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All But One North Dakota Flaring Lawsuits Dismissed

A federal judge has dismissed 13 of 14 lawsuits involving wellsite associated gas flaring aimed at North Dakota's major oil/natural gas producers. The dismissal was on a procedural basis, claiming the mineral rights owners who brought the lawsuits have not exhausted their administrative remedies with the state.

Bismarck, ND-based U.S. District Court Judge Daniel Hovland said the plaintiffs have not exhausted possible remedies with the North Dakota Industrial Commission for their claims they are owed royalty payments on natural gas that has been illegally flared.

The mineral rights owners went to court last fall, seeking a class action against the exploration/production companies in the state's robust Williston Basin (see Shale DailyOct. 10, 2013). Ten cases were filed in state district court initially and four more were added earlier this year, with all of them being consolidated in federal district court.

"As long as administrative procedures are prescribed they must be followed before a party seeks judicial relief," Hovland wrote in this 13 dismissal orders. The remaining case against Marathon Oil Corp. is still pending in state court; it was never consolidated with the others.

The Bismarck attorney representing the plaintiffs, Derrick Braaten, told local news media that the judge did not rule on the cases' merits but rather made a procedural ruling.

Ron Ness, president of the North Dakota Petroleum Council (NDPC), said the judge's action was great news for the E&P companies, "allowing them to move on and focus on the goal of the [NDPC's] industry task force to reduce flaring. This does not change our goal and the need of meeting infrastructure targets set by the industrial commission."

NDPC supports the state requirement for gas capture plans on new permits beginning June 1; it came out of the task force recommendations, Ness said (see Shale DailyMarch 5).

In his decision, Hovland said North Dakota generally permits flaring for one year after a well starts commercial production, and an operator must get an exemption from the industrial commission to go beyond the one year. If gas is flared in violation of the law, operators must pay royalties to the mineral owners and production taxes to the state.

The three-member industrial commission, headed by the governor, has broad authority to regulate oil/gas activities through the state's Department of Mineral Resources. The commission determines when flaring laws have been violated.

The companies named in the legal actions that were dismissed are: Hess Corp., Hunt Oil Co., Burlington Resources Oil & Gas Co. LP, WPX Energy Williston LLC, Continental Resources Inc., XTO Energy Inc., HRC Operating LLC, Statoil & Gas LP, Crescent Point Energy U.S. Corp., Samson Resources Co., SM Energy Co., EOG Resources Inc. and Kodiak Oil & Gas (USA) Inc.

The original mineral rights owners bringing the legal action were spread over the major oil/gas-producing counties in the Bakken Shale play, including McKenzie, Williams, Mountrail and Divide counties.

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