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Reply for Petition to Appeal

Posted by David Ganje - December 24th, 2020
Reply-to-Petition-for-Appeal-11-23-2020

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Circuit Court South Dakota Denies Motion

Posted by David Ganje - November 30th, 2020
49CIV20-000808_MEMORANDUM-DECISION

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Hostler vs Davison Cty Drainage Commissioner – Final Judgement

Posted by David Ganje - November 12th, 2020
17CIV20-000087_FINDINGS-OF-FACT-CERTIFICATION-FOR-FINAL-JUDGMENT-CONCLUSIONS-OF-LAW-AND-ORDER

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How Can I Turnaround from Covid-19?

Posted by David Ganje - October 30th, 2020

In this piece I discuss legal problems the business and ag world now face. I have seen this rodeo before. I have ridden the bronco. It hurts when you fall. (I prefer falling off of a motorcycle — the drop is less severe).

Don’t kid yourself. Don’t act like the coronavirus effect on the region’s economy is something that will just pass. Yes, it will pass. But it will take a damn long time to pass. Further, this will be a depression, and one not known by history because of the intricate modern phenomenon of government regulations which are indelibly integrated into every aspect of the business and agricultural world.

Those of you old enough will remember how long it took to get out of the 1980s ag recession. I have seen and worked in two recessions in my career — and this one is bigger and quite distinct from either of those. Start now to plan. Start now to deal with the complicated financial problems in the ag and ranch world. They are here.

A modern economy is not simple. It is an admixture of market stupidity, unresponsive government programs, bad banking regulations and management, and overall misjudgments by most everyone. Government won’t bail out the problem. Government might help some, but it is not the remedy. Government can’t foresee, can’t plan, can’t address and can’t correctly manage.

I know, I have also worked for government.

So let’s start our review. Consider that when I use the term business it means those in business whether ranchers, farmers, suppliers, service providers, banks and financial institutions. All of whom I have represented in my career. When I taught bankruptcy law, I used a medical analogy: I told the young legal scholars that a bankruptcy filing is akin to surgery. Surgery should always be treated as the last option.

In the medical field, a reasonable first option is an antibiotic. Here, the antibiotic is a “workout” or a “turnaround,” each of which are bankruptcy alternatives. These alternatives have value and should be attempted by both creditors and debtors as a viable option, not just a throwaway line. I have successfully represented debtors and creditors in turnarounds and workouts. Resolving “stressed-business” issues out of court makes sense when the option is there.

Financial restructuring and workouts involve working closely with a business’s creditors to create, or “workout” plan (often a written contract) to restructure business debts while allowing the business to remain viable. This process allows the business entity to negotiate its debts in a way that retains profitability without involving the court system. This is not as difficult as it might sound — creditors often share the same objective of returning a financially stressed business to good financial health in order to ensure their debts are paid.

A “turnaround” is a separate process from a workout. It may also use the availability of restructuring and workouts, but a turnaround has several other components. A turnaround will generally restructure operational aspects of the business. This may be the solution when the problem lies deeper in the company than lack of cash flow. Where a creditor will not restructure the debts owed to it, a turnaround will be utilized to find alternative financing or new ownership.

Another possibility in a turnaround is the sale of ownership or a portion of ownership, which can provide liquidity at the expense of a change of control of the business.

If the company’s goal is to continue in business, particularly under current ownership, then a creditor or a lender workout should be considered. If new ownership, or a sale of the business in whole or in part, is an acceptable outcome so long as the business is preserved as a going concern, a turnaround can be considered as well.

The process of financial restructuring and negotiating a workout with business creditors is something that should be considered to avoid the expenses and bureaucracy related to a bankruptcy proceeding. The Chapter 11 bankruptcy reorganization process is expensive and time-consuming. The goal of business turnarounds or financial restructuring is to provide a cost effective approach by way of a ‘non judicial/non bankruptcy’ business reorganization, to restructure business debts.

Courtship and finances have something in common: timing is everything. When a business is in a stressed situation, neither the business nor its creditors should go in stand-by mode. Negotiations should begin immediately. In both the workout and turnaround, all parties must agree to the terms; both are matters of serious negotiation to be done with all deliberate speed.

Bankruptcy proceedings are not the only way to save a business — sometimes a well-prescribed antibiotic can halt the damage and let the healing begin.

David L Ganje
Ganje Law Offices
Web:
lexenergy.net

605 385 0330

davidganje@ganjelaw.com

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South Dakota Paralegal Association talk

Posted by David Ganje - October 3rd, 2020

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

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Battle Over Drainage Permit Heats Up

Posted by David Ganje - September 16th, 2020

Mount Vernon farmer files second lawsuit to stop drainage project, while first permit could go to South Dakota’s high court

Written By: Marcus Traxler | Sep 14th 2020 – 6pm.

The matters of a Davison County drainage permit have become more entangled in the court system, with the results of the first decision being appealed to the South Dakota Supreme Court and a second permit for the same landowner drawing a new lawsuit.

John Millan filed a second permit for a drainage permit in Beulah Township on Aug. 6, which was shortly after his first permit was voided by a First Circuit Court ruling. That permit has drawn a second lawsuit from neighbor Kenneth Hostler, who filed a new suit on Aug. 31 against Millan and Davison County asking for a permanent injunction and declaratory judgment to void the new permit.

In the first court matter over the drainage permit that was initially approved in March, Judge Patrick Smith sided Hostler, writing in his decision that Millan’s initial application was missing key information in order for the Davison County Drainage Commission to make a decision. Millan and the county have appealed the first decision to the South Dakota Supreme Court, according to court documents filed Sept. 4.

In the appeal, Millan’s attorney, Gary Lestico, of the Rinke Noonan law firm in St. Cloud, Minnesota, claims among other items, that the trial court improperly considered matters outside of applicable South Dakota state law for permissible drainage of water and had erred in deciding that Millan didn’t meet his burden of proof in the permit application and erred deciding that the Davison County Drainage Commission had abused its discretion in initially granting the permit in March.

When Millan applied for another permit in early August, he sought administrative approval through Davison County Planning and Zoning Administrator Jeff Bathke, who oversees the county’s drainage processes. Bathke approved the permit on Aug. 10.

Drainage permits in Davison County can be approved by the administrator without going to the county’s Drainage Commission if they meet specific criteria. That criteria includes drainage projects that involve the county’s major creeks and rivers, such as Firesteel Creek, Enemy Creek, the James River or Dry Run Creek. The criteria also allows for approval if signed waivers are received for upstream landowners within a half-mile, downstream landowners within 1 mile and landowners within a quarter-mile of the center of the drain area. Six signed waivers, including one from Millan, were included with the permit, and based on the county’s criteria and mapping, Hostler was not a landowner who had to sign a waiver to allow the permit to proceed.

In his most recently filed lawsuit, Hostler alleges the new project application was “illegally approved.” He says the project will drain water onto his property in southeast corner of Section 19 in Beulah Township, which is located immediately to the north of Section 30, where Millan’s drainage project is planned in the southern half of the section.

“The method and place for discharging surface waters onto Plaintiff’s land in the new project is the same method and place for discharging surface waters onto Plaintiff’s land under a drainage permit voided by the Circuit Court in related litigation,” wrote Hostler’s attorney, David Ganje, of Sun City, Arizona.

The land in question is about 5 miles east of Mount Vernon and about 8 miles west of Mitchell near Interstate 90. Millan’s permit calls for 157,277 feet of drainage tile on his land, draining 320 acres of property, with the water eventually draining into Dry Run Creek.

The Davison County Commissioners decided earlier this month to retain James Davies, of Alexandria, as the county’s attorney in the matter due to conflicts involving Davison County’s staff attorneys.

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Dewey Burdock: Will South Dakota relinquish its responsibility?

Posted by David Ganje - August 24th, 2020

Powertech (USA), Inc., a wholly owned subsidiary of Azarga Uranium Corp., is a uranium mining company with pending applications to several state and federal boards and agencies for the development of an in situ uranium mine operation in Custer and Fall River Counties. This project, known commonly as the Dewey Burdock project, would be the most significant mining operation in the state in the last twenty years.  The project is an in situ uranium mining operation which would use local groundwater aquifers for uranium extraction, and for the subsequent disposal of process-related liquid waste. 


The mining project has been in the application stage since 2009. No final mining authorization has been granted by the various government agencies with jurisdiction over licensing, mining and water permits.  Important issues remain outstanding and undecided.  The wheels of justice, it is said, grind slowly but grind exceedingly fine.  Let us see.

Some of the government agencies with authority to issue major regulatory permit approvals necessary for this project include the Nuclear Regulatory Commission,  the Environmental Protection Agency, the Bureau of Land Management, the SD DENR,  the SD Board of Minerals and Environment, and the SD Water Management Board.  In this opinion piece I limit my comments to only part of this complicated dance of the multitudes.  This piece discusses state protection of water sources.  I treated financial and decommissioning issues and background questions regarding water resources in other opinion pieces.

When several agencies are involved in approval of a single project, a board might relinquish its responsibilities by narrowly interpreting the scope of its authority or by deciding not to exercise authority as a matter of discretion.  Complex and fragmented multiple-agency oversight of a big project runs the risk of a board’s over-reliance on the authority or expertise of different government agencies.  This is a dangerous form of decision-making.  For South Dakota boards to defer their legal obligations on significant natural resource issues to other government agency’s inclinations is an ill-advised undertaking.  He who sups with the devil must bring a long spoon.

As a result of the fragmented multiple-agency oversight, I am concerned South Dakota’s boards may limit their existing and established authority.  It is an established principal that state laws which do not directly interfere with (read preempt) the operation of federal programs or federal laws continue to be valid and enforceable by the state.

In the Powertech uranium mining procedure the SD Board of Minerals and Environment stated it has a “limited jurisdictional role in this matter especially where the principle of “dual regulation” would prevent the Board from acting.”  Powertech has argued in favor of such Board deference to other non-state agencies.  Powertech asserted the Board should consider the EPA’s actions as strong evidence that the proposed project water use is beneficial and in the public interest; and also argued the NRC’s license to Powertech is “compelling evidence” that Powertech’s proposed use of state waters is beneficial and in the public interest.  Nevertheless, South Dakota boards are required by established state policy and by statute to conserve groundwaters of the state and maintain the quality of groundwaters for present and future beneficial uses through the prevention of pollution and the control of water degradation.  These are considerations within the clear jurisdiction of South Dakota, its agencies and boards.

Let us look at some steps taken, or not taken, to protect groundwater in the area of the project.  First consider these comments by staff members of the U S Geological Survey given in 2009 paper at an international uranium symposium, “To date, no remediation of an ISR [in situ uranium mining] operation in the United States has successfully returned the aquifer to baseline conditions.”

Regionally, near the project site, four principal aquifers are used as major sources of water supply.  Several permits for use of water are pending before different agencies.  Two requested water-rights-withdrawal permits are pending before state boards.  The two water permit applications request the right to withdraw 8,500 and 551 gallons per minute. The Powertech application indicates most of the water withdrawn will be continuously reinjected as part of the mining process.  Shouldn’t the water quality of reinjected water be tested before it is reinjected?  It is unclear how much water is to be reinjected.  Should not such requirements be included before granting a permit approval? 

In its June 2012 Water Permit Application, Powertech acknowledged there are no aquifer baseline tests completed by the applicant at the project site.  Powertech argued that pre-licensing monitoring wells are not permitted until after a license is issued.  However, the NRC Licensing Board in 2012 in a separate mining application ruled that wells intended to collect background data or for background aquifer testing are permissible and are not considered the construction phase of a project.  Why should water and mining permits be granted without the benefit of the results of such tests?  As the reader will learn, South Dakota also has the authority to require this type of baseline aquifer testing before a permit is considered or granted.

The DENR recommended approval of Powertech’s general mining permit to the SD Board of Minerals and Environment.  As a part of its recommendations and conditions the DENR suggests that in the event there is a violation of ‘water quality standards’ Powertech should then be required to develop and submit a site-specific mitigation plan.  A contingency mitigation plan for possible water quality events should be a precondition to filing any large mining permit application. 

The filed Powertech water applications report that groundwater restoration or aquifer restoration will be performed under any NRC requirements.   Powertech will be required by its NRC license and federal regulations to restore groundwater quality to a) pre-operational baseline water quality, b) federal drinking water standards, or c) an alternate concentration limit approved by the NRC as protective of human health or the environment.  The NRC concluded, apparently without any baseline testing by Powertech on aquifers at the site, that the applicant’s proposed groundwater restoration methods will restore groundwater to ‘federal’ standards.  This is an indirect assurance concerning the protection of state waters.  Trusting too much to Big Brother invites one to become an agent of Big Brother.   At a minimum South Dakota should have requested baseline testing.  In addition, a legal mechanism known as an MOU (Memorandum of Understanding) allows a state such as South Dakota to take responsibility for regulation concerning groundwater protections. 

In a well-written legal brief by its attorneys, Powertech argued in 2013 that South Dakota does not have authority to regulate most aspects of uranium mining.  That position was not correct law then and is certainly in error today.  In 2019 the U S Supreme Court in a uranium mining case upheld a state mining law and ruled that federal law does not preempt state mining law.  Justice Gorsuch stated, “But Congress conspicuously chose to leave untouched the States’ historic authority over the regulation of mining activities on private lands within their borders.”  This places all the more focus on South Dakota to do the right thing. 

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

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Final Judgement Drainage Dispute

Posted by David Ganje - August 12th, 2020
17CIV20-000087_FINAL-JUDGMENT-ON-DECISION-BY-COURT.pdf-Hostler

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