# Title 38 — Mining and Gas and Oil Production

## Chapter 38-11.1 — Oil and Gas Production Damage Compensation

### § 38-11.1-01. Legislative findings.

The legislative assembly finds the following:
1. It is incumbent on the state to protect the public welfare of North Dakota which is
largely dependent on agriculture and to protect the economic well-being of individuals
engaged in agricultural production, while at the same time preserving and facilitating
exploration through the utilization of subsurface pore space in accordance with an
approved unitization or similar agreement, an oil and gas lease, or as otherwise
permitted by law.
2. Exploration for and development of oil and gas reserves in this state interferes with the
use, agricultural or otherwise, of the surface of certain land.
3. Owners of the surface estate and other persons should be justly compensated for
injury to their persons or property and interference with the use of their property
occasioned by oil and gas development.
4. This chapter may not be construed to alter, amend, repeal, or modify the law
concerning title to pore space under section 47-31-03.
### § 38-11.1-02. Purpose and interpretation.

It is the purpose of this chapter to provide the maximum amount of constitutionally
permissible protection to surface owners and other persons from the undesirable effects of
development of minerals. This chapter is to be interpreted in light of the legislative intent
expressed herein. Sections 38-11.1-04 and 38-11.1-04.1 must be interpreted to benefit surface
owners, regardless of whether the mineral estate was separated from the surface estate and
regardless of who executed the document which gave the mineral developer the right to conduct
drilling operations on the land. Sections 38-11.1-06 through 38-11.1-10 must be interpreted to
benefit all persons.
### § 38-11.1-03. Definitions.

In this chapter, unless the context or subject matter otherwise requires:
1. "Agricultural production" means the production of any growing grass or crop attached
to the surface of the land, whether or not the grass or crop is to be sold commercially,
and the production of any farm animals, including farmed elk, whether or not the
animals are to be sold commercially.
2. "Drilling operations" means the drilling of an oil and gas well and the production and
completion operations ensuing from the drilling which require entry upon the surface
estate and which were commenced after June 30, 1979, and oil and gas geophysical
and seismograph exploration activities commenced after June 30, 1983.
3. "Land" means the solid material of earth, regardless of ingredients, but excludes pore
space.
4. "Mineral developer" means the person who acquires the mineral estate or lease for the
purpose of extracting or using the minerals for nonagricultural purposes.
5. "Mineral estate" means an estate in or ownership of all or part of the minerals
underlying a specified tract of land.
6. "Minerals" means oil and gas.
7. "Pore space" means a cavity or void, naturally or artificially created, in a subsurface
sedimentary stratum.
8. "Surface estate" means an estate in or ownership of the surface of a particular tract of
land.
9. "Surface owner" means any person who holds record title to the surface estate on
which a drilling operation occurs or is conducted.

### § 38-11.1-03.1. Inspection of well site.

Upon request of the surface owner or adjacent landowner, the department of environmental
quality shall inspect and monitor the well site on the surface owner's land for the presence of
hydrogen sulfide. If the presence of hydrogen sulfide is indicated, the department of
environmental quality shall issue appropriate orders under chapter 23.1-06 to protect the health
and safety of the surface owner's health, welfare, and property.
### § 38-11.1-04. Damage and disruption payments.

The mineral developer shall pay the surface owner a sum of money equal to the amount of
damages sustained by the surface owner and the surface owner's tenant, if any, for lost land
value, lost use of and access to the surface owner's land, and lost value of improvements
caused by drilling operations. The amount of damages may be determined by any formula
mutually agreeable between the surface owner and the mineral developer. When determining
damage and disruption payments, consideration must be given to the period of time during
which the loss occurs and the surface owner must be compensated for harm caused by
exploration only by a single sum payment. The payments contemplated by this section only
cover land directly affected by drilling operations. Payments under this section are intended to
compensate the surface owner for damage and disruption; any reservation or assignment of
such compensation apart from the surface estate except to a tenant of the surface estate is
prohibited. In the absence of an agreement between the surface owner and a tenant as to the
division of compensation payable under this section, the tenant is entitled to recover from the
surface owner that portion of the compensation attributable to the tenant's share of the
damages sustained.
### § 38-11.1-04.1. Notice of operations.

1. Before the initial entry upon the land for activities that do not disturb the surface,
including inspections, staking, surveys, measurements, and general evaluation of
proposed routes and sites for oil and gas drilling operations, the mineral developer
shall provide at least seven days' notice by registered mail or hand delivery to the
surface owner unless waived by mutual agreement of both parties. The notice must
include:
a. The name, address, telephone number, and, if available, the electronic mail
address of the mineral developer or the mineral developer's designee;
b. An offer to discuss and agree to consider accommodating any proposed changes
to the proposed plan of work and oil and gas operations before commencement
of oil and gas operations; and
c. A sketch of the approximate location of the proposed drilling site.
2. Except for exploration activities governed by chapter 38-08.1, the mineral developer
shall give the surface owner written notice by registered mail or hand delivery of the oil
and gas drilling operations contemplated at least twenty days before commencement
of drilling operations unless mutually waived by agreement of both parties. If the
mineral developer plans to commence drilling operations within twenty days of the
termination date of the mineral lease, the required notice under this section may be
given at any time before commencement of drilling operations. The notice must
include:
a. Sufficient disclosure of the plan of work and operations to enable the surface
owner to evaluate the effect of drilling operations on the surface owner's use of
the property;
b. A plat map showing the location of the proposed well; and
c. A form prepared by the director of the oil and gas division advising the surface
owner of the surface owner's rights and options under this chapter, including the
right to request the department of environmental quality to inspect and monitor
the well site for the presence of hydrogen sulfide.
3. The notice required by this section must be given to the surface owner at the address
shown by the records of the county treasurer's office at the time the notice is given and

is deemed to have been received seven days after mailing by registered mail or
immediately upon hand delivery.
4. If a mineral developer fails to give notice as provided in this section, the surface owner
may seek appropriate relief in the court of proper jurisdiction and may receive punitive
as well as actual damages.
### § 38-11.1-05. Notice of drilling operations.

Repealed by S.L. 2011, ch. 265, § 7.
### § 38-11.1-06. Protection of surface and ground water - Other responsibilities of mineral

developer.
If the domestic, livestock, or irrigation water supply of any person who owns an interest in
real property within one-half mile [804.67 meters] of where geophysical or seismograph
activities are or have been conducted or within one mile [1.61 kilometers] of an oil or gas well
site has been disrupted, or diminished in quality or quantity by the drilling operations and a
certified water quality and quantity test has been performed by the person who owns an interest
in real property within one year preceding the commencement of drilling operations, the person
who owns an interest in real property is entitled to recover the cost of making such repairs,
alterations, or construction that will ensure the delivery to the surface owner of that quality and
quantity of water available to the surface owner prior to the commencement of drilling
operations. Any person who owns an interest in real property who obtains all or a part of that
person's water supply for domestic, agricultural, industrial, or other beneficial use from an
underground source has a claim for relief against a mineral developer to recover damages for
disruption or diminution in quality or quantity of that person's water supply proximately caused
from drilling operations conducted by the mineral developer. Prima facie evidence of injury
under this section may be established by a showing that the mineral developer's drilling
operations penetrated or disrupted an aquifer in such a manner as to cause a diminution in
water quality or quantity within the distance limits imposed by this section. An action brought
under this section when not otherwise specifically provided by law must be brought within six
years of the time the action has accrued. For purposes of this section, the claim for relief is
deemed to have accrued at the time it is discovered or might have been discovered in the
exercise of reasonable diligence.
A tract of land is not bound to receive water contaminated by drilling operations on another
tract of land, and the owner of a tract has a claim for relief against a mineral developer to
recover the damages proximately resulting from natural drainage of waters contaminated by
drilling operations.
The mineral developer is also responsible for all damages to person or property resulting
from the lack of ordinary care by the mineral developer or resulting from a nuisance caused by
drilling operations. This section does not create a cause of action if an appropriator of water can
reasonably acquire the water under the changed conditions and if the changed conditions are a
result of the legal appropriation of water by the mineral developer.
### § 38-11.1-07. Notification of injury - Statute of limitations.

Any person, to receive compensation, under sections 38-11.1-08 and 38-11.1-09, shall
notify the mineral developer of the damages sustained by the person within two years after the
injury occurs or would become apparent to a reasonable person. Any claim for relief for
compensation brought under this chapter must be commenced within the limitations period
provided in section 28-01-16.
### § 38-11.1-07.1. Pretrial appraisal required before commencement of action to recover

compensation.
1. As used in this section, "certified appraiser" has the same meaning as in section
43-23.3-01.
2. Before commencing a legal action to recover compensation, a person entitled to
compensation shall obtain a written appraisal valuing all parcels affected or

foreseeably affected by drilling operations under this chapter. A certified appraiser, an
individual possessing a temporary permit under section 43-23.3-11, or an individual
possessing a permit under section 43-23.3-04.1 shall conduct the required appraisal.
3. Before a court may take jurisdiction over an action commenced under this chapter, a
person seeking compensation under this chapter must have provided to a mineral
developer a copy of an appraisal issued under subsection 2. The mineral developer
may make a new offer for settlement to the surface owner within thirty days of
receiving the appraisal. If a new offer is made under this subsection, the amount of the
new offer serves as the offer contemplated under section 38-11.1-09.
4. The mineral developer shall reimburse the reasonable actual costs of the required
appraisal incurred by the surface owner for obtaining a required appraisal under this
section or, at the election of the surface owner, the mineral developer shall pay the
reasonable actual costs directly to the appraiser.
5. The required appraisal or opinion of value expressed in the required appraisal is
inadmissible at a proceeding commenced under this chapter, unless the information is
offered by the surface owner. Whether an appraisal is issued under this section does
not require or prohibit the introduction of specific evidence offered at a proceeding
commenced under this chapter.
### § 38-11.1-08. Agreement - Offer of settlement.

Unless both parties provide otherwise by written agreement, at the time the notice required
by subsection 2 of section 38-11.1-04.1 is given, the mineral developer shall make a written
offer of settlement to the person seeking compensation for damages when the notice required
by subsection 2 of section 38-11.1-04.1 is given. The person seeking compensation may accept
or reject any offer so made.
### § 38-11.1-08.1. Loss of production payments.

The mineral developer shall pay the surface owner a sum of money equal to the amount of
damages sustained by the surface owner and the surface owner's tenant, if any, for loss of
agricultural production and income caused by oil and gas production and completion operations.
The amount of damages may be determined by any formula mutually agreeable between the
surface owner and the mineral developer. When determining damages for loss of production,
consideration must be given to the period of time during which the loss occurs and the damages
for loss of production must be paid annually unless the surface owner elects to receive a single
lump sum payment. Payments under this section are intended to compensate the surface owner
for loss of production. Any reservation or assignment of such compensation apart from the
surface estate, except to a tenant of the surface estate, is prohibited. In the absence of an
agreement between the surface owner and a tenant as to the division of compensation payable
under this section, the tenant is entitled to recover from the surface owner that portion of the
compensation attributable to the tenant's share of the damages sustained.
### § 38-11.1-09. Rejection - Legal action - Fees and costs.

If the person seeking compensation rejects the offer of the mineral developer, that person
may bring an action for compensation in the court of proper jurisdiction. If the amount of
compensation awarded by the court is greater than the amount offered by the mineral
developer, the court shall award the person seeking compensation reasonable attorney's fees,
any costs and disbursements under chapter 28-26, and interest on the amount of the final
compensation awarded by the court from the day drilling is commenced. The rate of interest
awarded must be the prime rate charged by the Bank of North Dakota on the date of the
judgment.
### § 38-11.1-09.1. Mediation of disputes.

Within one year after a compensation offer made under section 38-11.1-08 is rejected,
either the mineral developer or surface owner may involve the North Dakota mediation service
or other civil mediator. Involvement of a mediator may comply with Rule 8.8 of the North Dakota

Rules of Court for purposes of alternative dispute resolution compliance. The cost of the
mediator must be mediated between the parties. If the parties are unable to reach an agreement
regarding the cost of the mediator through mediation, each party shall pay an equal portion of
the mediator's compensation. If the mediation is provided by the North Dakota mediation
service, compensation of the mediator must be the actual cost of the mediator to the North
Dakota mediation service.
### § 38-11.1-09.2. Mediation service.

The North Dakota mediation service may mediate disputes related to easements for oil and
gas-related pipelines and associated facilities.
### § 38-11.1-10. Application of chapter.

The remedies provided by this chapter do not preclude any person from seeking other
remedies allowed by law. This chapter does not apply to the operation, maintenance, or use of a
motor vehicle upon the highways of this state as these terms are defined in section 39-01-01.
