Legislative update: Senate District 4

Hello, A bill whose primary focus was to ensure certainty for enhanced oil recovery methods using carbon dioxide (CO2) injection and monetary benefits for the coal industry nevertheless received much pushback and caused much consternation due to potential threats to landowners and private property rights regarding the disposal of saltwater and other materials and saltwater disposals.
Enhanced oil recovery (EOR) is a process in which water or CO2 is injected into the formation to increase pressure and drive more oil to the surface, thus substantially increasing the profitability of aging wells.
SB 2344 originally passed the Senate 45-0 (receiving no opposition of any kind), with the focus being on CO2 injections – clarifying that using CO2 for enhanced oil recovery did not in itself constitute trespass in pore space (rock cavities thousands of feet below the surface).
However, on the House side numerous parties came forward with concerns about how this policy could affect private property rights with regards to the disposal of saltwater or other materials and saltwater disposals (something never mentioned on the Senate side).
With all that was being said, I admit to being alarmed with the developments and the potential harm to landowners and the threat to private property rights.
The main concerns were that landowners would lose their right to be compensated for saltwater disposals, either existing or future, and that existing disposal contracts could be voided.
In other words, a fear existed that oil companies could steamroll landowners by not honoring existing contracts or attempts at future contracts and dispose of saltwater wherever they wanted without owing any compensation.
Typical contracts for saltwater disposals include a per barrel injection fee in additional to any surface damage compensation and other lease agreements.
An amended version of the bill that alleviated much of the concerns passed the House 65-26 and went to conference committee (since the two chambers passed different versions).
The bill also looked to allow for the underground storage of natural gas to help curb flaring, but that whole subject was stripped from the bill in conference committee (a committee comprised of three Senators and three Representatives from the Energy and Natural Resources Committees) due to concerns from landowners and others.
Numerous meetings between landowners, industry stakeholders and legislators resulted in various additional conference committee amendments that made the bill better for landowners and all involved.
With the original intent of the bill being preserved (providing certainty in the use of CO2 injection for EOR), the final version of the bill ensures that current and future contracts regarding saltwater disposals are not impaired and that an operator can’t claim a landowner should no longer be compensated if a contract expires and a new one is negotiated. The right of a surface owner to sue if either of those conditions is violated is also preserved.
A 2017 Supreme Court case tied the Surface Damages Act (ND Century Code Chapter 38) with the Subsurface Pore Space section of century code (NDCC 47-31) in a way that wasn’t intended by the legislature and created uncertainty for industry and landowners.
Some wanted compensation given to landowners for storage if CO2 is injected into a formation for EOR and not all of it is recovered or if some of it migrates into an adjacent landowner’s pore space. Others said that landowners adjacent to a commercial saltwater disposal should be compensated if injected fluid migrates into their pore space.
The language of this bill does not agree with either of these claims, and by so doing protects the landowners with disposals, the owners of the saltwater disposals (sometimes the landowner themselves), and all those who benefit from EOR which produces more oil from an aging well.
Moreover, the possible migration of these injected materials into adjacent pore spaces is impossible to measure, since water is not detectable by seismic technology like oil is.
The last issue dealt with the disposal of saltwater within a unitized field or spacing unit.
The language of the bill provides that an operator that injects saltwater in a disposal within the spacing unit from which it was originally extracted needs to compensate the surface owner for any surface damages (as always) but does not need to provide for injection compensation.
Any saltwater not originally belonging to the spacing unit formation that is brought in from somewhere else and disposed of then requires injection compensation to be paid to the surface owner.
Overall, the argument is that when saltwater is injected into the Dakota Formation (an underground saltwater river), that water is owned by the state of North Dakota and is always flowing and migrating, and this bill basically keeps the same procedures in place that have been used for decades.
With all that in mind, I voted in favor of the bill, confident that the bill protects private property rights and the right to landowner compensation while also providing certainty to industry and all the beneficiaries involved, including landowners, local workers, and local governments.
It also will greatly benefit the coal industry with the monetization of CO2. The final version of SB 2344 with conference committee amendments passed the Senate and the House and was signed by the Governor.

Jordan Kannianen, District 4 Senator
jkannianen@nd.gov, 701.421.8813

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