on the issue of taking property for private use that it created a new law which holds that no county, municipality, or housing and redevelopment commission may acquire private property by use of eminent domain for transfer to any private person, nongovernmental entity, or other public-private business entity. The legislature in passing its general condemnation and eminent domain laws also restricts it to the taking or damaging of private property for public use.

For such a disposal of animal waste bill to be constitutional it should either provide for compensation to a landowner for the use of private property, or the legislature should require a finding that a private landowner’s property rights may be infringed in order to preserve the general public welfare (not private welfare.) The bill provides for no compensation and provides for no direction that the process make a finding that property rights may be imposed upon to preserve the general public welfare.

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


Non-meandered Waters – Chapter 2

Posted by David Ganje - January 31st, 2018

The non-meandered waters law of 2017 is about to slide into long-term legal acceptance by the state legislature. A bill is now pending before the 2018 legislature to extend the life of this new set of statutes.  The non-meandered water law passed last year at a special session of the legislature is an error-ladened compromise which, if continued without correction, will indeed slide into an indifferent acceptance by the state. The purpose of the law is to open up temporary bodies of water to public use.  The law has several good points and is an effort to fix a very unique set of challenges presented by Mother Nature.  It also has several clear problems.  Its provisions do not have a proper definition of the owner of land, creates different rules and rights for different landowners, does not allow for setbacks and does not provide for a quiet time for recreational use of the waters.  I outlined these and other problems in my open letter to the legislature:  http://www.capjournal.com/opinions/columnist/a-bill-of-particulars-for-the-legislature/article_ce1b72ee-563e-11e7-93d2-67b295d08c1a.html

This new water law created two sets of laws for non-meandered lakes. The rights, duties and liabilities of landowners under the law’s particularly designated non-meandered lakes are not the same as the rights, duties and liabilities as those of the landowners under all other non-meandered lakes.  Many of the non-meandered waters are over private land.  The management of non-meandered waters has a more significant, direct and personal impact on private landowners than do other public bodies of water in the state.  That is why the special legislative session gave authority in the law to the Game, Fish and Parks Commission to write rules to make everything ‘all right.’  The GFP Commission created new rules.  Those rules tell a certain class of landowner how he might petition the Commission to take his public property off the list of waters over which sportsmen might hunt and fish. The waters in one class are automatically, under the 2017 law, open to hunting and fishing.  The petition process allows for no real due process.  The rules were written poorly. The legislature should correct this. It should discharge its duty and not rush to a muddled consensus on important property rights issues.

In the Fall of 2017 several landowners in Marshall County wanted a 100 yard setback of public activity on the non-meandered water covering their property.  They were caught in a legal trap created by the legislature and enforced by GF&P.  What they sought was not unreasonable.  In fact the new law permits creating a setback for other non-meandered landowners who may do it on their own initiative. Nevertheless the water over the owner’s Marshall County land was a part of those water bodies the legislature declared to be ‘automatically’ open to public use and access.  The owners of other non-meandered waters in the state can put up access restrictive buoys and create a setback.  But these Marshall County landowners had to petition the GFP Commission before they might do this very act because their land fell within the ‘automatically open’ class of lakes.  Additionally these landowners had the legal burden of proof to show that what they wanted was justifiable.  Such a burden of proof is not required of other non-meandered landowners.  In November the Commission denied the request stating that the landowners had not met their burden of proof to show why such a setback should be granted.  Property rights are not an experiment.  This law should not be treated like an experiment in resource management. A system creating a second class of landowners who are required to meet a higher legal benchmark to do something their neighbors can already do, all on non-meandered bodies of water, should not be tolerated in a just system.

 

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