North Dakota landowners file class action against drilling companies

Posted on: December 3rd, 2013 by Steve Larson
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High cost of oilA putative class of North Dakotans who say a ConocoPhillips Co. unit illegally flared gas to avoid paying them royalties on it is going to file a federal class action according to a notice filed with the state court. 

Gary and Martha Sorenson are seeking to lead a class of mineral rights owners who say Burlington Resources Oil & Gas Co. has been flaring gas long after it was permitted by North Dakota statute, essentially sending their royalties payments up in smoke, according to the suit.

Burlington flared at least 30 million cubic feet — or 30,000 MCF — of gas from the Sunline 34-12H well after the one-year cutoff permitted by North Dakota statute, the landowners allege in their complaint in state court. Now, they’re seeking repayment for royalties on that gas they say they’re owed.

“The provisions of [the law] were enacted in part to mitigate the adverse health and environmental effects on the air of North Dakota,” the Sorensons wrote in their state complaint. “[Burlington] has not paid royalties for the 29,764 MCF of gas produced and flared from the Sunline 34-12H well after the first year of production.”

The Sorensons initially filed suit in North Dakota district court on October 16, joining a flurry of putative class actions filed by landowners in the state steamed over the loss of royalties from flaring, according to court records.

Oil and gas drillers that don’t want to directly purchase the land they’re exploring for a well enter into agreements with the landowners to pay royalties on the resources mined.  Burlington struck a deal to pay the Sorensons and other landowners for the use of their land near the Bakken oil formation on the western edge of the state, according to the suit.

As part of the deal, and in accordance with state laws, Burlington would be allowed to flare gas from the well for the first year of its operation, the Sorensons wrote. After that, it would not be allowed to waste that gas, increasing the amount of royalties paid to the landowners, according to the complaint.

The class claims that Burlington broke North Dakota laws governing royalty payments when it continued to flare gas long after the one-year deadline set by statute, including in its complaint a chart demonstrating Burlington’s reported flaring volumes.

The process of flaring involves a controlled burn of excess gas during testing and maintenance of a well, or to control the amount of pressure as gas is being produced. Burlington allegedly continually flares gas to avoid paying royalties to the landowners, according to the complaint.

In the state court complaint, the Sorensons were seeking declaratory relief against Burlington for flaring the gas, and for the royalties they’re allegedly owed. A federal complaint is expected to be filed shortly.