A Bismarck jury awarded a western North Dakota hunting ranch a $1 million judgment based on a claim that oil drilling turned their pristine landscape into “an industrial zone”. The claim by Deadwood Canyon Ranch was graphic, but familiar to readers of this blog:

“The well pumps operate continuously and emit a loud groaning noise; the oil wells flare and smell of excess gas; and the well sites are serviced by a fleet of 14-wheel tanker trucks that barrel down the newly constructed access roads, sometimes kicking up a dust storm as they pass.”

The judgment is based on a 1979 North Dakota law known as the Oil and Gas Production Damage Compensation Act.

The law provides that a mineral developer “shall pay the surface owner a sum of money equal to the amount of damages sustained by the surface owner and the surface owner’s tenant, if any, for lost land value, lost use of and access to the surface owner’s land, and lost value of improvements caused by drilling operations.”

Deadwood Canyon Ranch oil well. Photo Credit: Kathleen J Bryant/Forum News Service

“Kind of like the tobacco industry
James Grijalva, a University of North Dakota law professor whose areas of expertise include property law, said a jury verdict doesn’t set a precedent from a legal standpoint, but it could be an example for other juries to follow in thinking that a particular kind of damage is compensable.

“It’s kind of like the tobacco industry. They fought really hard never to lose a case, because once there’s a hole in the dam, the dike is breached,” he said.

This could happen in Montana too
This judgment is of particular interest to Montanans because Montana has a similar law on the books, Mont. Code Ann. § 82-10-504, “surface damage and disruption payments — dispute resolution.”

According to the Wyoming Law Review (p. 421),

Montana’s Surface Damage Act is quite similar. Written notification is again required of the producer to the surface owner not more than ninety days or less than tendays prior to entry and must relate the proposed operations.

Montana does not require a surface bond and mirrors North Dakota in requiring damages for loss of value to surface improvements, loss of land value, and loss of production and income from agriculture.

After entry, the surface owner has two years to notify the mineral developer of damages. Upon such notification, the developer has sixty days to make an offer of restitution. The surface owner can accept or file suit inthe appropriate state district court.

Whatever the route to calculating damages, payment must be made within sixty days of the agreement or award, or the surface owner is entitled to twice the amount of the owed damages.

The major difference between the North Dakota and Montana is timing of payment of surface damages. North Dakota requires the parties to speculate on the damages and agree—or seek a judicial determination if no agreement is reached—on a settlement beforehand. Montana’s statute considers damages in retrospect, with the surface owner essentially keeping tabs and presenting a bill after the alleged damage is done.

The judicial landscape may be changing
We seem to be seeing a change in the judicial landscape. Juries are increasingly willing to grant damages to plaintiffs for a variety of problems caused by oil and gas drilling. We’ve reported on some here:

• Bob and Lisa Parr of Wise County, Texas were awarded $2.9 million by a Texas jury against an oil and gas operator for “creating a private nuisance” that ruined their health. That ruling was recently upheld by a judge, but will almost certainly be appealed.
• Two oil companies in Michigan have been charged with violations of the Sherman Anti-Trust Act for colluding to reduce prices paid for real estate and price fixing.
• This week we covered the class action suit against Energy Corporation of America for failing to pay sufficient royalties to farmers and other land owners. That case will go to trial next March. This suit is one of several of this type that have recently been tried and won by plaintiffs.

We’ve established that the law is tilted far in favor of the oil and gas industry. It’s a positive step that courts are willing to protect land owners in ways that our federal and state legislatures have not.