North Dakota

December 17, 2013

Kentucky law and coverage for faulty construction

Source:, December 5, 2013
By: Carl A. Salisbury, Kilpatrick Townsend & Stockton LLP

The most striking development in coverage law in 2013 was the willingness of state high courts to correct prior mistaken precedent on their way to finding that faulty workmanship can be a covered “occurrence” under a construction contractor’s commercial general liability policy. In a six-week period, the North Dakota Supreme Court, the West Virginia Supreme Court of Appeal, and the Connecticut Supreme Court all brought themselves into line with the substantial majority of states on this coverage question. A recent decision by the United States Court of Appeals for the Sixth Circuit, applying Kentucky law, went in the opposite direction. Maybe it’s time for the Kentucky Supreme Court to take another look at the issue.

When can it fairly be said that a general contractor hires a sub-contractor with the expectation or intent that the sub-contractor will perform its work in a shoddy and negligent manner, exposing the general contractor to potential liability for construction defects and the property damage — not to mention the harm to the general contractor’s reputation — that usually results from faulty workmanship? The question answers itself: never. Recently, however, the Sixth Circuit answered the same question as follows: always.

In fairness we have to observe that federal courts are obliged by a rule called the Erie Doctrine to apply the law of the state in which the federal district court sits. In Liberty Mutual Fire Insurance Co. v. Kay and Kay Contracting LLC and MW Builders Inc., No. 12-5791, (6th Cir. Nov. 19, 2013) (download a copy from the “Opinions” section of the 6th Circuit website here), the Sixth Circuit was required to apply Kentucky law, which is currently unfavorable to policyholders in construction-defect coverage disputes.…

December 4, 2013

Strong Rules On Fracking In Wyoming Seen as Model

Source: The New York Times, November 23, 2013
Posted on:

In energy-friendly Wyoming, oil and gas companies are getting a clear message: Drill, baby, drill — but carefully.

Last week, state regulators approved one of the nation’s strongest requirements for testing water wells near drilling sites. The measure is intended to address concerns that groundwater can become contaminated from drilling activities.

It is the latest of several groundbreaking regulations related to energy production issued by Wyoming, which in 2010 became the first state to require disclosure of some of the chemicals used in the drilling process known as hydraulic fracturing, or fracking.

”I am not going to accept the question of do you want a clean environment or do you want energy,” said Gov. Matthew H. Mead, a Republican who championed the water-testing regulation. ”The fact is that in Wyoming, we want and need both.”

Wyoming ranks about fourth among states in natural gas production and eighth in oil production, which has grown rapidly in recent years.

The new water rule, which takes effect in March, will require oil and gas companies to test wells or springs within a half-mile of their drilling site, both before and after drilling. The tests will measure a range of factors, including temperature, bacteria, dissolved gases like methane and propane, and roughly 20 chemical compounds and elements including barium, benzene, strontium and nitrates.

The rule comes after another measure that took effect this month requiring drilling companies to monitor for certain air pollutants at new oil and gas production sites, and fix any leaks. The requirement applies only to an area in western Wyoming that struggles to keep ozone in check.…

December 2, 2013

Well Site to be Included in Oil Spill Cleanup

Read here about cleanup of a former oil well pad.


November 14, 2013

ND fire leads to oil & saltwater spill

Read here about an explosion in North Dakota that resulted in an oil and saltwater spill.


November 13, 2013

Tesoro Logistics restarts North Dakota pipeline

Source: San Antonio Express-News (TX), November 2, 2013
Posted on:

Tesoro Logistics LP said Friday it had restarted a 35-mile section of its North Dakota pipeline that was shut on Sept. 29 after it leaked and spilled crude oil in a farmer’s wheat field.

The spill was North Dakota’s largest since at least 2002, according to data compiled by the federal pipeline safety agency and posted on its website.

The Pipeline and Hazardous Materials Safety Administration gave Tesoro permission to restart the line after Tesoro agreed to add a number of safety improvements, the company said in a statement.

Tesoro agreed to perform frequent ground and air inspections of the pipeline and install additional leak-detection equipment, the federal agency said.

San Antonio-based Tesoro also will be required to update maps of its High Plains pipeline system and “identify further preventative measures” to protect important bodies of water, the agency said.

Before Tesoro restarted the pipeline, it performed a number of tests, including installing monitoring equipment along the 35-mile section to detect leaks, the company said in a statement.

Tesoro has said the damaged part of the pipeline was sent to an independent laboratory for analysis. A preliminary report shows a hole in the pipeline could have come from an electrical discharge, the source of which is still unknown.

An initial lab report showed no signs of corrosion or other defects, the company said.

As of Thursday, Tesoro said, more than 4,500 barrels of the North Dakota spill — estimated by North Dakota officials at 20,600 barrels — have been recovered.

“There have been no injuries or known impacts to water or wildlife as a result of this incident,” the company said, adding that remediation at the site “is underway.”

Tesoro Logistics is a master limited partnership that owns pipelines, storage, terminals and rail facilities.

San Antonio refiner Tesoro Corp. partially spun off Tesoro Logistics in April 2011, and held a 40 percent stake as of June 30, including a 2 percent interest in the general partner.


November 12, 2013

CO regulators consider stricter spill rules

Read here about oil and gas regulators in Colorado who are considering stricter spill rules.


August 15, 2013

Three Things to Know about Occurrence-Based Insurance

Source:, Vol No. 2, Issue 14

Until recently, North Dakota law stated faulty workmanship is never “accidental” and, therefore, a construction defect could never be a covered “occurrence” under Commercial General Liability (CGL) policies. In April, the North Dakota Supreme Court overturned that law, ruling that faulty construction can be accidental. On June 18, 2013, the West Virginia Supreme Court of Appeals did the same thing, overruling three prior cases on its way to holding that faulty workmanship can constitute a covered “occurrence.” On June 4, 2013, the Connecticut Supreme Court also found that CGL policies can cover damage from defective construction.

The clear trend nationwide is toward finding that claims of faulty workmanship can be covered under occurrence-based CGL policies. Judicial analysis of CGL policies in construction liability cases, which has at times been superficial and even sloppy, is becoming more careful and sound. Courts are now considering the impact of the 1986 revision of the CGL policy, which added a provision to broaden coverage of general contractors for the work of subcontractors. Judges are recognizing that nothing in the definition of “occurrence” in the CGL policy precludes coverage for construction defects. They are beginning to look at the drafting history of the 1986 CGL revision, which shows that the drafters intended to cover faulty workmanship.

Nevertheless, figuring out whether coverage exists for a particular claim can be tricky. Following are three things every contractor should know about coverage for construction defects. This discussion applies to the provisions in essentially all standard-form CGL policies.…

August 6, 2013

ND Oil Co Fined for Endangering Drinking Water Source

Read here about an oil and gas company in North Dakota that has been fined a record $1.5 million for endangering a drinking water source.


May 16, 2013

How will Brown Balance Oil, Environmental Interests?

Source:, May 14, 2013
By: Daniel Weintraub

California’s economy has been powered for decades by technology, trade and tourism — businesses and jobs mostly near the coast from San Diego to Los Angeles and around the San Francisco Bay Area. The state’s great inland valleys, while serving as a breadbasket for the world, have not been a land of high-paying employment or tax-producing industry.

A glance at the most recent unemployment numbers reflects this reality. While the state’s overall jobless rate is still high by historic standards, it has fallen to 6.3 percent in Orange County, 6.0 percent in San Francisco and 5.7 percent in San Mateo County. In the Central Valley, by contrast, unemployment remains in double digits from Kern County (13.6) all the way to San Joaquin (14.1).

Could Big Oil change all that?

A revolution in the oil industry that’s been taking place in Pennsylvania, Ohio and North Dakota is poised to sweep through California’s oil patch, with the potential to produce hundreds of thousands of jobs and billions in tax revenue for the state.

But there’s a big catch. That same revolution also brings the chance of environmental degradation, threatening the water supply and abetting a carbon-based economy that many were hoping would soon become a thing of the past. That might not be a problem in the rust belt or the job-starved upper Midwest, but environmental protection is one of California’s passions. It is also one of its attractions.

At issue is the future of what is known as the Monterey Shale, a geologic formation that stretches beneath the Central Valley from Bakersfield to Modesto. Parts of this region have been a source of oil for generations. Despite recent declines, California still ranks fourth among the states in crude oil production, behind Texas, Alaska and a surging North Dakota, and most of that oil comes from the southern Central Valley and the surrounding hills.…

May 9, 2013

USGS Doubles Estimates at Bakken and Three Forks Shale

Source: Resource Investing News, May 7, 2013
By: Vivien Diniz

Overall, the United States is on track toward greater energy independence, and that road is paved with shale oil. US oil reserves have skyrocketed to the highest levels seen in 30 years thanks to shale oil. And it will only get better from there.

On April 30, the US Geological Survey announced5 that the Bakken and Three Forks shale formations, located through parts of Montana, North Dakota and South Dakota, could contain an “estimated 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil.” That’s double the original 2008 Bakken Formation estimate of 3.65 million BBO.

However, Continental Resources (NYSE:CLR6), the largest leaseholder in the Bakken region, believes the USGS estimate to be quite modest. “The USGS generally is very conservative in their estimates,” Harold Hamm, Chairman and CEO of Continental, told NewsOK7. “This is a big step. We’re encouraged by it.”

In 2010, Continental Resources7 estimated that the Bakken field contains roughly 24 billion barrels of technically recoverable oil out of 577 billion barrels of total oil in place. In 2012, Continental boosted its total oil estimate by 56 percent, to 903 BBO, but has yet to revise its recoverable estimates.

Commenting on the increased estimates was Secretary of the Interior Sally Jewell, who said, “[t]hese world-class formations contain even more energy resource potential than previously understood, which is important information as we continue to reduce our nation’s dependence on foreign sources of oil.”

Technologies like hydraulic fracking have turned the Bakken and Three Forks Formations into the US’s most important source of domestic crude oil. But the technology is limiting.

“The Bakken reserve is huge. It’s a world-class resource, but right now with current technologies, we’re only recovering between 3 and 4 percent so if we can increase that recovery by just 1 percent, it will mean another million barrels of oil,” Tessa Sandstorm communications managers for the North Dakota Petroleum Council told Minot Daily News9.

As drilling technologies continue to improve, these resource plays will only get bigger, commented Rick Bott, President and COO of Continental. “The USGS assessment is proving that out. The play is getting much bigger.”

“We feel like in the future the recovery will go up as technology improves and as we try different recovery techniques.” Hamm said.