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SD weighs in on the dormant mineral laws

Posted by David Ganje - February 19th, 2019

A  recent South Dakota Supreme Court decision, Holsti v. Kimber, has shed light on two areas of the dormant mineral act, previously untouched by South Dakota’s highest court: first, what constitutes “use” and “nonuse” of a mineral interest in order for a claimant to keep ownership of the mineral interests, and second, who may exercise that “use” of mineral interests. Though other issues remain unanswered following the decision, the ruling suggests what a mineral interest owner may do to prevent lapse of one’s mineral interest and what a mineral interest owner may do to keep his interest in a mineral estate. This case is the first time the South Dakota Supreme Court has addressed head-on dormant mineral laws.

South Dakota defines a mineral interest as “any interest, in oil, gas, coal, clay, gravel, uranium, and all other minerals of any kind and nature, whether created by grant, assignment, exception, reservation, or otherwise, owned by a person other than the owner of the surface estate.” A mineral interest is considered abandoned if it is “unused” for 23 years (20 years in North Dakota), and a statement of claim is not recorded within that time. I call this the “Mineral Rights Grace Period.” Upon an abandonment, that is a non-use, the surface estate owner may succeed to the mineral interest of another claimant.

In order to maintain ownership of a mineral interest and avoid lapse, the mineral interest must be “used.” “Use” under the statute may include one of several statutorily defined “uses.” One such “use” relevant to this case is:

Any conveyance, valid lease, mortgage, assignment, order in an estate settlement proceeding, inheritance tax determination affidavit, termination of life estate affidavit, or any judgment or decree that makes specific reference to the mineral interest is recorded …

It is the burden of the mineral interest owner to maintain his interest. Upon lapse, the burden shifts to the surface estate owner (the landowner) to take steps to succeed in the mineral interest. In Holsti, the issue before the court was whether the mineral interest owners fulfilled their burden to maintain their interest in the mineral estate.

The facts of the case: in 1967, Severt Kvalhein conveyed real property to Holsti and recorded the deed. In the sale Kvalhein reserved 50 percent of the mineral rights for himself. Two years later, in 1969, Kvalhein died and his estate was devised to eight heirs, each heir taking a one-eighth interest in the minerals.

In 2007, Holsti conveyed his surface estate to his sons (“the Holstis”). In December 2011, the Holstis published a notice of lapse of mineral interest in the official county newspaper in according with the statutes to recover mineral interests. No one responded by recording a statement of claim asserting ownership of the mineral interest. The Holstis filed a quiet title action in May 2012 alleging abandonment of the mineral interest due to “nonuse.”

Kvalhein heirs answered and rejected the argument that the mineral interest was abandoned. In their defense, the heirs referenced several 1978 oil and gas leases, a 1994 statement of claim by one of the heirs, and two mineral deeds recorded by one of the heirs in 1998 and 2011.

The court looked to whether the Kvalheim heirs had a valid mineral interest at all. The trial court had decided they did not have a valid interest because no document was recorded evidencing transfer of the mineral interests to the heirs and reasoned that “use” of a mineral interest could only be done by a “record owner.” The Supreme Court rejected that reading of the statute and found that the heirs did not need a recorded written document conveying Kvalheim’s mineral interest to them. The court found the Kvalheim’s last will and testament, though unrecorded, was sufficient to convey the mineral interest to the heirs upon Kvalheim’s death.

Once the court determined the heirs had an interest in the mineral estate, it next turned to whether or not that interest had been abandoned due to “nonuse,” or if the heirs had satisfied “use” requirements. The circuit court found the 1978 oil and gas leases recorded by the heirs were insufficient because they did not make specific reference to the mineral deed recorded by Kvalheim in 1967. The Supreme Court disagreed. Because the language of the statute does not specifically use the words “record holder” or “original deed” the court held the only two requirements for a recorded oil and gas lease to satisfy “use” were: 1) a specific reference to the mineral interest in question and 2) recording in the county register of deeds office. Because the heirs’ oil and gas leases specifically referred to the legal description of the mineral and because the leases were recorded in the proper county’s register of deeds office, the Court found the leases to be sufficient as “use.” (In a similar 2013 case decided by the North Dakota Supreme Court, Estate of Christeson v. Gilstad, the court also found that a legal mineral interest owner by inheritance, but not a record owner, could record an oil and gas lease to preclude abandonment of the mineral interest).

By exercising their rights as mineral interest holders and recording oil and gas leases in 1978, the Kvalheim heirs reset the clock back to zero on the 23-year test for abandonment. Therefore, from the last recorded lease in 1978, the heirs had 23 years in which the surface estate owners could not claim abandonment. Before the expiration of the 23 years (1978-2001), two Kvalheim heirs recorded documents sufficient to toll the clock back to zero again: in 1994, one heir recorded a valid statement of claim; and in 1998 and 2011 two valid deeds were recorded conveying the mineral interest between heirs. The court found both the statement of claim and mineral deeds constituted a “use” under the law and precluded abandonment. The court did not decide and instead remanded to the circuit court an additional issue: whether these two “uses” by Kvalhein heirs were sufficient to preserve the other six heir’s mineral interests.

In their holding, the court has clarified who may be a mineral interest holder and what they must do to satisfy the burden of “using” their mineral estate. This clarification is to the benefit of mineral interest holders because non-record holders may still protect their interests (though, it would be better practice to record an interest). Interestingly, in this case the mineral interest claimants were able to keep their claims even though the claims came through a will that was never probated.

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

 

 

David L Ganje
Ganje Law Offices
Web:
lexenergy.net

605 385 0330

davidganje@ganjelaw.com


Proposed Campbell County Temporary Zoning ORDINANCE #2019-1

Posted by David Ganje - January 28th, 2019

To:  Campbell County Commissioners

 

From:  David L Ganje, attorney   //   605 385 0330

davidganje@ganjelaw.com

 

Re: Proposed Campbell County Temporary Zoning ORDINANCE #2019-1  (called in this memo the “proposed ordinance”) ((reference also made to the first memo I sent to the Commissioners, which is on file with Campbell County Auditor and is dated August 15th, 2018))

  1. PROPOSED ORDINANCE CONTAINS INAPPROPRIATE SUBJECTS. As a whole, the proposed ordinance was not reviewed by those in charge. Extensive subjects are included in the temporary ordinance which are not a part of a temporary, emergency ordinance under South Dakota law. The ordinance covers several subjects immaterial to wind energy development. Under state law, temporary ordinances are not to be comprehensive. A temporary zoning ordinance “regulates uses and related matters as constitutes the emergency.”[i] The immediate issue before the commission is the proposed phase 2 of a wind energy project. Yet the proposed ordinance addresses “Bed and Breakfast Establishments,” “Concentrated Animal Feeding Operations,” “Asphalt Mixing Plants,” and other non-wind farm matters. The proposed ordinance contains improper subjects “not necessary to protect the public health, safety, and public welfare.” This is particularly true because Campbell County does not yet have, and has not yet publicly considered or adopted, a written comprehensive zoning plan for the county. It is unusual for a law-drafter to put in more language than is necessary when writing a law. The proposed ordinance leaves me puzzled and concerned.  That which “constitutes an emergency” is not 99 pages of stuff dealing with bed and breakfasts, CAFOs, asphalt plants and the like.
  2. PROPOSED ORDINANCE IS A FULLY INTEGRATED ZONING ORDINANCE. The 99 page proposed ordinance cannot be legally adopted. It is a fully integrated planning and zoning ordinance — it even presents itself as such. It is not an emergency, temporary ordinance.  By way of illustration, the following language is found in the proposed ordinance, “WHEREAS, the Planning Commission and Board of County Commissioners has given due public notice to a hearing relating to zoning districts, regulations, and restrictions, and has held such public hearings.” Not only is this false—no such public hearings will be held before February 7th, 2019—these procedures are not for temporary zoning ordinances, they are for a fully integrated zoning ordinances, which are comprehensive. The word ‘temporary’ only shows up once in the whole ordinance — in its title. Just as problematic, the proposed ordinance asserts a comprehensive plan has been adopted by the county. This has not occurred. The county has not adopted a comprehensive plan. These statements and assertions are false. A fully integrated zoning ordinance cannot be enacted under the state’s temporary zoning statute.
  3. THE COMMISSION CANNOT ADOPT THE PROPOSED ORDINANCE. Because the proposed ordinance contains subjects unrelated to an emergency and holds itself out to be a fully integrated zoning ordinance, it is not a “temporary zoning ordinance.” The county did not follow lawful procedures for ordinance adoption. SDLC Chapter 11-2 requires two separate and publicly noticed meetings for a county to enact a general zoning ordinance that is not temporary.  First, after public notice, “[t]he planning commission shall hold at least one public hearing on the … zoning ordinance [and] … submit its recommendation to the board.”[ii] Second, “[a]fter receiving the recommendation of the planning commission[,] the board shall hold at least one public hearing on the … zoning ordinance[.]”[iii] These two provisions require at a minimum two public meetings for zoning ordinance adoption.  Without correct content and procedures an ordinance is invalid, and it may be challenged.[iv]
  4. ONLY THE PHASE 2 PROJECT DEVELOPER WAS CONSULTED ON PROPOSED ORDINANCE. It is inappropriate that the commissioners held no public meetings or public working meetings with residents on the proposed ordinance yet consulted with a project developer (sometimes called an operator or facility owner). On January 18th, a representative of the county, its zoning expert, told me the Campbell County Commissioners sought the advice of c­­ounty residents, the county state’s attorney, and the developer for the phase 2 wind farm project on the ordinance. My clients are not aware of any county resident that was approached by the commissioners. I know I was not approached by the commissioners, even though I submitted for my clients an extensive memo that addressed the ordinance last August. I am concerned about a conflict of interest for commissioners should a wind farm developer later seek a permit from the same county officials, some of whom may have worked with the developer in the writing of the very same proposed ordinance.
  5. FAILURE IN ORDINANCE WRITING PROCESS — NO PUBLIC ADVICE. On the subject of a new wind ordinance, in the August memo referenced above, I asked the commission not to do everything at the last minute: “Campbell County in July outsourced to a consulting agency the preparation of a wind farm zoning ordinance. I understand the county wishes to adopt an emergency and temporary ordinance. While commissioners will be the ones to formally adopt any ordinance after normal county public notice procedures, it is respectfully submitted that the process would be well served by requiring that the consultants themselves seek public input from landowners and residents at the early drafting stage, rather than wait until final ordinance readings.” In this memo, I also asked the commission to make efforts to educate the public early in the process: “I respectfully suggest the commission regard in a comprehensive manner, and help the public understand, any proposed ordinance as well as related land use issues …. Uncertainty… often leads to controversy.” The recent 99 page proposed ordinance was just sprung on the public. Why weren’t there any commission work sessions open to the public for a committee or the commission to discuss the ordinance terms? Why didn’t the county’s hired expert hold any public listening sessions? In August of 2018, I invited the commissioners to contact me. Neither I nor my clients heard from them. Neither I nor my clients heard from any special committee members the commissioners appointed either. Finally, on January 16th, 2019, the commission issued a 99 page proposed ordinance and—at the same time—set one public hearing for it. Interested residents and landowners experienced radio silence concerning the language of a proposed ordinance from July 2018 until the proposed ordinance was filed and presented to the public for the first time on January 16th, 2019. While the commission may argue it is acceptable to hold only one public meeting at the end of a serious lawmaking process, I observe here a disregard by the county for any meaningful participation in the lawmaking process by interested county residents.
  6. PROPOSED ORDINANCE IS 99 PAGES. We have a handsome number of legal issues in the proposed ordinance. The commission should nevertheless please understand I was not hired to write an ordinance. Please further understand it is not my charge to either rewrite the proposed ordinance or to critique the whole 99 pages. Therefore, I will, wherever possible, only address the current emergency zoning issue at hand, which means the proposed ordinance’s language and terms related to wind energy. In addressing the various legal issues the commission should please recall that an emergency and temporary ordinance should “protect the public health, safety, and public welfare.”
  7. SETBACK PROVISIONS IN PROPOSED ORDINANCE ARE INADEQUATE. We start with paragraph 5.24.03.2. of the proposed ordinance, entitled “setbacks.” The proposed language provides for a greater setback from a town than it does from a rural residence. That is unsupportable – a home is the same wherever a home is.[v] Further, a relevant portion of the proposed ordinance states, “Distance from existing off-site residences, shall be at least one thousand (3,960) feet.” The numbers (3,960) do not reflect the stated distance (one thousand feet). The preceding quoted language is vague, void, and not enforceable. Equally as important, the suggested setback distances in the proposed ordinance are inadequate. I submit the correct distance from off-site residences in the proposed ordinance should be “one and a half (1 ½) miles.” A distance of a mile or more is found in South Dakota[vi] and in other jurisdictions[vii]. “If there is a consensus among independent authorities, it is for more distant setbacks, measured in miles. The same pattern is shown in jurisdictions that have taken the time to research the topic and reach their own independent conclusions.[viii] The proposed ordinance only protects “existing” off-site residences and measures this setback from a “primary building.” The word “existing” causes ambiguity in the proposed ordinance (i.e., how do we know if a residence is “existing,” who determines if a residence is “existing,” etc.?) It also prejudices future non-commercial construction and development of rural private property. What if my clients, or any private citizen, wants to construct a residence on a property after the ordinance is adopted? Future construction is not protected by the current ordinance terms.
    Sub-paragraph 5.24.03.2.b. should read: “Distance from off-site residences, business, churches, and buildings or structures, shall be at least one and one-half (1 ½) miles. Distance to be measured from the wall line of the neighboring principal buildings to the base of the WES turbine.”
  1. PROPOSED ORDINANCE DOES NOT PROTECT ROADS. County road haul agreements are contracts between the county and a developer. These standard agreements REQUIRE permitted wind farm developers or those completing other county permitted activities to restore public roads back to their original condition.[ix] Written road haul agreements are useful and are quite common throughout the state. The boilerplate (one might call it form language) Campbell County language in the proposed ordinance DOES NOT require a road haul agreement.[x] This Campbell County language was unsuccessfully used a few years ago in another South Dakota county; in 2016, Codington County adopted identical ordinance language.[xi] But in 2018, Codington County experienced road problems and amended its ordinance.[xii] Road damage needed to be addressed in the ordinance. The template language did not protect the county and its residents from road damage, which was allegedly caused by wind farm development.[xiii] The exact language Campbell County wants to adopt failed to protect Codington County roads because it did not require a road haul agreement. Why would Campbell County adopt the same “cut and paste” language without considering its history? Why the county take did six months to write and pay others to write an ordinance whose form language all but guarantees problems from the get-go? The Campbell County language is a cut and paste job from other ordinances. The danger of “cutting and pasting” from other old ordinances is one of the risks I mentioned in the August memo. That advice was ignored by Campbell County ordinance drafters.
    The following ordinance language is reasonable: Along with a written and county approved county road haul agreement, it is required, at the time of permitting a project, that a project applicant must prove financial assurance is in place to promptly repair damaged county roads. 
  1. NO REQUIREMENT FOR SITE PLAN AND ENGINEERING DRAWINGS. The proposed ordinance does not have a requirement for a developer to submit a site plan and engineering drawings when the developer files a conditional use permit application. The only requirement is to submit a site plan and engineering drawings “for the feeder lines before commencing construction.” Under the proposed ordinance, the public has no information on the technical terms and nature of a proposed new project even though the county could still “approve” such a project.
    The following is missing in the proposed ordinance: a conditional use permit application for a project shall include a completed site plan and related engineering drawings.
  1. SERIOUS DECOMMISSIONING PROBLEMS IN PROPOSED ORDINANCE. Under the proposed ordinance, a decommissioning plan IS NOT to be publicly filed until “120 days after construction is completed.” Under this ordinance term, a wind farm would be fully completed and then, and only then, would the developer tell the public how it handles the project’s “end game.”[xiv] Further, the ordinance provides NO PUBLIC REVIEW, hearing, and approval process for a decommissioning plan. The developer sets the terms without consideration of a public hearing and approval process. The public and county should have a right to understand and approve the specifications a developer has in its written decommissioning plan at the same time the developer seeks approval for the very project. It is a little late for the car owner to buy car insurance after he has had an accident.[xv] The construction of any wind development project is significant.[xvi] Under the proposed ordinance, for example, the developer only has an obligation to remove underground cables, foundations, buildings, and ancillary equipment to a depth of four (4) feet. Contemporary turbines are larger than in the past, electrical requirements are critical, more roads are necessary, and wiring and cabling of substations is expensive and requires a lot of construction activity.[xvii] Should all of this development be approved by the county without the public first being told how it will all be dismantled by the operator if and when dismantling becomes necessary? If a developer knows its plan, does the economic tests for project feasibility like a cost-benefit analysis, and takes the advice of engineers and experts who have reviewed and approved a proposed project, then that developer will also have sufficient project information and technical savvy to — at the same time as applying for a permit — disclose how the developer plans to decommission its project.
  2. NO PUBLIC NOTICE AND HEARING FOR SOIL EROSION PLANS. The proposed ordinance does not require any public participation or county approval—all following a public hearing with requisite notice— on the important matter of a soil erosion, dust management, and sediment control plan.[xviii] The ordinance merely requires a developer “file” a soil plan. Further, under the proposed ordinance the plan need not be filed at the time of the permit application. The proposed ordinance, throughout, consistently allows for modest disclosure without an effort to provide due process for county residents and property owners.
  3. NO ADEQUATE BONDING REQUIRED FOR WIND ENERGY PROJECTS.  The proposed requirements for financial assurance are nonexistent. The proposed ordinance states, “After the tenth (10th) year of operation of a [wind farm], the Board may require a performance bond. . . .” The Board is not required to set a bond or required to ask for financial assurance of any type. The county has the authority to waive the requirement entirely or set it too low to really matter. Financial assurance by the developer should be required at the time the project is approved. Projects involving some government oversight are usually regulated because of a project’s environmental or property rights impact. The purpose of regulation is to safeguard the public in the event of a problem arising from such a project. End-of-life decommissioning is a common contingency event.  Proper planning, evolving around the full life of a proposed project, is key.  But government is not always well endowed with the skills to protect the public from end-of-life events. What if a project is abandoned or bankrupt in year one, two or three? And indeed what are the financial criterion for the county in setting the financial amount for a project? There are none under the proposed ordinance. Recent experiences in South Dakota on this subject spotlight this problem. A few years back, a state-licensed grain company (in the old days we called them grain elevators) by the name of Anderson Seed Company went belly up. Authority for setting bonds was then and still is given to the S.D. PUC. The bond for Anderson was set at $100,000 — $2.6 million was lost. The insolvency of the company resulted in a little over 4 cents on the dollar paid back to those parties who lost money in the insolvency. The bond was inadequate. The payout to the innocent grain sellers/producers was inadequate. The end-of-life planning was not well done. This experience resulted in a change in the law, but that change is itself an incomplete effort at planning a project end-of-life, that is, a decommissioning event.
  4. NO LIABILITY INSURANCE REQUIREMENT IN PROPOSED ORDINANCE.  The proposed ordinance has no insurance requirements for a wind farm operation or wind farm construction. Why would Campbell County not require general liability insurance on a large construction project and also not have the county named as an additional insured? The U.S. Department of Energy recommends local wind ordinances have an insurance provision.
    One recommendation states there “shall be maintained a current general liability policy covering bodily injury and property damage. Certificates shall be made available to the county.”
  1. PROPOSED ORDINANCE DOES NOT REQUIRE ANY INDUSTRY STANDARDS.     The proposed ordinance does not require inclusion of wind industry standards for construction, operation or demolition of a wind farm project, other than those required for aircraft safety.  However the Campbell County proposed ordinance requires industry standards for other non-wind projects. Why would a wind farm project get a free pass on industry standards when other non-wind farm projects to be approved by the county do not get a free pass on industry standards?
    An acceptable industry standard for a wind energy facility would state, “The design of a Wind Energy Facility shall conform to applicable industry standards, including those of the American National Standards Institute.  The Applicant shall submit certificates of design compliance obtained from relevant certifying organizations.”
  1. CONCLUSION AND ADVISORY NOTE.  This memo does not cover all legal issues that exist on the proposed ordinance. You are respectfully advised that issues, statements, and questions presented herein do not constitute a complete statement of, or a waiver of, any legal rights my clients may have now or in the future.

 

Thank you.

 

Endnotes (Matters The Commission Should Also Read And Consider)

[i] SDCL § 11-2-10.1 (2018) (South Dakota’s temporary zoning statute).

[ii] SDLC § 11-2-18 (2018).

[iii] SDLC § 11-2-19 (2018).

[iv] See Wedel v. Beadle County Com’n, 2016 S.D. 59 (S.D. 2016) (citation omitted).

[v] See Robert Bryce, Wind power is an attack on rural America, Los Angeles Times (Feb. 27, 2017) (“Rural residents are objecting to wind …. They don’t want to live next door to industrial-scale wind farms. They don’t want to see the red-blinking lights …, all night, every night for the rest of their lives. Nor do they want to be subjected to the audible and inaudible noise ….”), at https://www.latimes.com/opinion/op-ed/la-oe-bryce-backlash-against-wind-energy-20170227-story.html.

 

[vi] See David Ganje, Wind turbines ordinances revisited, Capital Journal (Nov. 8, 2017) (discussing South Dakota’s Lincoln and Walworth County setbacks, which exceed one mile) (“A[n] expert in property valuations … used a [] two-mile minimum as a benchmark for turbine setbacks.”), at https://www.capjournal.com/opinions/columnist/wind-turbine-ordinances-revisited/article.html.

[vii] Trempealeau County, Wisc. (1-mile setback from all homes and workplaces); Mason County, Ky. (1-mile setbacks at property line, shadow flicker limitations, decommissioning); Sumner, Me. (1-mile setback from property line, low-frequency noise/shadow flicker limitations, decommissioning). Each county name is a link to the actual ordinance.

[viii] See Tony Fleming, Wind Ordinance Debate: The 1,000-foot Set-Back Standard (Are environmentalists underregulating themselves?), Master Resource (Jan. 23, 2012), https://www.masterresource.org/wind-offset-distance/wind-ordinance-offset-debate/.

[ix] See Paul W. Wilke, Road Use Agreements to Mitigate Impacts of Energy Developments on Low Volume Roads, Applied Research Ass’n (2017) (On average, 43 truckloads are needed to build 1 wind tower foundation, 35 truckloads for the main crane of each wind tower, 25 truckloads for support cranes for each wind tower, and 313 truckloads per mile of road built), at https://www.countyengineers.org/assets/Presentations/2017/wed 2pmfinan wilke.pdf.

[x] Campbell County Ordinance #2019-1 § 5.22.03 (2018).

[xi] Codington County Amended Ordinance # 68 § 5.22.03 (2018), at https://www.codington.org/wp-content/uploads/2018/04/Ordinance-68-Wind-Energy-Systems-1.pdf.

[xii] Id. at § 5.22.03.1.f.ii. (Requiring road agreement approved by county); id. at § 5.22.03.15.ii.b., d., g., h., i. (Amending mitigation and CUP application requirements to address problems with haul roads).

[xiii] See J.T. Fey, County working on road haul agreement with Apex Energy, Watertown Public Opinion (Aug. 8, 2018) (The commissioners had dealt with another road haul issue before.”) J.T. Fey, Concerned citizen raises question about road damage, Watertown Public Opinion (July 27, 2018) (“[D]amage to a Codington County road has one citizen concerned about … construction on wind towers ….”).

[xiv] See Joshua Conaway, Be Aggressive with Wind Energy: Blow Away the Decommissioning Fears, 2 Oil & Gas, Nat. Resources & Energy J.621 (2017) (“Without proper regulations, a strong likelihood exists that these turbines will remain in place long after their useful lives have expired.”), at http://digitalcommons.law.ou.edu/onej/vol2/iss6/3.

[xv] See David Ganje, Wind Energy Development Memo // Decommissioning (2018), at http://www.windaction.org/ganje-memo-on-decommissioning.

[xvi] See Hayes Stripling, Wind Energy’s Dirty Word: Decommissioning, 95 Tex. L. Rev. 123 (Nov. 2016) (There is no easy answer for when a surety bond should be required. But “[w]hat is clear is that …  security [should] be in place on or before a project’s payout date.”), at http://texaslawreview.org/stripling.

[xvii] Id. (Avg. of 10 WES decommissioning cost $129,000 per turbine, ranging from $27,000 to over $650,000 per turbine.); see also Conaway supra note XIV (“These costs, if allocated on a per-turbine basis, are $25,899 and $92,463 respectively per turbine, solely for road removal.”) (emphasis added).

[xviii] Lisa Linowes, The Incompatibility of Wind and Crop ‘Farming’, Master Resource (July 1, 2013) (“[F]armers tell us that the ground is never the same…. The [once] fertile soil around the towers is … compacted resulting in lower crop yields. Since compaction is assumed to be a construction-related impact, crop-loss payments are often time-limited …. However, … the massive cranes [are] brought back … throughout the life of the project. And it’s not limited to existing roads or turbine pads….”), https://www.masterresource.org/linowes-lisa/incompatibility-wind-crop-farming/.


The Problem With South Dakota Boards

Posted by David Ganje - November 9th, 2018

‘Changes in regulations must await a demonstrated need.’ This is more than a concept but is the actual practice and the mantra of most governments. In keeping with the principles of government restraint, adopting new regulations must await a serious event which only then calls for new regulations.  A preferred ideology is to respond to events after they have happened.  Otherwise, it is argued that premature action is experimentation and not the job of government.

 Should a state board or a commission appointed by the governor be more than a policeman or a Justice of the Peace?  That is the question. Examples are necessary.  One must look at what power or authority is given to a board. In this instance I will use two boards and discuss their significance, and present to the reader the legal power granted to them.  The state Water Management Board and the Board of Minerals and Environment each consist of citizen members appointed by the Governor, not all of whom may be from the same political party.  So the beauty is that these appointees are not lobbyists, government employees or hired guns.

 Both named boards have an advisory function giving the public, the legislature and the governor advice, gathering information, and making recommendations.  In addition the boards have a rulemaking and permitting function.  This is extraordinary in government.  A group of citizens is in effect managing environmental and water policy.

 How extraordinary this is was borne out by my recent experience.  I was privileged to just complete the teaching of a seminar on natural resources and environmental law to Czech law students at a university in the Czech Republic.  In the seminar I compared and contrasted South Dakota’s water and natural resources law with that of the Czech Republic.  In South Dakota authority for water use permits and mining permits as well as overseeing permit holders and permit holder problems lies with the two citizen boards I mentioned.  That’s a lot of power in the hands of appointed citizens of the state, not in the hands of government employees.  Some of the seminar students had a hard time appreciating this difference in the law.  Their struggle has to do with the fact that all natural resource and environmental laws in their country are controlled by government agencies and its employees — not by boards or commissions.

 Is the preferred ideology of responding to events after they have happened the better way to preserve property, prevent loss and prevent harm to the environment?  No.  I have over the last couple of years provided numerous examples of historical events causing financial or other harm for which state government has provided no adequate response, and have suggested rules which will prevent future harm.  These examples can be found in the archives of this newspaper and in the various articles and blogs on my website. The subject of several of my suggestions is the lack of preparedness for accidents, spills or so-called disasters. In almost each instance the suggested points have not been addressed.  Alas these boards have the full authority to anticipate such problems and legal authority to act in advance; that is they have the power to make fair, open and public rules.  The rulemaking process itself allows for public input.  Secret rule making is not permitted.  And the boards are not burdened with lawmaking pressures of lobbyists hanging on their every word, interest groups petitioning them with incessant ‘concerns’ and other normal challenges of publicly elected politicians.  Boards are blessed with the legal authority to be agents of change in the fast evolving world of environmental and natural resource management.  They need to be more than just policemen or Justices of the Peace.  

Boards are not using their advisory and rulemaking authority to their advantage and to the advantage of the state.  Boards are given the legal framework to propose rulemaking but prefer to manage the status quo.  This exceptional citizen rulemaking power does not exist in other governments and in other countries.  This is indeed an opportunity squandered.

 

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


Memo to Commission on Wind Farms

Posted by David Ganje - September 8th, 2018

To:  Campbell County Commissioners

From:  David L Ganje attorney   //   605 385 0330

davidganje@ganjelaw.com

Re:   Campbell County’s prospective comprehensive plan, temporary zoning ordinance and proposed Campbell County Wind Farm Phase 2

Date:    August 15th 2018

 

 

 

By way of introduction, I represent Campbell County landowners Larry and Bea Odde and Donna Rossow.

  1. Wind farms are a significant structural and economic part of a county.  Each county naturally has the right to encourage the development of privately operated wind farms. A county, by virtue of South Dakota law, may also have the obligation of watchful care over wind farms within its borders.  My clients are certainly not opposed to wind energy projects.  My clients are however concerned about property rights and protections, wind energy ordinances, and Campbell County’s consideration of infrastructure projects.
  2. Infrastructure is described as physical improvements in a county such as road systems, water systems, bridges and some utilities.  This includes physical structures that are essential to a community.  Infrastructure has environmental, social and economic benefits as well as costs to a county. One does not usually think of private business as owning and operating infrastructure, yet it does.   Privately owned infrastructure includes wind farms and electrical utilities. A wind farm is private infrastructure.  Infrastructure does not consist of a small business enterprise which would only affect a piece of property off in a corner somewhere.  Due to infrastructure’s broader effect on a county, it is subject to more than just private property rights.  A wind farm is private enterprise with public consequences.   Commissioners have the right, and a legal duty, to oversee the planning, development and maintenance of certain infrastructure within a county.
  3. The state of North Dakota regulates the siting of a wind energy facility greater than 500 kW.  That is not the case in South Dakota.  The South Dakota Public Utilities Commission (PUC) does not regulate the legal siting terms and conditions of a wind energy facility producing under 100 MW of electricity.  In SD a “wind energy facility” is defined as a system designed for or capable of generation of 100 MW or more of electricity.  A wind energy facility is the same thing as a wind farm.  The county commission will take notice that neither the existing Campbell County Wind Farm Phase 1, nor the proposed new Phase 2 equal 100 MW of electrical capacity generation per the developer’s information.  Phase 1 and Phase 2 are both outside of the PUC’s siting authority.  This leaves only one lead agency to oversee and manage the project siting process for a wind farm in Campbell County:  the Campbell County Commission.
  4. Wind energy projects, also known as wind farms, create a number of siting issues.  The physical placement and configuration of wind turbines, roads, fences, collection lines and the like must be considered. Relevant questions include a project’s impact on existing land use, a neighbor’s land use, and the environment.  For example, authorizing a wind farm in close proximity to a residence may create a claim for inverse condemnation or a regulatory taking of private property. A regulatory taking, that is, a taking by government rulemaking, may occur if a land-use regulation “goes too far.”  The commission is challenged to create a balance between private property rights and the government’s power to regulate in the public interest.
  5. Campbell County is naked. The county has no comprehensive plan and has no zoning ordinances.  A comprehensive general plan lays out the physical development of the county. In South Dakota a comprehensive plan is required for the purpose of protecting the development of the county; to protect the county’s tax base; for planning land use that will make adequate provisions of transportation, roads, water supply, drainage, sanitation, education, recreation, or other public requirements; to reduce governmental expenditure; and to conserve and develop natural resources.  Zoning ordinances are adjunct to, and must be in accordance with, a county’s comprehensive plan.  Without a comprehensive plan zoning ordinances cannot be adopted.  The only exception to this restriction is the passage of a so-called emergency temporary ordinance.
  6. The Phase 1 Campbell County wind farm became a public matter in approximately 2010.  At that time the county did not have a comprehensive plan, a wind energy ordinance or a procedure for obtaining special use permits.  The Phase 1 wind farm became operational in December of 2015.  At that time the county did not create a county comprehensive plan, wind energy ordinance or a procedure for obtaining special use permits.   A new proposed Campbell County wind farm referred to as Phase 2 has been proposed since approximately March of this year.  Yet, at this time the county still does not have a comprehensive plan, a wind energy ordinance or a procedure for obtaining special use permits.  The county commission in July of this year hired a consulting agency to help write a temporary ordinance or comprehensive plan.  It is of concern that Campbell County with its natural and physical features does not have wind energy regulations on the books.
  7. My clients may have believed that Consolidated Edison Development, Inc. operates Phase 1.  Department of Revenue papers received by the County Auditor in April of 2018 indicate that Campbell County Wind LLC is the entity paying taxes on Phase 1.  A company that owns or holds property under a lease and who operates the same for the purpose of furnishing electricity is the party that pays taxes.  A November 2015 federal filing by Campbell County Wind Farm, LLC reports that Campbell County Wind Farm, LLC is a Delaware limited liability company and that it “will own and operate” a 98 MW wind energy project located in Campbell County, South Dakota.
  8. One South Dakota official was recently quoted as saying that wind energy development in the state is a “gold rush.”  I wonder whether that state official understands the connotation of a gold rush.   A gold rush creates huge challenges and can leave a government with a bucketful of problems.  In a gold rush there are often no established rules or laws in the area and no established infrastructure to deal with the influx of activity.  A comprehensive plan as well as zoning ordinances, if written fairly, create good rules of the road.  A gold rush is like a community with no road signs, no speed limits and no traffic rules.  Thinking of zoning ordinances as writing a traffic code for the county makes sense.  A plan and ordinances can be written to protect people and property, and to keep things moving smoothly.  A plan and ordinances should establish county oversight, safety, uniformity and a road map which wind farm operators can read and follow.
  9. Campbell County in July outsourced to a consulting agency the preparation of a wind farm zoning ordinance.  I understand the county wishes to adopt an emergency and temporary ordinance. While commissioners will be the ones to formally adopt any ordinance after normal county public notice procedures, it is respectfully submitted that the process would be well served by requiring that the consultants themselves seek public input from landowners and residents at the early drafting stage, rather than wait until final ordinance readings. Letting another party write your local laws may be somewhat akin to letting a stranger use your credit card.  Please consider that lawyers as a group are said to be the second oldest profession.  But now that I think about it perhaps consultants as a group are really the second oldest profession– not lawyers.  The commission will of course be the government body taking final ownership of the local zoning and planning law and its effects on the county.
  10. When poor wind farm government oversight is in place, real operational consequences arise. In a workshop a few years ago a speaker at the Michigan Association of Planning discussed problems a wind farm created in Altamont Pass California.  Apparently the older technology wind turbines caused a great number of bird deaths.  The turbines were shut down in 2015.  I do not here suggest or imply that this would be the case with Campbell County Wind Farm Phase 1 or Phase 2.  Rather I provide the speaker’s comments on possible wind farm oversight issues.  The presentation indicated that there was no environmental analysis before turbines were first installed; that there was a fragmented regulatory scheme letting the government avoid responsibility for solving the problem; and that the industry avoided taking responsibility and did not address the Altamont problem proactively.
  11. South Dakota has no state environmental regulations on the siting of wind turbines.  And, except for language in projects which may be under the joint jurisdiction of the PUC and local governments, wind power siting and permitting processes varies by county. Suggested guidelines are provided in a jointly issued statement by the state Game, Fish and Parks and the state Bat Working Group Organization.  The following issues should be considered in a permit application:  1) Land Use 2) Natural and Biological Resources 3) Noise 4) Visual Resources 5) Public Interaction 6) Soil Erosion and/or Water Quality 7) Health and Safety 8) Cultural, Archaeological, and Paleontological Resources 9) Socioeconomic, Public Service, and Infrastructure 10) Solid and Hazardous Wastes 11) Air Quality and Climate.
  12. Local laws are best tailored for each county.  Lincoln County is different than Walworth County.  And, yes, Walworth County may be different than Campbell County. The Walworth ordinance dealing with wind energy says that a decision to grant a wind permit is an administrative matter.  It is not.  The South Dakota Supreme Court in 2009 ruled that a conditional use permit application (a common process for wind farm approval) is quasi-judicial.  Such ordinances are subject to a constitutional due process of the law review.  This requires that a county be visibly fair to all parties affected by the permitting decision.  Wind farm permits are exceptional permits because one might get approval in an area where regular zoning rules would not allow it.  Due process in South Dakota requires a.) reasonable notice to all parties effected, and  b.) an opportunity to be heard at a meaningful time and in a meaningful manner.  The current ordinance fails on both counts.
  13. The challenge for the county is to not create a chilling effect on new wind energy development and yet to protect the community, property owners, property values and the environment. One method occasionally used to write a new zoning ordinance is problematic. This problematic method is the adoption by a county of ordinance language based on that of another or several other sister counties. Adopting boilerplate central resource terms for suggested ordinance language is also not the best answer.  In 2009 the PUC published and placed on the web a recommended general model wind farm siting ordinance.  In an opinion piece on wind ordinances I previously critiqued part of the PUC recommended model language.  Several months later the PUC withdrew the model ordinance.

 

 

I respectfully suggest the commission regard in a comprehensive manner, and help the public understand, any proposed ordinance as well as related land use issues effected by any proposed plan.  Uncertainty among landowners and residents often leads to controversy.  The particular language of an ordinance is always where the rubber meets the road.  I look forward to looking at the proposed ordinance language from you and your consultants.  Part of my job is to help my clients ask better questions. This memo is given for discussion purposes and is not intended as a complete assessment of any legal matters considered.  If you would like to discuss the memo or have any questions please feel free to contact me.  Thank you.

 

 

 

 

 

 

 

 

 

 

 

 

 


Are acts of God acts of man?

Posted by David Ganje - September 2nd, 2018

Man imposes his laws upon man. James Madison tells us that laws should not be overly voluminous or overly incoherent. Good luck on that score. I used to carry around the written U.S. tax code in law school for our tax class. I figured carrying around the tax code was good enough such that I did not feel compelled to go to the gym for exercise. That was before computers when law codes were written on heavy papyrus rolls.

Man by law has made a law of ‘an act of God.’ An act of God or what is also called a ‘force majeure event’ is an event beyond the control of parties to a contract which may prevent completion of the contract. And importantly an act of God may be grounds for cancellation of the contract. An act of God clause is the adult business version of the dog ate my homework. Wouldn’t an act of God be a good defense in criminal court? Boy, I sure could have used it for myself in juvenile court.

How a contract party is to deal with a surprise event is written into the agreed upon terms of the contract. In contract writing an event that is not a part of the contract obligation but affects the ability to complete the agreement is the so-called an act of God clause. These clauses also go by the fancy name of a ‘force majeure clause.’ Such clauses are a man-made road map showing what to do because of an unplanned event. This type of clause is a little bit like putting the genie back in the bottle after it has been out on the town partying too much. One finds these clauses in wind energy agreements, right-of-way agreements, easements, oil and gas leases and general construction contracts.

Under some clauses, government rules which prevent a party from completing the contract may constitute grounds for a party’s legal non-performance of the agreement. So this is one situation in which you can legitimately blame the government.

What are these magical “events” which will excuse a party from completing a contact? There are as many possible events as man can devise in his mischievous little mind. An act of God event is simply whatever the agreed upon contract says it is. This is man-made law. Here is an example of an actual agreement: “The term ‘force majeure’ shall be Acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, riots, epidemics, lightning, earthquakes, explosions, accidents or repairs to machinery or pipes, delays of carriers, inability to obtain materials or rights of way on reasonable terms, acts of public authorities, or any other causes. . . not within the control of the [contracting party] and which by the exercise of due diligence [the contracting party] is unable to overcome.” Looking at this clause, I will provide the reader with a few comments. First, it is written by someone rushing a bunch of ideas into a clause. It’s a little too shot-gunny. It is overbroad and needs focus. And it was written by a lawyer who has not experienced a tornado, flood or a debilitating blizzard.

No question. An act of God clause is one of several underappreciated stepsisters (that’s an East River expression) when parties and their attorneys draft and negotiate an agreement. Usually in a transaction parties give energetic attention to ‘The Money’ or to the conditions of contract performance, not realizing that an act of God event can cause equal if not greater trouble. How quickly money throws one off the scent. It’s the old story of greed outstripping prudence. The scope of an act of God clause depends on the specific terms of the agreement, so pay attention my honorable readers. Do not avoid focused common sense in the early stages when negotiating and drafting any agreement. Otherwise an uninsured accident is just over the next hill. An act of God is a peril outside of man’s control.


WATER RIGHTS AND WATER LAW WORKSHOP

Posted by David Ganje - July 30th, 2018

The Rapid City office of the United States Geological Survey (USGS) Dakota Water Science Center is hosting a public workshop on South Dakota water rights and water law. USGS has invited attorney David Ganje to give the workshop. The program will be held on September 18th at 10 a.m. Mountain time at 1608 Mt. View Road, Rapid City, SD 57702. The workshop is open to the general public. Admission is free but phone reservations are strongly recommended as space is limited. Reservations may be made by calling 605 385 0330.


The leviathan in the Missouri

Posted by David Ganje - July 30th, 2018

It is good to be vigilant when dealing with a leviathan of a bureaucracy. It is better however to be pointed with them, carry a big stick, keep notes and exercise financial purse strings. The U.S. Army Corps of Engineers, as a government agency, has been in existence since 1802. It is now and forever shall be. It is a federally created ‘regulatory monopoly.’ The Corps is in effect the world’s largest civil engineering firm. This agency of the Department of Defense is the nation’s largest single producer of hydroelectricity. Hydropower plants and dams are authorized by Congress under the Flood Control Act of 1944, commonly called the “Pick-Sloan Act.” The Act authorized the managing of the Missouri River to provide for flood control, navigation, municipal and industrial water supply, recreation, and hydropower generation.

At the time of Lewis and Clark, the Missouri River was diverse. The river had many channels along with widespread bars, islands, and shallow sloughs. It had natural levees, backwater lakes, oxbows, sandbars and dunes. The Missouri was wide and shallow. A hundred years ago it measured about 2,546 miles in length but now has about 200 miles less due to damning and channelization. Along the Missouri River today the Corps operates a total of 36 generator units capable of producing approximately 2.4 million kilowatts of power.

In an editorial this month Senator Mike Rounds expressed concern about the Corp’s flood management practices. He indicated he will be keeping a close watch on the Corp’s flood control management. This is a polite way of addressing a hardcore problem. The Corps is akin to a government highway department – it is good at constructing highways but is often out of its league when administering the highways, creating good rules of the road, or at establishing operations without causing damage to property owners or the environment. The Corp’s problems are devilishly more serious than the senator suggests. In 2016 the GAO, in a report on the Corp’s operations, concluded that the extent to which the Corps has reviewed or revised current water control manuals is unclear because the Corps did not document its own reviews. The GAO report also concluded that the Corps has revised some water control manuals but that various divisions and districts do not track consistent information about revisions to its manuals, and the extent to which operating manuals have or should be updated is unclear.

The Corp’s own ‘outside consultants’ report that historically the Corps was focused on construction of dams, levees, navigation channels, and other infrastructure. But that future Corp’s operations should be focused on (1) operating, maintaining, rehabilitating, and upgrading existing infrastructure, (2) re-allocating reservoir storage and releases among changing water demands and users, and (3) providing some degree of ecosystem restoration and ecological services in heavily altered riparian and aquatic ecosystems. I submit that the Corps has not yet read this memo by its consultants. By way of example, after preliminary motions a Court of Claims judge this year properly ordered a case to go forward brought by farmers, landowners, and business owners who claim a taking of their property without just compensation in contravention of the Fifth Amendment. This lawsuit is based on actions by the Corps on the Missouri River. The plaintiffs allege that the Corps has changed its management of the river and that the changes caused flooding of their properties.

The Corps has a tendency to do what it pleases unless there is hell to pay. South Dakota has used its disproportionate clout in the recent past to send messages to this leviathan. Controlling the purse strings was the key. Money usually is. A material example of this is the Corp’s continuing attempt to control and manage what it calls ‘surplus water’ in the Missouri River. This is a self-defined quantification of water that does not exist in federal legislation or under the common law of waters in this country. It is an attempt by the Corps to acquire control over water that otherwise belongs to the states and Indian tribes. For a look at my extensive critique of the Corp’s past efforts to grab control of surplus waters see my letter to the Western States Water Council found on my website: lexenergy.net

More than mere vigilance will be required, or what you may have now won’t be no more.  Congressional oversight by way of eliminating funding for projects or by way of de-authorizing a project is a good way to manage a federal agency. The risk to upper basin Missouri River states and Indian tribes is that once a quantity of water is regulated and defined by the Corps as surplus water it becomes that much harder to later reinstate the original legal as well as declared beneficial uses of that water. A Prussian general when once asked to notice the beauty of a river nearby, turned and replied ‘an unimportant obstacle.’ The Corps is big brother with all of big brother’s flaws.

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


Arbitration – always look a gift horse in the mouth

Posted by David Ganje - July 12th, 2018

Mandatory arbitration is a court of last resort. When one arbitrates under mandatory arbitration there is no appeal, or even a right of reconsideration of the matter by the arbitrator if something went wrong. One’s legal rights to challenge a final arbitration decision are very limited. The arbitrator’s decision is almost absolute.

I know. I have sat as an arbitrator and have represented parties in arbitration.

Arbitration is defined as an alternative to litigation in which the parties are required to put their dispute before an arbitrator. The arbitrator, for good or ill, and without the benefit of a black robe, makes the final decision on the dispute. If one’s agreement contains a mandatory arbitration clause, you can’t go to court. (There are minor exceptions, but we will save that for another sermon).

Mandatory arbitration clauses can be found in easements, real estate contracts, water rights agreements, some mineral rights contracts, business agreements, and are often found in a public contract, that is, a contract with a government body or agency. An arbitration clause is sometimes buried in the agreement’s terms particularly in consumer agreements. Consumer agreements containing arbitration clauses, as described by an old labor leader, are akin to negotiations between a lion and a lamb in which the lamb wakes up the next morning in the stomach of the lion.

I find it commonplace for parties, and their attorneys, not to seriously consider the issue of arbitration when negotiating the language to be placed in an agreement. Big mistake. Never approach a goat from the front. Never approach a horse from the rear. Never approach an arbitration clause from any angle unless you and your well-seasoned counsel, have weighed the pros and cons while in a sober state of mind. Arbitration is a shortcut to justice, but there are many pitfalls, cliffs, dark places and precipices along the way.

South Dakota statutory law enforces and encourages arbitration clauses. And regarding the legitimacy of arbitration the state Supreme Court stated as recently as this year, “The plain language of [state law], being clear, certain and unambiguous, does not provide for a right of appeal from an order compelling arbitration.” The South Dakota Supreme Court some time ago gave its official blessing to arbitration as a dispute resolution process: “This Court has consistently favored the resolution of disputes by arbitration.”

Arbitration is faster and less expensive than litigation. These are its two most compelling attractions. But one rolls the dice in arbitration in that one can never be sure of the wisdom, fairness and competence of the sole judge of the affair – the arbitrator. In some arbitration clauses the parties have a right to agree upon a particular arbitrator. Arbitration itself is a private process meaning it is not a public event. This can be advantage in several situations.

So what are problems with arbitration? I have already painted a pretty colored picture in this piece, but will here elaborate a bit more.

No appeals are allowed. In small-dollar conflicts the costs of arbitration are not always justified. The rules of evidence in arbitration are a bit loose and that can be problematic. A pre-hearing exchange of evidence between the disputing parties is not as well managed as it is in litigation. If an arbitrator does not carefully follow the relevant law dealing with the problem, the decision of that arbitrator will still stand as a final decision.

Judges are a bit different. A judge is constantly looking over his or her shoulder. A judge is, or at least should be, always considering the consequences of a decision from the point of view of another court — the appellate court.