Session of 1999
Substitute for HOUSE BILL No. 2045
By Committee on Utilities

  9             AN  ACT concerning underground storage of natural gas; amending
10             K.S.A. 55-1201, 55-1204, 55-1205 and 55-1210 and repealing the ex-
11             isting sections.
13       Be it enacted by the Legislature of the State of Kansas:
14             Section  1. K.S.A. 55-1201 is hereby amended to read as follows: 55-
15       1201. As used in this act:
16             (a) "Underground storage" shall mean means storage in a subsurface
17       stratum or formation of the earth;.
18             (b) "Natural gas" shall mean means gas either while in its original
19       state or after the same has been processed by removal therefrom of com-
20       ponent parts not essential to its use for light and fuel;.
21             (c) "Native gas" shall mean gas which has not been previously with-
22       drawn from the earth;
23             (d) "Natural gas public utility" shall mean means any person, firm
24       or corporation authorized to do business in this state and engaged in the
25       business of transporting or distributing natural gas by means of pipelines
26       into, within or through this state for ultimate public use;.
27             (e) (d) "Commission" shall mean means the state corporation
28       commission.
29             (e) "Suitable for the underground storage of natural gas" means
30       strata or formations which, based on tests approved by the commission,
31       are found by the commission to be capable of preventing or substantially
32       minimizing the potential for natural gas to migrate to other strata or
33       formations.
34             Sec.  2. K.S.A. 55-1204 is hereby amended to read as follows: 55-
35       1204. (a) Any natural gas public utility desiring to exercise the right of
36       eminent domain as to any property for use for underground storage of
37       natural gas shall, as a condition precedent to the filing of its petition in
38       the district court, shall obtain from the commission a certificate setting
39       out findings of the commission:
40             (1) That the underground stratum or formation sought to be ac-
41       quired is suitable for the underground storage of natural gas and that its
42       use for such purposes is in the public interest; and
43             (2) regarding the amount of recoverable oil and native natural gas,

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  1       if any, remaining therein in place in the stratum or formation; and
  2             (3) if the proposal is to wash out a salt cavern for storage, those
  3       measures that the utility must take to protect the lease.
  4             The commission, if it determines appropriate or necessary, may require
  5       an independent study to be conducted to assist the commission in deter-
  6       mining whether a stratum or formation is suitable for the underground
  7       storage of natural gas.
  8             (b) The commission shall issue no such certificate under this section
  9       until after public hearing is had on application and upon reasonable notice
10       to interested parties notice as provided by law is given to all interested
11       parties and a public hearing on the application is held in accordance with
12       the provisions of the Kansas administrative procedure act.
13             (c) Subject to the provisions of K.S.A. 55-143 and amendments
14       thereto, the applicant shall be assessed an amount equal to all or any part
15       of the costs of such any study and any proceedings conducted pursuant
16       to this section and the applicant shall pay the amount so assessed before
17       the commission issues a certificate under this section.
18             (d) A copy of the order of the commission certifying a stratum or
19       formation as suitable for underground storage of natural gas, and delin-
20       eating the area comprising the same, shall be filed in the office of the
21       register of deeds of each county where any portion of the storage area is
22       located. The costs of such filing shall be assessed as a cost of the
23       proceeding.
24             (c) (e) All provisions of K.S.A. 66-106, 66-118a, 66-118b, 66-118c,
25       66-118d, 66-118e, 66-118j and 66-118k or any, and amendments thereto,
26       shall be applicable to all proceedings of the commission under K.S.A. 55-
27       1201 to 55-1206, inclusive, and acts amendatory thereof or supplemental
28       through 55-1206, and amendments thereto.
29             (d) (f) The state corporation commission shall remit all moneys re-
30       ceived by or for it for costs assessed under this section to the state trea-
31       surer at least monthly. Upon receipt of each such remittance, the state
32       treasurer shall deposit the entire amount thereof in the state treasury and
33       the same shall be credited credit it to the conservation fee fund created
34       by K.S.A. 55-143 and amendments thereto.
35             Sec.  3. K.S.A. 55-1205 is hereby amended to read as follows: 55-
36       1205. Any (a) After obtaining a certificate from the commission as pro-
37       vided by K.S.A. 55-1204, and amendments thereto, a natural gas public
38       utility, having first obtained a certificate from the commission as here-
39       inbefore provided, desiring to exercise the right of eminent domain for
40       the purpose of acquiring property for the underground storage of natural
41       gas shall do so in the manner provided in K.S.A. 26-501 to 26-516, inclu-
42       sive. The petitioner shall file the certificate of the commission as a part
43       of its petition and no order by the court granting said petition shall be

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  1       entered without such certificate being filed therewith. The appraisers in
  2       awarding damages hereunder shall also take into consideration the emi-
  3       nent domain procedure act (K.S.A. 26-501 et seq. and amendments
  4       thereto), except as otherwise provided by this section.
  5             (b) If eminent domain proceedings are brought pursuant to this sec-
  6       tion to condemn property located in two or more counties, the proceedings
  7       shall be brought in the county where the greatest portion of the property
  8       is located.
  9             (c) Unless the condemnee otherwise agrees, the interest condemned
10       in a proceeding pursuant to this section shall be a leasehold interest for
11       natural gas storage purposes which shall include a defined subsurface
12       stratum or formation, royalties on liquids extracted from such stratum or
13       formation and the use of so much of the surface as reasonably necessary
14       to permit natural gas storage operations. The award shall provide for
15       annual rental payments for the use of such acquired interests with direc-
16       tions for the payment of damages which might result from the use thereof.
17       The term of the leasehold shall continue until the underground storage
18       facility is abandoned pursuant to K.S.A. 55-1208 and amendments
19       thereto.
20             (d) In ascertaining the amount of compensation and damages to be
21       awarded in an eminent domain proceeding brought pursuant to this sec-
22       tion, the court, in addition to the factors specified by K.S.A. 26-513 and
23       amendments thereto, shall consider: (1) The value of the amounts of re-
24       coverable oil and native gas remaining natural gas in place in the property
25       sought to be appropriated and for such purposes, for which purpose the
26       appraisers shall receive as prima facie evidence of such amounts evidence
27       the findings of the commission with reference thereto to those amounts
28       and evidence based on professional engineering studies and presented by
29       any interested party; (2) the value of royalties for any oil produced or
30       other minerals recovered from the premises; (3) the annual leased value
31       of the property for underground storage of natural gas (the leased value
32       of the storage formation); (4) the value of pipeline and utility easements;
33       (5) the value of surface easements for pads or well site areas to be used
34       for extraction, injection and monitoring wells and other purposes; (6) the
35       value of any surface area used for roadways; and (7) if fresh water is
36       taken, the value of the water rights taken.
37             (e) If there has been an uncompensated and unauthorized prior use
38       of the property by the petitioner for underground storage of natural gas,
39       the appraisers shall assign a value to such prior use based on the fair
40       rental value of the storage space, which shall be included in the award.
41             (f) The court, in its order granting a petition for the purposes of this
42       act, shall specify the amount of surface area covered by any dominant
43       easement being taken and shall describe the location of such easement.

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  1             Sec.  4. K.S.A. 55-1210 is hereby amended to read as follows: 55-
  2       1210. (a) All natural gas which has previously been reduced to possession,
  3       and which is subsequently injected into underground storage fields, sands,
  4       reservoirs and facilities, whether such storage rights were acquired by
  5       eminent domain or otherwise, shall at all times be the property of the
  6       injector, such injector's heirs, successors or assigns, whether owned by
  7       the injector or stored under contract.
  8             (b) In no event shall such gas be subject to the right of the owner
  9       of the surface of such lands or of any mineral interest therein, under
10       which such gas storage fields, sands, reservoirs and facilities lie, or of any
11       person, other than the injector, such injector's heirs, successors and as-
12       signs, to produce, take, reduce to possession, either by means of the law
13       of capture or otherwise, waste, or otherwise interfere with or exercise any
14       control over such gas. Nothing in this subsection shall be deemed to affect
15       the right of the owner of the surface of such lands or of any mineral
16       interest therein to drill or bore through the underground storage fields,
17       sands, reservoirs and facilities in such a manner as will protect such fields,
18       sand, reservoirs and facilities against pollution and the escape of the nat-
19       ural gas being stored.
20             (c) With regard to natural gas that has migrated to adjoining property
21       or to a stratum, or portion thereof, which has not been condemned as
22       allowed by law or otherwise purchased:
23             (1) The injector, and such injector's heirs, successors and assigns,
24       shall not lose title to or possession of such gas if such injector, or such
25       injector's heirs, successors or assigns, can prove by a preponderance of
26       the evidence that such gas was originally injected into the underground
27       storage.
28             (2) The injector, and such injector's heirs, successors and assigns,
29       shall have the right to conduct such tests on any existing wells on adjoining
30       property, at such injector's sole risk and expense including, but not limited
31       to, the value of any lost production of other than the injector's gas, as
32       may be reasonable to determine ownership of such gas. Advance notice
33       of such tests shall be given to the owners of property rights comprising
34       the adjoining property in accordance with the rules and regulations
35       adopted by the commission and the tests shall be conducted on such terms
36       and conditions as established by rules and regulations adopted by the
37       commission.
38             (3) The owner of the stratum and the owner of the surface shall be
39       entitled to such compensation, including compensation for use of or dam-
40       age to the surface or substratum, as is provided by law, and shall be
41       entitled to recovery of all costs and expenses, including reasonable attor-
42       ney fees, if litigation is necessary to enforce any rights under this subsec-
43       tion (c) and the injector does not prevail owners of property rights com-

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  1       prising the adjoining property shall be entitled to compensation for the
  2       use of and damages to the surface and substratum.
  3             (d) The injector, such injector's heirs, successors and assigns shall
  4       have the right to compel compliance with this section by injunction or
  5       other appropriate relief by application to a court of competent
  6       jurisdiction.
  7             New Sec.  5. A person whose stratum or formation is acquired for
  8       use for underground storage of natural gas and the owners of property
  9       rights comprising property adjoining any such stratum or formation shall
10       be entitled to recovery of all costs and expenses, including reasonable
11       attorney fees, if litigation is necessary to enforce any rights under K.S.A.
12       55-1203, 55-1204, 55-1205, 55-1208 or 55-1210, and amendments
13       thereto, and the injector does not prevail. 
14       Sec.  6. K.S.A. 55-1201, 55-1204, 55-1205 and 55-1210 are hereby
15       repealed.
16         Sec.  7. This act shall take effect and be in force from and after its
17       publication in the statute book.