38-11.1 Oil and Gas Production Damage Compensation
Download pdf
Loading PDF...
<![CDATA[CHAPTER 38-11.1OIL AND GAS PRODUCTION DAMAGE COMPENSATION38-11.1-01. Legislative findings. The legislative assembly finds the following:1.It is necessary to exercise the police power of the state to protect the public welfare<br>of North Dakota which is largely dependent on agriculture and to protect the<br>economic well-being of individuals engaged in agricultural production.2.Exploration for and development of oil and gas reserves in this state interferes with<br>the use, agricultural or otherwise, of the surface of certain land.3.Owners of the surface estate and other persons should be justly compensated for<br>injury to their persons or property and interference with the use of their property<br>occasioned by oil and gas development.38-11.1-02. Purpose and interpretation. It is the purpose of this chapter to provide themaximum amount of constitutionally permissible protection to surface owners and other persons<br>from the undesirable effects of development of minerals. This chapter is to be interpreted in light<br>of the legislative intent expressed herein.Sections 38-11.1-04 and 38-11.1-05 must beinterpreted to benefit surface owners, regardless of whether the mineral estate was separated<br>from the surface estate and regardless of who executed the document which gave the mineral<br>developer the right to conduct drilling operations on the land.Sections 38-11.1-06 through38-11.1-10 must be interpreted to benefit all persons.38-11.1-03. Definitions. In this chapter, unless the context or subject matter otherwiserequires:1."Agricultural production" means the production of any growing grass or crop<br>attached to the surface of the land, whether or not the grass or crop is to be sold<br>commercially, and the production of any farm animals, including farmed elk, whether<br>or not the animals are to be sold commercially.2."Drilling operations" means the drilling of an oil and gas well and the production and<br>completion operations ensuing from the drilling which require entry upon the surface<br>estate and which were commenced after June 30, 1979, and oil and gas geophysical<br>and seismograph exploration activities commenced after June 30, 1983.3."Mineral developer" means the person who acquires the mineral estate or lease for<br>the purpose of extracting or using the minerals for nonagricultural purposes.4."Mineral estate" means an estate in or ownership of all or part of the minerals<br>underlying a specified tract of land.5."Minerals" means oil and gas.6."Surface estate" means an estate in or ownership of the surface of a particular tract<br>of land.7."Surface owner" means any person who holds record title to the surface of the land<br>as an owner.38-11.1-03.1. Inspection of well site. Upon request of the surface owner or adjacentlandowner, the state department of health shall inspect and monitor the well site on the surface<br>owner's land for the presence of hydrogen sulfide.If the presence of hydrogen sulfide isindicated, the state department of health shall issue appropriate orders under chapter 23-25 to<br>protect the health and safety of the surface owner's health, welfare, and property.Page No. 138-11.1-04. Damage and disruption payments. The mineral developer shall pay thesurface owner a sum of money equal to the amount of damages sustained by the surface owner<br>and the surface owner's tenant, if any, for loss of agricultural production and income, lost land<br>value, lost use of and access to the surface owner's land, and lost value of improvements caused<br>by drilling operations. The amount of damages may be determined by any formula mutually<br>agreeable between the surface owner and the mineral developer. When determining damages,<br>consideration must be given to the period of time during which the loss occurs and the surface<br>owner may elect to be paid damages in annual installments over a period of time; except that the<br>surface owner must be compensated for harm caused by exploration only by a single sum<br>payment. The payments contemplated by this section only cover land directly affected by drilling<br>operations.Payments under this section are intended to compensate the surface owner fordamage and disruption; any reservation or assignment of such compensation apart from the<br>surface estate except to a tenant of the surface estate is prohibited.In the absence of anagreement between the surface owner and a tenant as to the division of compensation payable<br>under this section, the tenant is entitled to recover from the surface owner that portion of the<br>compensation attributable to the tenant's share of the damages sustained.38-11.1-05. Notice of drilling operations. Except for exploration activities governed bychapter 38-08.1, the mineral developer shall give the surface owner written notice of the drilling<br>operations contemplated at least twenty days prior to the commencement of the operations,<br>unless waived by mutual agreement of both parties. If the mineral developer plans to begin<br>drilling operations within twenty days of the termination date of the mineral lease, the required<br>notice under this section may be given at any time prior to commencement of drilling operations.<br>This notice must be given to the record surface owner at that person's address as shown by the<br>records of the county recorder at the time the notice is given.This notice must sufficientlydisclose the plan of work and operations to enable the surface owner to evaluate the effect of<br>drilling operations on the surface owner's use of the property. Included with this notice must be a<br>form prepared by the director of the oil and gas division advising the surface owner of the surface<br>owner's rights and options under the chapter, including the right to request the state department<br>of health to inspect and monitor the well site for the presence of hydrogen sulfide. If a mineral<br>developer fails to give notice as provided under this section, the surface owner may seek any<br>appropriate relief in the court of proper jurisdiction and may receive punitive as well as actual<br>damages.38-11.1-06.Protection of surface and ground water - Other responsibilities ofmineral developer. If the domestic, livestock, or irrigation water supply of any person who owns<br>an interest in real property within one-half mile [804.67 meters] of where geophysical or<br>seismograph activities are or have been conducted or within one mile [1.61 kilometers] of an oil<br>or gas well site has been disrupted, or diminished in quality or quantity by the drilling operations<br>and a certified water quality and quantity test has been performed by the person who owns an<br>interest in real property within one year preceding the commencement of drilling operations, the<br>person who owns an interest in real property is entitled to recover the cost of making such<br>repairs, alterations, or construction that will ensure the delivery to the surface owner of that<br>quality and quantity of water available to the surface owner prior to the commencement of drilling<br>operations. Any person who owns an interest in real property who obtains all or a part of that<br>person's water supply for domestic, agricultural, industrial, or other beneficial use from an<br>underground source has a claim for relief against a mineral developer to recover damages for<br>disruption or diminution in quality or quantity of that person's water supply proximately caused<br>from drilling operations conducted by the mineral developer. Prima facie evidence of injury under<br>this section may be established by a showing that the mineral developer's drilling operations<br>penetrated or disrupted an aquifer in such a manner as to cause a diminution in water quality or<br>quantity within the distance limits imposed by this section. An action brought under this section<br>when not otherwise specifically provided by law must be brought within six years of the time the<br>action has accrued. For purposes of this section, the claim for relief is deemed to have accrued<br>at the time it is discovered or might have been discovered in the exercise of reasonable<br>diligence.A tract of land is not bound to receive water contaminated by drilling operations onanother tract of land, and the owner of a tract has a claim for relief against a mineral developer toPage No. 2recover the damages proximately resulting from natural drainage of waters contaminated by<br>drilling operations.The mineral developer is also responsible for all damages to person or property resultingfrom the lack of ordinary care by the mineral developer or resulting from a nuisance caused by<br>drilling operations. This section does not create a cause of action if an appropriator of water can<br>reasonably acquire the water under the changed conditions and if the changed conditions are a<br>result of the legal appropriation of water by the mineral developer.38-11.1-07.Notification of injury.Any person, to receive compensation, undersections 38-11.1-08 and 38-11.1-09, shall notify the mineral developer of the damages sustained<br>by the person within two years after the injury occurs or would become apparent to a reasonable<br>person.38-11.1-08. Agreement - Offer of settlement. Unless both parties provide otherwise bywritten agreement, at the time the notice required by section 38-11.1-05 is given, the mineral<br>developer shall make a written offer of settlement to the person seeking compensation for<br>damages when the notice required by section 38-11.1-05 is given.The person seekingcompensation may accept or reject any offer so made.38-11.1-09.Rejection - Legal action - Fees and costs.If the person seekingcompensation rejects the offer of the mineral developer, that person may bring an action for<br>compensation in the court of proper jurisdiction. If the amount of compensation awarded by the<br>court is greater than that which had been offered by the mineral developer, the court shall award<br>the person seeking compensation reasonable attorney's fees, any costs assessed by the court,<br>and interest on the amount of the final compensation awarded by the court from the day drilling is<br>commenced. The rate of interest awarded must be the prime rate charged by the Bank of North<br>Dakota on the date of the judgment.38-11.1-10.Application of chapter. The remedies provided by this chapter do notpreclude any person from seeking other remedies allowed by law. This chapter does not apply to<br>the operation, maintenance, or use of a motor vehicle upon the highways of this state as these<br>terms are defined in section 39-01-01.Page No. 3Document Outlinechapter 38-11.1 oil and gas production damage compensation]]>