- Associated Press - Wednesday, March 5, 2014

WICHITA, Kan. (AP) - A federal judge handed a key legal victory Wednesday to landowners battling a Nebraska gas firm in a lawsuit over the condemnation of more than 9,100 acres spanning three counties in south-central Kansas.

U.S. District Judge Monti Belot ruled Northern Natural Gas lost its ownership interest in gas seeping from an underground storage facility. The judge ruled the company must pay landowners “just compensation” for the value of any storage gas and native gas that lies underneath their land in the condemnation proceedings now underway.

The ruling on the ownership rights issue is the latest legal turn in a decades-old legal fight stemming from gas seeping from the Cunningham Storage Field in Kansas.

Northern did not immediately return a phone message left at its offices seeking comment on the ruling.

More than 173 property owners hold some interest in the more than 40 tracts - spanning Pratt, Kingman and Reno counties - at issue in the federal lawsuit. Northern is using the power of eminent domain to take the property from unwilling sellers.

Northern filed the condemnation lawsuit in a move to stop drilling by third-party natural gas producers, which the company contends have been essentially siphoning off their stored gas supplies by changing the geological pressure. Northern argued the drilling sucked gas from what had been a stabilized storage field.

The company also wants to get underground storage rights on the condemned property and plans to drill observation wells on that property to check for migration of gas.

Still left at issue in the litigation is how much Northern will have to pay the drilling companies who put in the gas wells, the landowners who get royalties off those wells and other landowners whose property values would be diminished by the loss of the mineral rights.

The case remains in federal court in Kansas where a judge must ultimately determine how much money Northern must pay for the condemned properties. Wednesday’s decision did not indicate any amounts.

The legal maneuvering for condemnation in U.S. District Court in Kansas comes after a 2010 decision by the Federal Energy Regulatory Commission that granted Northern Natural Gas the authority to expand its 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.

In a 28-page decision, the court found that the issuance of a regulatory certificate from FERC works “no instantaneous change of ownership” in storage gas under Kansas law. Belot cited Kansas statute as the determining authority on ownership rights in the state. The judge wrote that the company’s right to retain title to its injected storage gas is limited to the certified area where it had obtained the necessary storage rights and to the adjoining property.

The judge said the Kansas Storage Act does not relieve Northern of its obligation to pay for the taking of the landowners’ property rights to storage gas.

Since the late 1970s, Northern has operated the Cunningham Storage Field in south-central Kansas. The company obtained voluntary storage lease rights to about 30 percent of the 2010 expansion area and is now in federal court in Kansas litigating for condemnation of the remaining acreage.

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