Landowner sues oil companies over spills: State becomes unofficial party in case

Editors Note: A previous version of this story stated that the state had become party to the defense. The story should have stated that the state had become a party to the case, causing the plaintiff's attorneys to question what role the state was playing in the litigation.

As North Dakota’s government faces criticism for its alleged failure to regulate the oil and gas industry, state officials have become an unofficial party to a civil lawsuit, prompting the plaintiff in the case to question whose side the state is on.

The case, which has been in the works for several years, involves Daryl Peterson, a landowner from Bottineau County, who has complained that numerous saltwater spills on his property have not been properly cleaned up.  

But after seeking legal representation and bringing a suit against three oil companies -- Sagebrush Resource, Ballantyne Oil and Petro Harvester Operating Co. -- Peterson and his attorneys now find themselves questioning both the oil companies and state officials, even though the state is not named in the lawsuit.

The circumstances of the case have created an odd legal situation, where state officials with the North Dakota Industrial Commission and the Oil and Gas Division have become unnamed parties in the case, while the Industrial Commission continues to operate as the adjudicating body that is supposed to make the final decision.

“It’s like we brought an action in district court, and the district judge is acting like we are suing them, even though what we are really asking for is a decision,” said Derrick Braaten, Peterson’s attorney. “Quite frankly, I’m utterly confused by it.”

Alison Ritter, the communications director for the Oil and Gas Division, said that the state has not sided with the plaintiff or the defendants in the case. She said the Oil and Gas Division has requested that a third party -- an administrative law judge -- decide the case and provide a recommendation to the Industrial Commission.

But the entire situation has left Peterson and Braaten confused as to what role the state is playing in the case.

The legal dispute could provide more ammunition to critics who have argued that the state Department of Health and the Department of Mineral Resources, North Dakota's main oil regulatory agencies, have bowed to the interests of oil companies, to the detriment of landowners and residents.

The state’s decision to become a party to the case has also open up many senior regulatory officials to depositions, possibly exposing information about the state’s role as the regulator of oil companies.

If successful, the case could spawn a host of other lawsuits against oil companies and the state, requiring further reclamation of contaminated soil.

At the time of publication, no one from the Attorney General’s office -- which has represented state officials during depositions that have already been conducted for the case -- was available for comment.

Years of saltwater spills

The main issue at question in the lawsuit is whether the three oil companies -- all of which have owned a saltwater disposal well on Peterson’s property at one time -- failed to remove contaminants from the soil and return the land to its original condition.

“That disposal well has had numerous leaks over the years -- some reported, some not,” Peterson said.

Peterson, who has spent large sums of money in soil testing and legal fees, said the case is simply about making the oil companies clean up the site correctly, as required under state law.

“All I have seen is me spending money on attorneys, trying to keep up with their game of stall and delay, basically, bleeding me to death,” Peterson said.  

Many of the spills that contaminated the property occurred over more than a decade. On numerous occasions, spills from the disposal well allowed hundreds of barrels of saltwater to spread across Peterson’s land, according to a complaint filed with the Industrial Commission in 2013.

“Contamination from frequent deluges of waste water and oil continues to leach and spread throughout the soil and possibly into water supplies on the subject property,” Peterson’s lawyers wrote in the complaint. “Although attempts at remediation and reclamation have been made, the investigations of the extent of the damage and attempts at remediation and reclamation have been inadequate, incomplete and largely ineffectual.”

While Peterson persistently asked the state to force the oil companies to clean up the site, it wasn’t until 2011 that state officials visited the site and told the oil company to excavate and replace the topsoil.

But even after the oil company performed the required reclamation, Peterson said parts of his land were unable to grow vegetation because of continued saltwater exposure.

Independent testing has shown that high concentrations of contaminants remain in the soil, Peterson and Braaten said.

“We have had some of our experts go out and they found significantly elevated levels of chlorides, which is an obvious indication that there is still saltwater contamination that exists in the area,” Braaten said.

The oil companies' lawyers have disputed the idea that the cleanup has not worked.

Peterson said he had hoped the state would have sided with him and forced the companies to clean up the site again, but those hopes were dashed when the state became a party to the lawsuit.

Peterson said he never thought he would have to pay to have the oil compaines and state officials deposed in the case.  

“I thought that laws protected people,” Peterson said. “If someone came in and destroyed your home, law enforcement would be out there to get the culprit and have them pay for it.”

Peterson said he does not see any difference with contaminants being spilled on his soil.

“They have annihilated my property, destroyed my property, at great financial consequence, and they have made minimal attempts to repair it.”

Now that the state has become party to the case, Peterson said his intentions are as much about holding the state government accountable as it is cleaning up his land.

“We want to be good for our case, but we want to be good for the future of landowners and the future of the environment in North Dakota,” Peterson said.

Peterson said he believes his case is a litmus test for other landowners in the state who have complaints about how oil companies have cleaned up spills and contamination on their property. He said there are at least a half-dozen landowners in Bottineau County alone who are watching the case closely.

“I think they are being held back until they do have an outcome from me,” Peterson said.

How to proceed

Braaten, a lawyer with Baumstark Braaten Law Partners in Bismarck, said at this point, he is unsure how to proceed with the case.

“It’s weird because the complaint we actually brought was against these operators for spills and other violations,” Braaten said. “What we were asking for was the Industrial Commission to look at this and determine whether they were in violation of statutes and regulations, and if they were, to enforce those statutes and regulations.”

Braaten said he sent out a letter stating that, to his understanding, the Industrial Commission was supposed to serve as the adjudicating body and not a party to the lawsuit.

But Braaten said the attorneys for the state responded with: “No, we’re a respondent. We’re getting sued here. We’re a party.”

Braaten said he disagreed with that fact. He said if Peterson actually wanted to sue the state, he could have done so under different legal standing, but they chose not to go down that path.

“Quite frankly, as an attorney, I don’t know what to do about that,” Braaten said. “They have decided that they are a party.”

Braaten said the oddest thing about the current circumstances is that the case will still be heard in front of the Industrial Commission, even though they are now party to the case.

“It’s confusing to me because they are supposed to be the independent, objective decision-maker” Braaten said.  

While the case will have to be heard in front of the Industrial Commission first, Braaten said Peterson had the right to appeal the case to a district court. He said if that happens, the judge would have to decide whether the state can be a party to the case.

The one benefit to the state becoming party to their case, Braaten said, is that more state officials are now open to deposition and the legal discovery process.

While his law firm would have had access to Department of Health officials before, Braaten said the state’s decision to become a party allows his law firm to collect evidence from the Oil and Gas Division, too.

Braaten said it was never his intention to depose officials like Lynn Helms, director of the Department of Mineral Resources, and Dave Glatt, the director of the Department of Health, but the circumstances have forced his hand.

“It’s unfortunate. I really thought that we specifically did not sue the state, because we wanted the agencies to be on our side and just enforce the law," he said. "But they took an adversarial position against us. So it has really not gone the way I had hoped it would."

Brown is a regional reporter for The Dickinson Press. Contact him at 701-456-1206 and follow him on Twitter at Andy_Ed_Brown.