'

Continental
R E S 0

U R C E S

February 25, 2014
Via Electronic Mail

and Regular Mail

North Dakota Industrial Commission
Attention: Industrial Commission Executive Director
State Capitol, 14th Floor
600 East Boulevard Ave Dept 405
Bismarck, North Dakota 58505
Re: North Dakota Industrial Commission Draft Permitting Policies - Dated January
27, 2014 (the "Special Places Policies")

Dear Director Helms:
Continental Resources, Inc. ("CLR"), appreciates the opportunity to submit comments on
the North Dakota Industrial Commission's ("NDIC") Special Places Policies. CLR, based in
Oklahoma City, is focused on the exploration and production of onshore oil-prone plays and has
grown from its humble beginnings forty-six years ago to become a top 10 independent oil
producer in the United States. CLR has a long and successful history of developing its industryleading leasehold and production in the nation's premier oil play, the Bakken of North Dakota
and Montana.
Approximately one month ago, CLR submitted extensive comments in response to the
Special Places Policies, which, at that point, were expected to be proposed as a formal
regulation. Although NDIC wisely acknowledged the dearth of legal authority justifying a
regulation, NDIC has since undertaken what appears to be a repackaging of the same bundle of
development restrictions and then simply applying a "policy" label on the cover page. The label
being used to describe NDIC's proposed development restrictions may have changed, but the
intent remains the same: minimizing mineral development and sacrificing private property rights
throughout the state. Because NDIC apparently ignored CLR's first round of comments, which
are incorporated herein by reference, CLR will, respectfully, again attempt to resubmit our
comments.
In our view, the Special Places Policies are not about improving transparency or
protecting special places. As mentioned in our comments submitted on January 22°d, NDIC
permitting regulations already provide opportunities for public input, and they already allow
"(t]he director (to] impose such terms and conditions on the permits issued ... as the director
deems necessary." 1 Having confirmed what the Special Places Policies are not about, let us not
1

See N.D. ADMIN. CODE§ 43-02-03-16.

 North Dakota Industrial Commission
CLR Comments on Special Places Policies
February 25, 2014
Page 2

persist in characterizing the policies improperly. The Special Places Policies are not in the best
interest of the state and its citizens in protecting mineral development and private property rights.
Sadly, the policies have stolen a page right out of the environmental movement's playbook.
North Dakota's bureaucracy is strangling the proverbial golden goose by placing one too
many hardships on an already overburdened industry which has fueled an era of unprecedented
prosperity, enriching citizens as well as state and county coffers and elevating North Dakota to a
position of prominence on the national economic stage. To be sure, the Bakken is a rare and
incredibly valuable resource, and North Dakota is blessed to have so much of the resource right
in its own backyard. But the Bakken is not the only attractive play in America, and other states
would be all too happy to have an investment supporting job growth and energy independence
within their borders. Aside from assessing significantly lower gross production tax rates, many
other states offer drilling incentives to promote development.
NDIC and the state have an important decision to make about the Special Places Policies
and, more broadly, their attitude toward industry and continued development. For the moment,
CLR remains committed to North Dakota, but a sustained commitment will depend largely upon
the policy decisions being made today, which will have significant impacts on production
tomorrow.

Sincerely,
CONTINENTAL RESOURCES, INC.

Harold G. Hamm
Chairman and Chief Executive Officer

Cc:

Honorable Jack Dalrymple, Governor of the State of North Dakota
Attorney General Wayne Stenehjem, State of North Dakota
Commissioner Doug Goehring, North Dakota Department of Agriculture

Encl.

CLR Comments to Special Places Rule/Guidance -January 22, 2014

 '

Continental
R E S 0

U R C E S

January 22, 2014
Via Hand Delivery and Regular Mail
Office of Governor
State of North Dakota
Attn: Honorable Jack Dalrymple
600 East Boulevard Ave
Bismarck, North Dakota 58505-0100
Office of Attorney General
State of North Dakota

Attn: Attorney General Wayne Stenehjem
600 East Boulevard Ave

Department 125
Bismarck, North Dakota 58505
North Dakota Department of Agriculture
Attn: Commissioner Doug Goehring

600 East Boulevard Ave
Department 602
Bismarck, North Dakota 58505-0020
Re: Draft Amendment to North Dakota Administrative Code Sections 43-02-03-16, 4302-02-12, 43-02-02.2-04, 43-02-02.3-08, 43-02-02.4-06, and 43-02-05-04 and new Sections 4302-03-16.4 and 42-02-03-16.5 (collectively, the "Special Places Rule/Guidance")
Dear Governor Dalrymple, Attorney General Stenehjem, and Commissioner Goehring:
Continental Resources, Inc. ("CLR"), appreciates the opportunity to submit comments on
the North Dakota Industrial Commission's ("NDIC") Special Places Rule/Guidance. CLR,
based in Oklahoma City, is focused on the exploration and production of onshore oil-prone plays
and has grown from its humble beginnings forty-six years ago to become a top 10 independent
oil producer in the United States. CLR has a long and successful history of developing its
industry-leading leasehold and production in the nation's premier oil play, the Bakken of North
Dakota and Montana.
CLR is committed to responsible development of the mineral resources which are critical
to fueling our country's pursuit of economic prosperity and achieving its vision of energy
independence. For example, drawing upon its spirit of innovation CLR pioneered the EcoPad®,
which has been widely embraced by the oil and gas industry as the model for multi-well
development. Using EcoPad® technology, CLR and other operators in North Dakota have

 Governor Dalrymple, Attorney General Stenehjem, Commissioner Goehring
CLR Comments on Special Places Rule/Guidance
January 22, 2014
Page 2
increased production of the state's mineral resources while dramatically reducing their collective
environmental footprint. Similarly, CLR is the first company to have begun consulting
voluntarily with the North Dakota Field Office of the U.S. Fish and Wildlife Service to ensure
CLR's projected development in North Dakota continues to comply with applicable federal
wildlife laws. Finally, NDIC regulations already allow "[t]he director (to] impose such terms
and conditions on the permits issued ... as the director deems necessary", 1 and CLR has
routinely tailored its operations to conform to NDIC-imposed restrictions governing oil and gas
development in environmentally and aesthetically sensitive areas of the state.
The Special Places Rule/Guidance may placate a vocal minority of individuals and
organizations who are openly hostile to our country's continued development of fossil fuels
toward energy independence, but it will alienate the overwhelming majority of North Dakotans,
"73 percent of [whom] agree benefits of oil and gas development outweigh the risks and ... 83
percent [of whom] believe oil and gas production should increase or stay the same. " 2 Whether
the Special Places Rule/Guidance restrictions are ultimately proposed in the form of an
administrative regulation or informal agency guidance, they will have a significant and
unwarranted economic impact not only on the oil and gas industry but, more importantly, on the
state and its citizens. For the aforementioned reasons and those listed below, CLR respectfully
voices its strong opposition to the Special Places Rule/Guidance and its onerous restrictions and
requests the rule and/or any guidance developed therefrom be withdrawn completely.

I. The Special Places Rule/Guidance is Void Because There Is No Statutory Authority
for the Rule, and it Contradicts the NDIC's Enabling Legislation. The North Dakota
Supreme Court has stated repeatedly that ''[a]n administrative regulation may not exceed
statutory authority or supersede a statutet and a regulation which goes beyond what the
Legislature has authorized is void." 3 Similarly, the court has held that "an administrative
4
regulation is void if it ... conflicts with the statute it implements." The North Dakota
1

See N.D. ADMIN. CODE§ 43-02-03-16.
Email from Brittany Rud to N.D. Petroleum Council (Jan. 21, 2014 10:17 CST) (providing results ofa recent
survey commissioned by the North Dakota Petroleum Council) (on file with author).
3
See Little v. Traynor, 565 N.W.2d 766, 775 (N.D. 1997) (quoting Moore v. N.D. Workmen's Comp. Bureau, 374
N.W.2d 71, 74 (N.D. 1985)); see also N.D. CENT. CODE.§ 28-32-02 ("The authority of an administrative agency to
adopt administrative rule is authority delegated by the legislative assembly.").
4
See N.D. Dep't of Human Servs., 672 N.W.2d 649, 654 (N.D. 2003):
2

'Since the power to make regulations is administrative in nature, legislation may
not be enacted under the guise of its exercise by issuing a "regulation'' which is
out of hannony with, or which alters. extends, or limits, the statute being
administered, or whicb is inconsistent with the expression of the lawmakers'
intent in other statutes. The administrative officer's power must be exercised
within the framework of the provision bestowing regulatory powers on him and
the policy of the statute which he administers. He cannot initiate policy in the
tme sense, but must fundamentally pursue a policy predetermined by the same
power from which he derives his authority.· (quoting Medical Props., Inc. v.
N.D. Bd. of Pharmacy, 80 N.W.2d 87. 90 (N.D. 1956)).

 Governor Dalrymple, Attorney General Stenehjem, Commissioner Goehring
CLR Comments on Special Places Rule/Guidance
January 22, 2014
Page 3

legislature has empowered the NDIC to maximize production of the state's mineral
5

resources - not to impose zoning ordinances. But the NDIC has apparently concluded
its broad authority to regulate the production of oil and gas also implies its authority to
regulate against such production. The Special Places Rule/Guidance, without having
defined any objective criteria justifying NDIC's classification of a place as a "special
place" or a place of "extraordinary significance" (as opposed to, say, a pretty place or a
sacred place or a happy place), boldly designates dozens of areas and millions of mineral
acres as "'special places" within which development will be significantly curtailed.
Whether the Special Places Rule/Guidance restrictions are ultimately proposed in the
form of an administrative regulation or informal agency guidance, their obvious goal is to
6
dampen, discourage, and condemn oil and gas development, making the restrictions void
for having "go[ne] beyond what the Legislature has authorized" and "conflict[ ed] with
7
the statute [the Special Places Rule/Guidance] implements."
2. NDIC Has Failed to Comply with its Mandatory Duty to Issue a Regulatory
Analysis in Connection with the Special Places Rule/Guidance. North Dakota
Century Code Section 28-32-08 makes '"the preparation and issuance of a regulatory
8
analysis ... a mandatory duty of [an] agency proposing a mle" if"[t]he proposed rule is
expected to have an impact on the regulated community in excess of fifty thousand
9
dollars." Fmther, "[t]he analysis ... must be available on or before the first date of
10
public notice." It is worth mentioning here that ND IC' s issuance of the Special Places
Rule/Guidance restrictions as guidance in a desperate attempt to circumvent regulation11
making requirements of North Dakota's Administrative Agencies Practice Act would
constitute an egregious abuse of the agency's discretion. Whether the Special Places
Rule/Guidance restrictions are ultimately proposed in the form of an administrative
regulation or informal agency guidance, they are projected to delay (and, potentially,
prevent) development of at least l 0,000. wells and impact more than one million mineral
5

See, e.g., N.D.

CENT. CODE.§ 38-08-01:

It is hereby declared to be in the public interest to foster, encourage, and
promote the development, production, and utilization of natural resources of oil
and gas in the state ... in order that the greatest possible economic recovery of
oil and gas be obtained within the state to the end that the landowners, the
royalty owners, the producers, and the general public realize and enjoy the
greatest possible good from these vital natural resources.

See also N.D.

*

CENT. CODE. 38-08-03 (authorizing NDJC "[t)o promulgate and to enforce rules, regulations, and
orders to effectuate the purposes and intent of this chapter").
6
Contra N.D. CENT. CODE.§ 38-08-01 ("It is hereby declared to be in the public interest to foster, encourage, and
promote the development, production, and utilization of natural resources of oil and gas in the state .... ")(emphasis
added).
7
See supra notes 3 and 4 and accompanying text.
8
N.D. CENT. CODE. § 28-32-08(5).
9
Id. § 28-32-08(1 )(b).
10 Id.
11
N.D. CENT. CODE§ 28-32-0 l to -52.

 Governor Dalrymple, Attorney General Stenehjem, Commissioner Goehring
CLR Comments on Special Places Rule/Guidance
January 22, 2014
Page4
acres. Although the precise economic impact of the restrictions contained in the Special
Places Rule/Guidance may be incapable of calculation, there is no question their impact
12
will far exceed the regulatory analysis threshold of fifty thousand dollars.
Therefore,
NDIC must comply with its statutory duty to conduct a regulatory analysis prior to
proposing the restrictions-whether the restrictions are proposed as an administrative
regulation or informal agency guidance.
When NDIC conducts the requisite regulatory analysis, it must ensure the analysis
includes the following:
a. A description of the classes of persons likely to be affected by the proposed
rule, including classes that will bear the costs of the proposed rule and classes
that will benefit from the proposed rule;
b. A description of the probable impact, including economic impact, of the

proposed rule;
c. The probable costs to the agency of implementation and enforcement of the
proposed rule and any anticipated effect on state revenues; and
d. A description of any alternative methods of achieving the purpose of the
proposed rnle that were seriously considered by the agency and the reasons
why the methods were rejected in favor of the proposed rule.

13

3. The NDIC's Promulgation of the Special Places Rule/Guidance is Equivalent to the
Legislature's Enactment of an Eminent Domain Statute. Although many oil and gasproducing states have enacted eminent domain statutes 14 which facilitate the states'
development of their respective mineral resources, the North Dakota legislature has
consistently refused to sanction the taking of private property for a public purpose. Most
recently, when concerns about flaring first aired, the oil and gas industry encouraged
Governor Dalrymple and the legislature to enact a quick take eminent domain statute,
which would have allowed operators and midstream companies to install gas pipelines
across the properties of numerous surface owners whose refusal to grant pipeline
easements has perpetuated flaring by preventing stranded wells from being connected to
natural gas infrastructure. Neither members of the administration nor legislature, who
presumably know and respect their constituents' strong stances on protection of private
prope11y rights, considered enactment of an eminent domain statute to be politically

palatable.
12

The Administrative Rules Committee adopted guidelines which state: "[i]n determining whether the rule is
expected to have an impact on the regulated community in excess of $50,000, this standard means a reasonable
expectation of a reasonably foreseeable cumulative negative fiscal impact to an identifiable regulated community in
excess of $50,000 in any 12-month period, which would not occur if the rule is not adopted." Any doubt about
issuance of a regulalury aualysis :should be resolved in favor of issuance.
13

N.D. CENT. CODE.§ 28-32-08(2)(a)-(d).
See, e.g., ALASKA STAT.§ 09.55.440; CAL. CODE CIV, PROC.§ 1255.410; COLO. REV. STAT. ANN.§ 38-1-105;
LA. REV. STAT. ANN.§ 33:1329; Mess. CODE ANN.§ 11-27-81; N.M. STAT. ANN.§ 42A-1-22; OHIO REV. CODE
ANN. § 163 .06; 26 PA. CONS. STAT. ANN. § 307; TEX. PROP. CODE ANN. § 21.021.
14

 Governor Dalrymple, Attorney General Stenehjem, Commissioner Goehring
CLR Comments on Special Places Rule/Guidance
January 22, 2014
Page 5

It is curious, therefore, that the NDIC should have reached an entirely opposite
conclusion about the scope of its regulation-making/guidance-issuing authority and
public perception of private property takings. The Special Places Rule/Guidance, which
will effectively condemn millions of acres of private property without payment of just
compensation mereJ7 to placate a vocal anti-industry minority, is tantamount to eminent
1
domain legislation. But the legislature has repeatedly refused to enact such legislation,
and "[t]he legislature cannot delegate [its legislative] power to [NDIC or] any other
16
body."
Further, an agency is prohibited from proposing a rule or issuing guidance
(particularly guidance which is apt to be implemented as a regulation) with constitutional
takings implications unless the agency has first completed a written assessment of the
takings implications. 17 By i&rnoring the flood of rational and well-intentioned opposition
to the Special Places Rule/Guidance, the NDIC risks memorializing itself as the state
agency which usurped the legislatures authority, abolished private property rights, and
devastated the economic we11-being of the state and its citizens.
4. The Special Places Rule/Guidance is the Epitome of Regulatory Overreach. Whether
introduced as regulation or guidance, the Special Places Rule/Guidance is a regrettable
example of regulatory overreach and an invitation to federal government and private
interest group intervention. For example, the Special Places Rule/Guidance expressly
requires NDIC to post permit-related infonnation on its website and solicit public
15

See generally Letter from Sen. Kelly Annstrong to Members of the N.D. Indus. Comm'n (Jan. 16, 2014) (on file
with author):
It is disconcerting to me that [the NDlC] would voluntarily overstep its authority
in such an extraordinary way .... [I]t appears by the creation of [the Special
Places Rule/Guidance], we are saying that regulatory overreach is fine, as long
as it is a North Dakota regulatory agency initiating the rule. . . . In my mind
there is no doubt that these types of [special places) designations should be left
to the legislature. . . . Rather than creating rules to assist the enforcement of
laws passed by the legislature, it seems that the [NDIC] is considering using its
regulatory authority to create a whole new class of protected areas in North
Dakota. It is the specific purview of the legislature to create law.
16

See Medical Props., Inc. v. N.D. Bd. of Pharmacy, 80 N.W.2d 87, 89 (N.D. 1956).
See N.D. CENT. CODE§ 28-32-09 (requiring an agency to prepare a written assessment of the constitutional
takings implications of a proposed rule if the proposed rnle may limit the use of private real property). The
assessment must:
17

analyze the likelihood that the proposed rule may result in a taking or regulatory
taldng; clearly and specifically identify the purpose of the proposed rule; explain
why the proposed rnle is necessary to substantially advance that purpose and
why no alternative action is available to achieve the agency's goals while
reducing the impact on private property owners; estimate the potential cost to

the government if a court determines that the proposed rule constitutes a taking
or regulatory taking; identify the source of payment within the agency's budget
for any ordered compensation; and certify that the benefits of the proposed rule
exceed the estimated compensation costs. Id. § 28-32-09(1)(a)-(f).

 Governor Dalrymple, Attorney General Stenehjem, Commissioner Goehring
CLR Comments on Special Places Rule/Guidance
January 22, 2014
Page6
comments. In addition to inviting comment from individuals and organizations whose
ideologies run contrary to the best interests of the state and its citizens, this requirement is
also likely to foster heightened federal agency scrutiny of drilling permits.
Most importantly, the Special Places Rule/Guidance not only solicits comments from a
number of different state agencies (e.g., North Dakota Game and Fish Department, State
Historical Preservation Officer, North Dakota Parks and Recreation Department, North
Dakota Department of Transportation, North Dakota Department of Trust Lands, North
Dakota Water Commission, Theodore Roosevelt National Park, Dakota Prairie
Grasslands» but it also invites oversight by the Bureau of Land Management ("BLM")
and U.S. Fish and Wildlife Service (the "Service'). As mentioned previously, CLR is
already working voluntarily with the North Dakota Field Office of the Service and other
federal agencies to ensure its projected development complies with applicable federal
wildlife laws. But actively empowering a federal agency like the Service or BLM to
deny a state permit to drill is incomprehensible.
North Dakota purports to abhor federal government oversight and insists it should have
18
an exclusive right to regulate the oil and gas industry within its borders, but the Special
Places Rule/Guidance rolls out a welcome mat for intervention which extends from

Williston to Washington.
I thank you in advance for your thorough consideration of these comments, and I urge
you strongly to withdraw from issuing either a regulation or guidance which implements the
restrictions contemplated by the Special Places Rule/Guidance.
Sincerely,
CONTINENTAL RESOURCES, INC.

tfcw1L
Harold G. Hamm
Chairman and Chief Executive Officer
cc:

N01th Dakota Industrial Commission Oil and Gas Division

18
See, e.g., Press Release, Senator John Hoeven, Hoeven Statement in Response to the Interior Department's New
Draft Rule on Energy Development on Federal and Tribal Lands (May 16, 2013),

releases?ID=6eff578c-a46c-4223-9 I f3-e4b7280ce34b:
The right approach is to authorize states to regulate oil and gas
within [their] borders .... recogniz[ing] that ... nobody knows better than local
experts and authorities how best to protect their own environment. ... North
Dakota ... ha[s] a long record of effectively regulating oil and gas development
... with good environmental stewardship. (emphasis added).