Ten class actions were filed in North Dakota by mineral owners alleging lost income due to the flaring of natural gas by various oil and gas producers. According to a July 2013 report by Ceres, the flaring of natural gas in North Dakota has doubled in the past two years.
The lawsuits allege that the producers have violated several North Dakota Industrial Commission rules relating to flaring and paying royalties for flared gas. After an oil well begins to produce, North Dakota allows limited flaring during the first year. After one year, the producer must apply for a written exemption for any future flaring. If the producer does not ask for the exemption, royalties and state taxes on the flared gas must be paid.
The lawsuits allege that these various producers have flared gas without the proper authorization and therefore, owe royalties on “(a) gas flared from a well one year after the first production without applying for and obtaining a flaring exemption; (b) gas flared from a well within the first year of production under an order issued by the Industrial Commission limiting the maximum barrels of oil to be produced per day until the well is connected to a gathering system and processing plant…; and (c) gas flared within the first year of production even though the operator reported the well was physically connected to a gathering system and processing plant.”
The plaintiffs claim that they lost millions of dollars in royalties due to producers’ practice of burning off large quantities of gas rather than selling it.
For an example of one of these ten class actions, seeattached case filed in District Court, Northwest Judicial District, County of Williams, State of North Dakota.
This post was written by Barclay Nicholson (firstname.lastname@example.org or 713.651.3662) from Norton Rose Fulbright’s Energy Practice Group.