Northern Natural Gas Co. has filed a federal lawsuit to take more than 9,100 acres in south-central Kansas so it may expand the boundaries of its underground Cunningham Storage Field.
The lawsuit, filed in U.S. District Court in Wichita, KS, on July 19, argues that the property-taking is in the public interest and a necessity to allow it to contain natural gas that is migrating from the underground storage facility (Northern Natural Gas Co. v. Approximately 9117.53 acres in Pratt, Kingman, and Reno Counties, Kansas, et al, No. 10-CV-1232-KHV-KHM).
The lawsuit also asks the court to order gas well operators within the expansion area to shutter any wells in operation. At least 173 property owners, and oil and gas producers, hold an interest in the 40 tracts targeted in the filing.
Northern, based in Omaha, is an affiliate of MidAmerican Natural Gas, which in turn is owned by Warren Buffett. Northern owns and operates the Cunningham Storage Field, which can store up to 62 Bcf. Northern uses the field to serve a market area that includes parts of Kansas, Iowa, Minnesota, Nebraska and Wisconsin.
In June the Federal Energy Regulatory Commission issued Northern a Certificate of Public Convenience and Necessity that authorized “expansion of Northern’s certificated buffer zone to include the Viola and Simpson formations” in the three counties (see Daily GPI, June 4). The approval gave Northern the right to increase the certificated boundary of the Cunningham field by about 12,320 acres.
Northern said it has made “bona fide good faith efforts” to obtain the appropriate property, interests and rights to be condemned in the expansion area and has sought to reach an agreement to compensate and pay damages (if any) with all of the owners of the land to be taken. Northern said in June it began to issue written offers to each interest owner and was able to acquire some of the property.
The process to contain the migrating gas has been ongoing for several years. In September 2005 following an application by Northern, FERC issued an order finding that Northern’s storage gas was migrating from the Cunningham field, and authorized it to install and operate two additional withdrawal wells and a compressor unit.
Three years later FERC authorized an expansion of the field by 1,760 acres. The Commission’s determination noted that storage gas from the Cunningham field had migrated “at least” to some gas wells north of the facility’s certificated boundary. And FERC said the gas found in the wells consisted primarily of Northern’s migrated storage gas.
By early 2009 Northern had acquired by agreement the storage rights on an additional 3,040 acres north of the acreage granted to it by FERC, including the lease acreage associated with the gas wells. Based on new data that indicated more gas migration, Northern last September asked for FERC to allow it to expand the Cunningham field and/or to allow a containment plan. FERC issued an order allowing the expansion.
In the court filing this week, Northern asked the district court for the right to exercise the power of eminent domain to establish, among other things, a buffer zone to protect the Cunningham Storage Field from third-party production of storage gas; manage, maintain, protect and preserve the integrity of the storage field; implement a containment plan to slow and reverse gas migration from the field; and prevent the production of natural gas, gas liquids, gas condensate and/or other hydrocarbons, minerals, and/or other gases, liquids, fluids or substances from the Viola and Simpson formations.
Drilling companies and landowners contend that native gas reserves exist on their properties. And to date, state court rulings have gone in the defendants’ favor, allowing landowners to keep the rights to the gas, even if it was originally stored in the Cunningham facility, if the gas had migrated more than one-half mile from the storage facility onto areas underneath the landowners’ property.
“We think it is the illegal confiscation of the minerals under this acreage because they circumvented the judicial system where they have been beat every time and went to the regulatory process — where they have tremendous lobbying power in Washington, DC, because this company is owned by Warren Buffett,” said VAL Energy President Todd Allam. His company has a leasehold that is six miles from the Cunningham field.
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