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Letter to the Editor: A South Dakota Water Lottery

Posted on: October 20th, 2014
by David Ganje

Letter to the Editor: A South Dakota Water Lottery

Posted Aberdeen American News, Farm Forum: Monday, October 13, 2014 9:08 am

by David Ganje

While it has yet to come to the attention of the national environmental and natural resources community, the South Dakota state legislature passed a first-in-the-nation law this year in the field of natural resources. The state will use a ‘lottery system’ for the issuance of certain state managed water permits. The water lottery system is combined with a moratorium on water use for identified water bodies managed by the state. Under current South Dakota law, all water within the state’s jurisdiction is property of the people of the state. The right to the use of water may be acquired by private parties and municipalities by a state-managed appropriation procedure. The state has been historically a first in time, first in right state when granting water use rights. South Dakota’s ‘water management’ jurisdiction does not however apply to Indian Country or on federal lands. Water use in South Dakota is authorized when the state Water Management Board grants a private, beneficial use of the state’s water resources. An example of a private use is an irrigation permit. A water use permit is issued either as a new water use or as a vested water right for an existing water use if it predates 1955.

The new water lottery system comes into play in situations where the state Water Board has determined that an existing groundwater source is ‘fully appropriated.’ A water source is fully appropriated when the state rules that no new or further access to the water should be granted because it would prejudice the ability of the water source to recharge to an acceptable level. The lottery system will not apply to open or unappropriated aquifers. The Water Board under the new legislation can accept water permit applications even for a fully appropriated aquifer. A 30 day application time period will also be set for a fully appropriated aquifer by public notice. The notice gives prospective applicants the right to apply under the lottery system. The applications are then placed in a lottery drawing system. The actual method for drawing successful applicants has not yet been implemented but will be announced in the next several weeks. The ‘winning’ applicants will then have to wait under the state’s five-year moratorium on approval of permits in those instances when the state has made a designation of a ‘fully appropriated aquifer.’

A lottery system for resource development permits has been used in the past, but never by a state for access to state managed water. The U.S. Bureau of Land Management used a lottery system for granting oil and gas leases until 1987 but has not used it since. The state, of course, does not call this new law a lottery system. I do. The new unchallenged law describes the lottery system as a procedure in which, “the board shall create a priority list using a random selection process to be determined by the board.” This new lottery system is an effort to cure problems in past experiences when an aquifer is placed in a moratorium. One cannot criticize the conceptual fairness of the new law. The statutes attempt to treat water permit applicants seeking access to a particular aquifer equally by using the “random selection process” in a moratorium scenario. The law itself has some challenges in its language as well as in its untested procedure. It is soon to be implemented by the state Water Board and the S.D. DENR. The new law is a unique effort by the state to deal with natural resources stewardship issues. In that regard the legislature should be applauded. Will the bar of reason support this brave new attempt at fairness? Time will tell.


Tags: Environmental Law, Infrastructure Security, Natural Resources Law, Water Law, Water Regulation, Water Rights, Water Systems Security

Illinois Association of American Water Works Recognizes Ganje’s Water Workshops

Posted on: September 19th, 2014
by David Ganje

Illinois Association of American Water Works Recognizes Ganje’s Water Workshops

The Illinois Section of the American Water Works Association (ISAWWA) has recognized David Ganje of Ganje Law Offices for his recent workshops given for the Association.  David Ganje recently presented two specialized workshops to the ISAWWA on the subjects of water law and water security. The Association wrote letters of appreciation to Mr. Ganje for the work and will use the presentations in future workshops.

Ganje Selected as Super Lawyer for 2014

Posted on: September 1st, 2014
by David Ganje

Ganje selected as Super Lawyer for 2014

David Ganje has been selected to the 2014 New York Super Lawyers list in the category of energy and natural resources. Each year no more than five percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor. Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement

Landmen-Oil & Gas Lease Brokers

Posted on: August 22nd, 2014
by David Ganje


By entering into an oil and gas lease, a landowner provides an oil and gas lessee, usually an oil company, with the right to explore for and produce oil and gas found under the landowner’s property. (In the article I will use the accepted term ‘oil and gas lease’, although an oil and gas lease is not in a correct legal context a real estate or commercial lease.) Both the oil company and the landowner enter into an oil and gas lease with the same goal: profit. However, the underlying interests of each party are very different. An oil company wants as much access to the surface and subsurface as possible. In contrast, a landowner desires to limit access and to limit any potential damage caused by drilling and recovery operations.  An oil company also desires to keep a lease alive despite a lack of production or a failure to drill. A landowner desires, among other things, that the lease end quickly if the oil company fails to produce in well paying quantities. Some landowners enter into oil and gas negotiations with little experience or knowledge of oil and gas matters.

A “landman” is the usual point of contact between a landowner and an oil company or a so-called lease investor. The American Association of Professional Landmen (AAPL) reports that a landman’s services include: “negotiating for the acquisition or divestiture of mineral rights; negotiating business agreements that provide for the exploration for and/or development of minerals; determining ownership in minerals through the research of public and private records; reviewing the status of title, curing title defects and otherwise reducing title risk associated with ownership in minerals; managing rights and/or obligations derived from ownership of interests in minerals; and unitizing or pooling of interests in minerals.” Given these responsibilities, landmen have influence over oil and gas leases, and over the effect that leases will have on a landowner. One could say that landmen are the “real estate brokers” of the oil and gas industry. Despite this influence, landmen generally do not need to be licensed or even certified by a state in which they are making deals. The only national organization to implement ethical standards for landmen is the American Association of Professional Landmen. The AAPL is a nationwide organization with over 20,000 members. This organization offers various training programs, sets ethical standards for landmen and lobbies congress on behalf of its members.

Landmen are paid by the lessee. Landmen are for all intents and purposes agents of the oil and gas producers. This leads some landmen to resort to high-pressure sales tactics. A report by the AAPL Licensing Task Force in 2008 recommended that the organization support landmen licensing efforts. The report concluded that licensing requirements were most needed in Texas and other states where many landmen interact with residents, and where the areas are experiencing an oil and gas boom. Opponents of licensing argue that requiring a license or certification will not make landmen better. This argument fails to consider the true purpose behind man-made laws. Laws are created to encourage people not to act on their impulses, and also allow the state to take action if they do act on their impulses. Licensing requirements for landmen will not make all parties better, but regulations allow a state to step in if a landman’s practices are contrary to established legal standards.

Landmen in South Dakota must be licensed as real estate brokers and licensees. Landmen in North Dakota are not required to be licensed. Landmen in South Dakota come under the jurisdiction of the South Dakota Real Estate Commission. The South Dakota Codified Laws define “Real Estate” to include mineral rights. Because of South Dakota law, several disclosure requirements are mandated of landmen before they can close an oil and gas lease. South Dakota law also defines a “Real Estate Broker” as someone who “buys, rents, sells, manages, leases, etc., an interest or estate in Real Estate.” The South Dakota Attorney General has opined that landmen are “Real Estate Brokers.” Accordingly, landmen must be licensed as such. The Code provides that any landman operating without the requisite license is committing a Class 1 misdemeanor and is required to forfeit any compensation for the deal he brokers. A separate legal question may lie as to whether an oil and gas lease created by and negotiated by such a landman is enforceable as a contract.

David Ganje of Ganje Law Offices practices natural resources, environmental and commercial law in North Dakota and South Dakota.   The website: lexenergy.net . The contents of this article are intended for general information purposes only and are not intended as legal advice.

Tribes Cast Eye To Water Laws & Protecting Resources

Posted on: July 29th, 2014
by David Ganje

Tribes cast eye to water laws and protecting resource

Peter Harriman, pharrima@argusleader.com 11:09 p.m. CDT July 25, 2014

At the Indian Water Rights Conference this week in Rapid City, lawyer David Ganje gave a overview of water laws as they relate to tribes and offered recommendations on writing and maintaining successful tribal water codes. The conference, hosted by the Great Plains Water Alliance, included tribes from South Dakota, North Dakota, Minnesota, Montana and Alaska.

Ganje, who specializes in natural resources law, recently answered five questions on the subject for the Argus Leader.

1. Federal law already assigns primary water rights to tribes for the exterior boundaries of reservations. Why do tribes need water codes?

“Water codes are really property management vehicles for managing both a right and a commodity. Tribes, as all government bodies now, are more and more aware of the proper management of water. Historically, all of them had been inattentive to water. There had more or less been enough of it around, both surface and groundwater. Now there is a realization that surface and groundwater interact with each other, and climate is affecting all of them. This goes for states and reservations.”

2. What is the relationship between state government and tribes in the Dakotas regarding water?

“Different states over time have approached reservations and undertaken water compacts. There are about 14 different water compacts in the region. In Idaho, Utah and Colorado, some tribes have completed successful water compacts, effective agreements between reservations and the state. There are no compacts in South Dakota and North Dakota. It is always possible. It is a matter of how willing each side is to negotiate, put everything on the table and address it.”

3. As they deal with the issue of managing water, are states and tribes also further developing the concept of tribal sovereignty?

“Water is a major issue in terms of what is tribal sovereignty. While there is precedent for strong water rights in favor of tribes, the question is how does that coexist with an immediate neighbor’s rights, and how does it exist on checker-boarded reservations? Those are questions where water is developing the idea of sovereignty.”

4. Is the historical assumption in the Dakotas that there will always be enough water undergoing review?

“Yes, the scientists are telling us the ebb and flow of water is still unpredictable, notwithstanding the management of flood control dams. They are not the panacea not the bottom line. Nor are they a guarantee that there can be a proper allocation of those resources. The question of who owns the water, who owns the flow is not yet resolved. Science has taught us to be careful, to be more prudent about this.”

5. Because it is out of sight, is groundwater also out of mind with regard to water quality, even in the face of potential development in South Dakota such as uranium mining, fracking to increase oil and gas production and the Keystone XL pipeline that could possibly threaten it?

“Groundwater quality is an emerging issue. The uranium leach mining currently under consideration has risks involved. There is a school of scientific thought that the dispersal of water is as problematic as the water itself used in natural gas production. There is some evidence that water has a tendency to leach itself into groundwater.”