Nw. Landowners Ass'n v. State
| Decision Date | 04 August 2022 |
| Docket Number | 20210148 |
| Citation | 2022 ND 150 |
| Parties | Northwest Landowners Association, Plaintiff and Appellee v. State of North Dakota, North Dakota Industrial Commission, Hon. Douglas Burgum in his official capacity as Governor of the State of North Dakota, and Hon. Drew H. Wrigley in his official capacity as Attorney General of North Dakota, Defendants and Appellants and Board of University and School Lands of the State of North Dakota, Defendant and Continental Resources, Inc., Intervenor-Defendant and Appellant |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Bottineau County, Northeast Judicial District, the Honorable Anthony S. Benson, Judge.
Derrick L. Braaten (argued) and Todd A. Sattler (on brief) Bismarck, N.D., for plaintiff and appellee.
Matthew A. Sagsveen, Solicitor General (argued), and Steven B. Nelson, Office of Attorney General, Bismarck, N.D., for defendants and appellants.
L. Poe Leggette (argued) and Alexander K. Obrecht (appeared) Denver, Colorado, for intervenor-defendant and appellant Continental Resources, Inc.
Lawrence Bender, Bismarck, N.D., for amicus curiae North Dakota Petroleum Council.
[¶ 1] Northwest Landowners Association commenced this action, challenging the constitutionality of Senate Bill 2344, which relates to subsurface pore space. The district court granted the Association's cross-motion for summary judgment, concluding S.B. 2344 is unconstitutional under the state and federal takings clauses. The State and Continental Resources appeal from the district court's summary judgment order and amended judgment. On appeal, the State argues that S.B. 2344 does not violate the state or federal takings clauses and does not constitute an unconstitutional gift and that the district court misapplied N.D.R.Civ.P. 56 by failing to consider evidence submitted by the State. Continental Resources, on the other hand, argues the court erred in analyzing the Association's facial challenge, in determining pore space has value as a matter of law, and in denying Rule 56(f) discovery. The State also appeals from the court's order granting attorney's fees and expenses, arguing the court abused its discretion in awarding the Association attorney's fees. We affirm in part and reverse in part the amended judgment, and we affirm the order granting attorney's fees and expenses.
[¶2] In 2019, the Legislative Assembly enacted S.B. 2344, relating to pore space, which is defined as "a cavity or void, whether natural or artificially created, in a subsurface sedimentary stratum." N.D.C.C. §§ 47-31-02; 38-11.103(7). Senate Bill 2344 contained three sections that amended and reenacted three existing statutes (N.D.C.C. §§ 38-08-25, 38-11.1-01, 38-11.1-03) and a fourth section that created and enacted N.D.C.C. § 47-31-09.
[¶3] Section 1 of S.B. 2344, N.D.C.C. § 38-08-25, designated the use of carbon dioxide for enhanced recovery of oil, gas, and other minerals as an additional acceptable recovery process. Section 1 also added three legislative declarations that certain activities relating to the use of carbon dioxide are in the public interest, along with a grant of rulemaking authority to the North Dakota Industrial Commission ("NDIC") to effectuate these purposes. Section 1 also added subsection 5, which allows an oil and gas operator to use subsurface pore space and denies the surface owner the right to exclude others or to demand compensation for this subsurface use. Section 38-08-25(5), N.D.C.C., states:
Notwithstanding any other provision of law, a person conducting unit operations for enhanced oil recovery, utilization of carbon dioxide for enhanced recovery of oil, gas, and other minerals, disposal operations, or any other operation authorized by the commission under this chapter may utilize subsurface geologic formations in the state for such operations or any other permissible purpose under this chapter. Any other provision of law may not be construed to entitle the owner of a subsurface geologic formation to prohibit or demand payment for the use of the subsurface geologic formation for unit operations for enhanced oil recovery, utilization of carbon dioxide for enhanced recovery of oil, gas, and other minerals, disposal operations, or any other operation conducted under this chapter. As used in this section, "subsurface geologic formation" means any cavity or void, whether natural or artificially created, in a subsurface sedimentary stratum.
[¶4] Section 2 of S.B. 2344, N.D.C.C. § 38-11.1-01, supplemented existing legislative findings emphasizing the importance of agriculture to the public welfare and recognized the importance of "preserving and facilitating exploration through the utilization of subsurface pore space in accordance with an approved unitization or similar agreement, an oil and gas lease, or as otherwise permitted by law." N.D.C.C. § 38-11.1-01(1). Section 2 also added an interpretive provision stating, "This chapter may not be construed to alter, amend, repeal, or modify the law concerning title to pore space under section 47-31-03." N.D.C.C. § 38-11.1-01(4).
[¶5] Section 3 of S.B. 2344, N.D.C.C. § 38-11.1-03, adopted a new definition of "Land" that "excludes pore space." Chapter 38-11.1, also known as the Damage Compensation Act, requires the mineral developer to compensate the surface owner for "lost land value, lost use of and access to the surface owner's land, and lost value of improvements caused by drilling operations." N.D.C.C. § 38-11.1-04.
[¶6] Lastly, section 4 of S.B. 2344 enacted a new section barring tort claims for injection or migration of substances into pore space. Section 47-31-09(1), N.D.C.C., states:
Injection or migration of substances into pore space for disposal operations, for secondary or tertiary oil recovery operations, or otherwise to facilitate production of oil, gas, or other minerals is not unlawful and, by itself, does not constitute trespass, nuisance, or other tort.
[¶7] The Association filed a complaint against the State, challenging the constitutionality of S.B. 2344 on its face. The Association argued S.B. 2344 constituted a taking because it "strips landowners of their right to possess and use the pore space within their lands and allows the State of North Dakota to directly redistribute that right to others without the consent of or compensation to the landowners." Continental Resources intervened and became an additional defendant to the suit. The State and Continental Resources collectively moved for judgment on the pleadings. The Association responded by filing a cross-motion for summary judgment.
[¶8] A status conference was held during which the State argued it needed further discovery before it could respond to the Association's summary judgment motion. The State filed a Rule 56(f), N.D.R.Civ.P., motion arguing further discovery was needed to establish the value of pore space. The court did not decide the State's Rule 56(f) motion before the deadline to respond to the Association's summary judgment motion. The State then filed its own cross-motion for summary judgment.
[¶9] The district court granted summary judgment in favor of the Association. In its order, the court denied the State's motion to conduct discovery, concluding pore space has value as a matter of law and further discovery was not necessary to decide the summary judgment motions. First, the court concluded that landowners have a property right in the underlying pore space and a right to compensation for use of their pore space. Second, the court rejected the Appellants' argument that S.B. 2344 could be constitutionally applied in some scenarios and for that reason is not facially invalid. Third, the district court concluded S.B. 2344 was enacted for the "constitutionally impermissible purpose of economic development to benefit private parties." It concluded that S.B. 2344 constitutes a taking under both the federal and state constitutions because it takes landowners' property without compensation for the benefit of private parties while also barring the landowners from seeking tort remedies, including trespass. The court found S.B. 2344 "unconstitutional on its face" and declared the entire bill invalid. The court issued an injunction preventing enforcement of the law.
[¶10] After the district court granted its motion for summary judgment, the Association moved for attorney's fees under 42 U.S.C. §§ 1988 and 1983. The court awarded attorney's fees, concluding attorney's fees may be awarded under § 1988 even if the complaint does not expressly rely on § 1983 or § 1988.
[¶11] We first address Continental Resources' argument that the district court erred in analyzing a threshold question to the Association's facial challenge to S.B. 2344. Continental argues that because it can identify constitutional applications of S.B. 2344, the court erred in continuing on to analyze the Association's takings challenge.
[¶12] The Association's complaint sought a declaration that S.B. 2344 is unconstitutional and should be declared void therefore making a facial challenge rather than an as-applied challenge. "A claim that a statute on its face violates the constitution is a claim that the Legislative Assembly exceeded a constitutional limitation in enacting it, and the practical result of a judgment declaring a statute unconstitutional is to treat it 'as if it never were enacted.'" Sorum v. State, 2020 ND 175, ¶ 21, 947 N.W.2d 382 (citing Hoff v. Berg, 1999 ND 115, ¶ 19, 595 N.W.2d 285). A facial challenge is a question of law and fully reviewable on appeal because a "violation that occurs at the time of enactment does not depend on any facts or circumstances arising later." Sorum, at ¶ 21.
[¶13] Continental...
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