Decades-old gas fight unfolding in federal court

Gavel

WICHITA, Kan. (AP) — A Nebraska gas company seeking to condemn more than 9,100 acres of land in Kansas will soon learn how much it will have to pay property owners near its seeping underground storage facility.

A three-person commission appointed by U.S. District Judge Monti Belot will begin hearing testimony Tuesday to determine on a tract-by-tract basis the “just compensation” Omaha-based Northern Natural Gas must shell out for the rights to a geological formation underlying the condemned land. The company is using the power of eminent domain to take the property from unwilling sellers in Pratt, Kingman and Reno counties.

The proceeding at the federal courthouse in Wichita is expected to take between six and eight weeks, said Northern Natural Gas spokesman Mike Loeffler. The commission plans to hear testimony from experts and other witnesses before deciding a fair value the company must pay for 68 tracts, some of which have multiple interest owners, he said.

It is unclear how many owners still have a property interest in the affected parcels, but the company’s amended complaint filed in 2011 cited more than 200 parties to the lawsuit. The commission will determine the value of each tract, but it is up to the judge to then decide how to split the compensation among all of its interest owners, according to a court filing.

Northern Natural Gas sued in 2010 to stop drilling by third-party natural gas producers, whom the company contends have been essentially siphoning off their stored gas supplies by changing the geological pressure. It believes that the drilling has sucked gas away from what had been a stabilized storage field.

“It is very unusual because we have not had this experience at any of our other storage fields and because from our perspective it is so clear cut that what the third-party producers have been doing has been producing Northern (Natural Gas) storage gas,” Loeffler said. “And that is not happening at other storage fields.”

Kansas property owners won a key legal victory last month when Belot ruled Northern must pay for any storage gas and native gas under their acreage. But it will be up to the commissioners to decide how much. The company contends a lot of the natural gas which the property owners are claiming they should be paid for is not economically recoverable and should not be considered as part of the compensation it must pay.

Belot told commissioners in written instructions that in order to decide a just compensation they should consider the difference between the fair market value of each individual tract before and after the taking. That includes the value of any wells taken by Northern Natural Gas.

The firm’s lawsuit, filed in U.S. District Court in Wichita, argues that taking the property is “in the public interest and necessity” in order to contain gas migrating from its underground storage facility. The company is looking to get underground storage rights on the condemned property, and it plans to drill observation wells on that property to check for migration of gas.

The legal maneuvering for condemnation comes in the wake of a 2010 decision by the Federal Energy Regulatory Commission that granted Northern Natural the authority to expand their Cunningham Storage Field in Kansas by an additional 12,320 acres. The facility stores gas in two underground formations now spanning about 28,000 acres.

The company has reached settlements with about 30 percent of affected property owners, Loeffler said.

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