Judge: Company must pay $7.3M to landowners for property rights for storage, natural gas



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WICHITA, Kansas — A federal judge agreed Wednesday with a court-appointed panel's recommendation that a natural gas company should pay $7.3 million for storage rights and natural gas under nearly 9,200 acres of land spanning three southern Kansas counties, far below the more than $100 million that the property owners wanted.

Northern Natural Gas filed a condemnation case in 2010 to stop drilling activity near its underground Cunningham Storage Field, saying the drilling was changing the geological pressure and essentially siphoning off its stored gas.

In October, a panel of petroleum experts determined the "just compensation" for gas producers and landowners who hold property rights to two underground geological formations near the company's storage facility. On top of the $7.3 million award, the panel said Northern Natural Gas, of Omaha, Nebraska, should pay $5,000 for each of the eight wells instead of $400,000 a piece that the producers felt was due.

In a ruling handed down Wednesday, U.S. District Judge Monti Belot agreed called the panel's recommendations a "fair resolution" supported by the evidence and consistent with constitutional requirements.

"Even a routine condemnation presents difficult issues — and this is no ordinary condemnation," Belot wrote.

He cited the difficulty of setting a value for oil and gas properties, coupled with Kansas law that gives landowners an ownership right to any escaped storage gas under their property.

"Except for us paying for our own gas, this is a complete victory for us," Mike Loeffler, spokesman for Northern Natural Gas, said Thursday.

The court rejected claims by gas producers and landowners who wanted compensation for gas they hoped to be able to draw out of the storage field in the future, he said.

"The court completely rejected attempts by producers to continue to pillage our interests," Loeffler said.

Belot must decide how to split the compensation among all of the affected landowners in Pratt, Kingman and Reno counties. A status conference is scheduled for Feb. 18.

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

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