Judge dismisses North Dakota flaring lawsuits

BISMARCK, N.D. (AP) -- A federal judge has dismissed lawsuits from several North Dakotans who claimed they are owed millions of dollars from oil drilling companies that are burning and wasting natural gas instead of capturing it.

U.S. District Judge Daniel Hovland's ruling, filed Wednesday, said the federal government lacks jurisdiction in the cases because the mineral owners did not "exhaust administrative remedies" with state regulators.

North Dakota mineral owners in October filed lawsuits seeking damages from oil drilling companies for natural gas lost when it is burned instead of captured as a byproduct of oil production.

Derrick Braaten, a Bismarck lawyer representing mineral rights owners, said the loss in royalties amounts to more than $200 million to the dozen or so clients who sought damages. Braaten said he's disappointed with Hovland's ruling and might appeal.

"We're still analyzing before we decide what our next step is," Braaten said.

Hovland dismissed 13 of the cases against oil companies that were moved from state to federal court. Another case against Marathon Oil Corp. is still pending in state court.

"I would expect a motion to dismiss that case, given what the federal judge did here," Braaten said.

Despite dismissing the lawsuits, Hovland, who is based in Bismarck, wrote "flaring is without question a wasteful, albeit sometimes necessary and unavoidable practice."

North Dakota oil producers can flare natural gas for a year without paying taxes or royalties on it. Companies can then ask state regulators for an extension because of the high costs of moving the gas to market. More than 95 percent of the extensions requested in recent years were granted, records show.

North Dakota drillers currently burn off, or flare, more than 30 percent of the gas because development of pipelines and processing facilities to capture it hasn't kept pace with oil drilling. Less than 1 percent of natural gas is flared from oil fields nationwide, and less than 3 percent worldwide, the U.S. Energy Department said.

North Dakota, which is producing nearly 1 million barrels of daily, also produces more than 1 million cubic feet of natural gas daily. The state is losing nearly $1 million monthly in natural gas tax revenue from flaring, state tax department records show.

Ron Ness, president of the North Dakota Petroleum Council, said Hovland's ruling "obviously is positive news for the industry ... but it does not change our objective to substantially reduce flaring."

The North Dakota Petroleum Council's flaring task force has said the industry already has invested more than $6 billion in infrastructure to capture natural gas in the past six years and plans to spend at least an additional $1.7 billion over the next two years building gas pipelines and other infrastructure. The council in January pledged to capture 85 percent of the gas by 2016 and 90 percent within six years as infrastructure catches up with oil development.