Been meaning to post this one for a while.
The plaintiff in Northwest Landowners Ass'n v. North Dakota, No. 20210148 (Aug. 4, 2022), challenged North Dakota's adoption of a statute about "pore space," which is "a cavity or void, whether natural or artificially created, in a subsurface sedimentary stratum." Whoa.
The problematic part of the statute "allows an oil and gas operator to use subsurface port space and denies the surface owner the right to exclude others or to demand compensation for this subsurface use." Slip op. at 2. The statute also amended the definition of "land" to exclude pore space, and barred tort claims for injection or migration of substances into pore space. Frack!
The Association sued, asserting that the statute effected a facial taking because "it strips landowner of their right to possess and use the pore space within their lands and allows the State of North Dakota to directly redistribute that right to others without the consent of or compensation to the landowners." Slip op. at 3. Everyone filed cross-motions saying they should win as a matter of law. The trial court agreed with the Association, and entered summary judgment in its favor.
After agreeing that the plaintiff's takings claim was a proper facial claim, the North Dakota Supreme Court (applying the Fifth Amendment and the North Dakota Constitution's "overlapping and broader" property protections) held that under North Dakota law's historical treatment of pore space, concluding that it was a recognized private property interest, and additionally, that owners of that property could sue in tort for trespass "for the use of their surface estate that was not 'reasonably necessary' to develop the mineral estate." Slip op. at 8.
"Thus," the court concluded, "North Dakota law has long established that surface owners have a property interest in pore space." Slip op. at 9. Did the plaintiff establish its members have a protected property interest? Yes.
Next, was this a taking without just compensation? Applying a physical invasion categorical analysis (Cedar Point Nursery and Loretto), the court held that this qualified as a taking of owner's right to exclude, and that "Senate Bill 2344 constitutes a per se taking." Slip op. at 11. "It allows third-party oil and gas operators to physically invade a landowner's property by injecting substances into the landowner's pore space." Id.
Moreover, by prohibiting the payment of compensation, the statute "removes all rights that make ownership or pore space valuable." Id.
The court rejected the State's argument that because the owner of the mineral rights also owns an implied easement to access property to find and develop those mineral rights, there's no taking because that means mineral owners already have a right to access and use the surface owner's pore space. Slip op. at 12.
Not so fast, held the court: "[e]ven when a severance of minerals has created an implied easement permitting use of the surface estate by the owner of the severed minerals, S.B. 2344 constitutes a taking." Slip op. at 13. Check out ¶ 30 on page 13 for the full analysis of why.
Next, the court rejected the State's assertion that because the statute is a valid exercise of police power, it cannot be a taking. Labeling the argument "misplaced," the court held that the takings clause(s) are inherent limitations on the police power. Thus, answering the police power question does not also resolve the takings question: "[w]hen an action is determined to be within the broad scope of the state's police power, the court must still consider whether just compensation is due for a taking or damaging of property." Slip op. at 14.
Finally, the court rejected the State's related argument that third-party access to pore space was a "background principle" of North Dakota law under Lucas. Again, no succor from the court. Background principles are for Lucas claims only, and don't apply to the physical invasion/appropriation categorical taking category.
The court affirmed the taking, and concluded that the unconstitutional provisions could be severed from the balance of the statute.
Northwest Landowners Ass'n v. North Dakota, No. 20210148 (N.D. Aug. 4, 2022)
