Bakken Shale / Shale Daily / Rockies/Other / NGI All News Access

North Dakota Producers Face Lawsuits for Flaring

Ten lawsuits seeking class action status have been filed by mineral rights owners against North Dakota oil/natural gas operators alleging the loss of millions of dollars in royalties due to large amounts of flared associated gas during the past six years.

Bismarck, ND-based attorney Derrick Braaten filed the lawsuits on behalf of 10 mineral rights owners spread over the major oil/gas-producing counties in the Bakken Shale play, including McKenzie, Williams, Mountrail and Divide counties. Named in the lawsuits are ten operators -- Burlington Resources Oil and Gas Co. LP, Continental Resources Inc., Crescent Point Energy U.S. Corp., HRC Operating LLC, Marathon Oil Corp., Samson Resources Co., SM Energy Co., Statoil Oil and Gas LP, WPX Energy and XTO Energy Inc.

A separate lawsuit was filed against each company, and each listed eight causes of action, seeking to force the companies to pay damages. In addition to Braaten's North Dakota-based law firm, four other law firms from Colorado, Texas, Montana and Wyoming with oil/gas and class action experience are representing the mineral rights owners.

Flaring has been a major concern of state and industry officials as the Bakken shale boom has grown (see Shale Daily, July 31). A law on the issue was passed earlier this year by the North Dakota state legislature (HB 1134) offering tax breaks to oil and natural gas operators as an incentive to cut flaring (see Shale Daily, May 1).

Ron Ness, president of the North Dakota Petroleum Council (NDPC), defended the operators, telling local news media that "nobody wants to capture that flare gas more than the oil operators; it is the value stream coming out of the well." Ness argued that the operators are complying with state laws on flaring and working to reduce the amount of associated gas that is flared.

"The industry has invested more than $6 billion in new pipelines, processing plants and other infrastructure to move it from the wellhead to the marketplace," said Terry Kovacevich, NDPC chairman and regional vice president for Marathon Oil. "This is a significant investment, but we are committed to making North Dakota the model of a modern, efficient and technology-driven oilfield."

Reduced slightly in the most recent monthly statistics from 30% to 29% of produced gas, flaring is the subject of an industry task force now at work to make recommendations for cutting flaring to below 10% (see Shale Daily, Oct. 16).

The lawsuits seek to force operators to comply with state law and pay royalties to mineral owners for the value of flared gas going back over the past six years, Braaten told local news media. State and industry officials do not agree that the operators are out of compliance with requirements on flaring, which are currently being examined for potential changes.

"The plaintiffs and class members they seek to represent in each case are western North Dakota mineral rights owners who potentially have lost millions of dollars in royalties due to producers' practice of burning off large quantities of gas rather than selling it," said Braaten, calling flaring a "controversial practice" that has grown from 3% in 1999 to more than 30% at times during the current drilling boom in the state.

Currently about 1,500 wells in the state are flaring gas, according to the plaintiffs' filings. The plaintiffs point out that both wells connected to gas gathering and processing infrastructures and those still unconnected are part of the problem.

Justin Kringstad, director at the North Dakota Pipeline Authority, said in August that solid progress was made in catching up with the connection of wells to gathering systems. Of the current month's 29% flaring total, 16% was from wells already connected, and the remaining 13% were still waiting for connections, Kringstad said.

Counsel for the royalty owners are five law firms from North Dakota, Colorado, Texas, Montana and Wyoming with oil and gas and class action experience.

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