Carbon storage ruling adds uncertainty, North Dakota energy industry says

BISMARCK, N.D. (North Dakota Monitor) — A court’s finding that a North Dakota law affecting underground storage of carbon dioxide is unconstitutional creates doubt for the energy industry, representatives said Wednesday.

A district court judge on Tuesday ruled in favor of the Northwest Landowners Association in its suit against the North Dakota Industrial Commission, which approved a permit for underground storage for carbon pipeline developer Summit Carbon Solutions.

The landowner group successfully challenged a law that can force landowners to allow storage beneath their property. Northeast Judicial District Judge Anthony Swain Benson ruled the law allows a government-authorized taking of property without an avenue for “just” compensation determined by a jury.

Summit’s project would transport greenhouse gas emissions from ethanol plants in five states, including Tharaldson Ethanol near Casselton, to the sequestration site.

The lawsuit isn’t specific to Summit, but seems likely to have implications for the project.

In a statement, Summit Carbon Solutions said it is reviewing the court decision and evaluating its options.

Summit said the North Dakota storage area “remains an important long-term asset for the project and our partners, including the State of North Dakota, our ethanol plant customers, and the communities we serve.”

The ruling also could impact the coal and oil and gas industries.

Jonathan Fortner, president and CEO, North Dakota Lignite Energy Council. (Provided)

Jonathan Fortner is the president and CEO of the Lignite Energy Council, a leading coal group in North Dakota.

“The district court’s decision creates new uncertainty for carbon capture projects at a time when reliable, affordable electricity is more important than ever,” Fortner said in a statement. “When projects stall, the impacts are not abstract. They show up in grid reliability, electricity bills, and the loss of high-paying, local careers.”

Minnkota Power Cooperative has been working to develop Project Tundra, which would capture carbon from a coal-fired power plant near Center for underground storage.

The Energy and Environmental Research Center in Grand Forks, has worked on both the Summit and Minnkota projects.

“It puts a shadow on projects and the projects underway,” John Harju, EERC’s vice president for strategic partnerships said of the ruling Wednesday.

The law that was challenged requires landowners to allow carbon dioxide storage beneath their property if at least 60% of the affected landowners agree to the project.

About 92% of landowners in Summit’s storage area  in Oliver, Mercer and Morton counties had chosen to participate in the project when the Industrial Commission approved the storage permit last year.

The Dakota Resource Council, an environment group, said the ruling strengthens the position of landowners.

“We see it as a major win for family farmers, ranchers, and rural landowners who have been standing up to CO2 pipelines and storage projects,” the group said in an email.

Owen Anderson, an energy law scholar who began his career in North Dakota, was surprised by the decision. He’s not aware of any courts in other states that have reached a similar conclusion and said the decision, if upheld, opens the door to challenges of other pore space uses such as saltwater disposal, which could impact the oil and gas industry.

“I would assume the state would appeal this,” Anderson said. “It’s a key case, no question about that.”

North Dakota Attorney General Drew Wrigley said Tuesday his office was still evaluating next steps.

National leader

North Dakota has been a leader in carbon capture and storage. It was the first state to be granted primacy in permitting Class VI injection wells, the kind of well needed for CO2 storage. Previously, all permitting had been done at the federal level.

North Dakota has two ethanol plants injecting carbon underground, Gevo’s site near Richardton, formerly Red Trail Energy, and Blue Flint Ethanol at Underwood.

A representative of Colorado-based Gevo said the company is glad to work with the local community and landowners.

“We believe in fair compensation for our landowner partners and this has not been an issue for us in Richardton, nor do we expect it to be an issue in the future,” Gevo said in a statement.

Basin Electric Power Cooperative also operates a carbon storage operation at the Great Plains Synfuels Plant near Beulah.

Representatives from Minnkota did not respond to requests for comment Wednesday. Basin Electric did not provide a statement Wednesday. An official with Blue Flint declined to comment.

Legislature’s role

The decision creates uncertainty around how carbon capture projects could move forward and whether the Legislature will need to take further action.

Sen. Dale Patten, R-Watford City, is one of the legislative branch’s biggest proponents of carbon sequestration. He’s not sure what the next step will be if the district court ruling isn’t overturned.

“If the Supreme Court upholds the decision, what would be the alternative language that we could use?” Patten said. “I don’t know.”

Pore space, unlike surface land, cannot be fenced off. Carbon dioxide injected into underground pore space will migrate horizontally without regard for property lines on the surface.

“This concept lets a small minority of pore space owners, even just one owner, dictate to the majority of owners — the majority have property rights as well,” Ron Ness, president of the North Dakota Petroleum Council, said in a statement Wednesday.

Patten fears the court’s decision will prevent landowners from realizing the value of their pore space.

“You cannot realize that value individually very effectively,” Patten said. “You have to realize it collectively.”

Troy Coons, chair of the Northwest Landowners Association that challenged the law in court, said a company could use good business practices and work with landowners to lease 100% of the pore space in a project area. If it is a public utility using the pore space for a public use, and they can’t lease 100% of the pore space, they have the option to use eminent domain.

He does not think the Legislature should step in again.

“I say they need to stay out of it,” Coons said. “They seem to have a real hard time allowing the organic, natural path of business to happen.”

He and the association’s attorney, Derrick Braaten, pointed out oil and gas companies in the Bakken routinely manage to work with landowners every day.

“It’s possible,” Braaten said. “It’s been done and it is being done.”

Reach North Dakota Monitor Deputy Editor Jeff Beach at jbeach@northdakotamonitor.com.

North Dakota Monitor reporter Jacob Orledge can be reached at jorledge@northdakotamonitor.com.