Gas company moves to condemn 9,117 acres in Kansas

(AP) — A Nebraska company moved Monday to condemn more than 9,100 acres of land in south-central Kansas, marking the culmination of a decade in legal battles between property owners and a firm owned by billionaire investor Warren Buffet.

Omaha-based Northern Natural Gas Co. filed a lawsuit in U.S. District Court in Wichita, arguing that taking the property is “in the public interest and necessity” in order to contain gas migrating from its underground storage facility. It is also seeking a court order to shut down all gas wells within the expansion area.

The filing is the first step under the power of eminent domain to take land from unwilling sellers in Pratt, Kingman and Reno counties. At least 173 property owners hold some interest in the 40 tracts targeted in the filing.

“All they want is condemnation. They don’t want to try to work it out with us. They just want to take it. This is a group of very angry landowners out here. We don’t want to give it up. It is their fault it is leaking,” said Dorothy Trinkle, one of the leaders of a landowner group formed to oppose the takeover.

Northern Natural Gas spokesman Mike Loeffler said the goal is to stop drilling by third-party natural gas producers, who the company contends have been essentially siphoning off their stored gas supplies by changing the geological pressure. The company believes that the drilling has sucked gas away from what had been a stabilized storage field.

The company is looking to get underground storage rights on the condemned property, and plans to drill observation wells on that property to check for migration of gas, Loeffler said.

The legal maneuvering for condemnation comes in the wake of a June 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.

But drilling companies that have put in the gas wells, and the landowners who get royalties off those wells, contend that there is native gas reserves underneath the property for which they should be compensated.

They have also won rulings in state courts that would allow landowners to keep the gas, even if it was originally in the storage facility, once it migrated more than a half mile away from the storage field and into areas under their land.

“We think it is the illegal confiscation of the minerals under this acreage because they circumvented the judicial system where they have been beat every time and went to the regulatory process — where they have tremendous lobbying power in Washington, D.C., because this company is owned by Warren Buffet,” said Todd Allam, president of VAL Energy, a Wichita firm with a block of oil and gas leases six miles from the storage field.

Northern Natural is a subsidiary of MidAmerican Energy Holdings Co., which in turn is a subsidiary of Buffet’s Birkshire Hathaway Inc.

The ruling by the Federal Energy Regulatory Commission, an independent agency that regulates the interstate transmission of natural gas, oil and electricity, noted that there was native gas under the land that the federal lawsuit seeks to condemn that would need to be compensated, Allam said.

Northern Natural’s goal is to acquire all the land through good faith negotiations, Loeffler said.

“Under the condemnation, there is going to be a pretty good court battle to determine fair value to the landowners and the operators of existing production,” Allam said.

Allam said the company only offered $10 for each producing gas well, while Trinkle, the leader of a landowner group, said landowners were offered between $10 and $100 an acre.

Even landowners who don’t have wells on their property don’t want to lose their mineral rights because land that sells without mineral rights lose $200 to $300 an acre in value.

“Not only are they hurting us who have wells, but Pratt County is going to lose $4 million in valuation,” Trinkle said, noting that is going to hurt schools.

Northern Natural Gas can store up to 62 billion cubic feet of gas at its Kansas facility, Loeffler said. The company serves a market area including Minnesota, Wisconsin, Iowa, Nebraska and parts of Kansas.

Copyright 2010 The Associated Press.