Supreme Court rejects appeal on flared gas royalty payments
BISMARCK - Legal challenges over flared natural gas hit a roadblock this week when the North Dakota Supreme Court ruled that a mineral owner's lawsuit should have been dismissed.
BISMARCK – Legal challenges over flared natural gas hit a roadblock this week when the North Dakota Supreme Court ruled that a mineral owner’s lawsuit should have been dismissed.
But one of the attorneys who claims mineral owners are owed royalty payments for natural gas that was flared said the legal fight that’s now nearly three years old is not yet over.
“We’re not planning to stop until royalty owners get paid,” said Bismarck attorney Derrick Braaten.
The legal challenge began in 2013 when mineral owners filed 14 lawsuits against oil companies claiming they are owed royalty payments on natural gas that was flared in violation of North Dakota statutes.
Thirteen of the lawsuits were moved to federal court, where a judge dismissed them and said the mineral owners failed to exhaust their administrative remedies through the North Dakota Industrial Commission.
One lawsuit, Sarah Vogel versus Marathon Oil Co., remained in district court, where a judge dismissed it on similar grounds.
Vogel, who was once a member of the Industrial Commission when she served as North Dakota agriculture commissioner, appealed the dismissal to the North Dakota Supreme Court.
This week, the Supreme Court affirmed the district court’s decision, saying that Vogel is required to go to the Industrial Commission prior to pursuing claims in court. Justice Carol Ronning Kapsner dissented.
Braaten, one of Vogel’s attorneys, said mineral owners were seeking to file class action lawsuits against oil companies because bringing individual claims to the Industrial Commission would be uneconomic. Mineral owners expected to spend more money in legal fees going through the administrative process than they could potentially recoup in royalties.
The legal team and Vogel hadn’t decided Friday what their next step is, but Braaten indicated he intends to bring claims to the Industrial Commission.
“I plan to find a way to make it economical,” Braaten said.
Vogel said Friday she’s disappointed with the Supreme Court opinion because she questions whether she can get a fair hearing through the Industrial Commission, which consists of the governor, attorney general and agriculture commissioner.
“I think the oil companies play the Industrial Commission hearing process like a fiddle,” Vogel said. “But it doesn’t work for individuals.”
Through the administrative hearing process, the hearing officer is typically an assistant attorney general who at times serves as legal counsel for the commission.
Vogel said she thinks the cases should be heard by an independent administrative law judge.
One of her concerns is that some oil companies have made campaign contributions to members of the Industrial Commission. The Marathon Oil Co. Employees PAC made contributions of $1,000 and $3,000 to Attorney General Wayne Stenehjem’s campaign for governor, records show, and most of the approved hearing officers work in Stenehjem’s office.
“It just doesn’t give the appearance of neutrality,” said Vogel, a Democrat who had considered running for governor against Stenehjem but never entered the race.
Lynn Helms, director of the Department of Mineral Resources, said the campaign contributions have never created a conflict of interest that he’s aware of.
“I feel we make every possible effort to make sure it’s fair,” Helms said. “If there’s a possibility that the hearing officer or the people on the approved list of hearing officers would be a party to the case, then we try to identify those and take them to an administrative law judge.”
Mineral owners have been granted royalties owed on flared natural gas through the administrative hearing process, Helms said.
Marathon Oil attorney John Morrison didn’t return a call seeking comment on Friday.
In December, Morrison argued during the Supreme Court hearing that Marathon has paid royalties on flared natural gas and disputed the claims that Marathon flared gas in violation of state law.