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Vol. 19, No. 22 Week of June 01, 2014
Providing coverage of Bakken oil and gas

Flaring plaintiffs appeal

NDIC asked to find operators violated anti-flaring rules or decline to intervene

Janelle Steger Combs

For Petroleum News Bakken

An attorney for plaintiffs in the flaring lawsuits that a federal judge dismissed May 14 has delivered 13 letters to the North Dakota Industrial Commission requesting the commission to find that the operators named in the initial complaints violated anti-flaring rules and enforce penalties against them, or decline to determine the matter in deference to the court. The latter option is not likely to be a possibility. Plaintiffs’ attorney Derrick Braaten delivered the letters May 23.

While the Industrial Commission held a meeting on May 27, the requests were not on the agenda. The letters were filed on the docket closing date for the commission’s June hearings, so they will likely be set for hearing on June 25 or 26. However, those hearings occur in front of staff panel for the Department of Mineral Resources, not with the three members of the Industrial Commission. The next tentative meeting of that panel is set for July 1. The commission’s members are Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring.

While the staff panel that hears evidence can often issue rulings without input from the commission, this matter will most certainly appear before the commission for decision. After that time, the plaintiffs or the oil companies have the right to file for an appeal of the administrative decision in state District Court. The remedy of class action damages is not provided in this administrative process.

The federal court ruling

As reported in the May 18 edition of Petroleum News Bakken, North Dakota federal District Court Judge Daniel L. Hovland ordered that the class action flaring lawsuits against numerous North Dakota operators be dismissed. Hovland dismissed the complaints because the plaintiffs failed to exhaust their administrative remedies through the Industrial Commission. In this case, the commission has the administrative process in place to handle flaring issues and the loss of royalties that can result. The dismissal did not reach the factual merits of the cases.

The 13 operators charged in the suits are Burlington Resources Oil & Gas (ConocoPhillips), Continental Resources Inc., Crescent Point Energy, EOG Resources Inc., Hess Corp., HRC Operating LLC (Halcon Resources), Hunt Oil Co., Marathon Oil Co., Samson Resources Co., SM Energy Co., Statoil Oil & Gas LP, WPX Energy and XTO Energy Inc. (ExxonMobil). All of the operators, except Marathon Oil, removed their cases to federal court. The Marathon case in state court is still pending, and this decision does not dispose of it.

Basis of the complaints

When filed, the complaints noted that under Section 38-08-06.4 of the North Dakota Century Code, an oil and gas producer may flare associated natural gas for a period of one year after the well goes on production and is not required to pay royalties, so long as the operator fully complies with the requirements of the North Dakota Industrial Commission. After the one-year period, the producer may apply to the commission for permission to continue flaring. The plaintiffs alleged that no such exemptions were obtained by the producers and sought royalties on gas flared after one year and on gas flared in the first year when proper procedures were not followed.



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