ND Supreme Court finds Board Unreasonably Interpreted Temporary Housing Regulations in Penalizing Fracking Company Utilizing “Man Camps”

Western Petroleum, LLC, and Maxum Petroleum Operating Company, Inc., doing business as Pilot Logistics Services, appealed from a district court order affirming the Williams County Board of County Commissioners’ decision to penalize Pilot for violating the county’s temporary housing regulations. In September 2011, the Williams County Board of County Commissioners adopted temporary housing regulations relating to the use of “man camps” or “crew housing facilities” in the county around fracking sites. The use of temporary housing on property within the county was thereafter prohibited without a conditional use permit. In September 2011, the Board granted Western Petroleum a conditional use permit for temporary housing units on its property, which allowed Western Petroleum to use up to 40 RVs for one year and up to seven mobile homes for two years. In February 2012, Pilot Logistics acquired Western Petroleum and its property; however, Western Petroleum did not transfer the permit to Pilot, nor did Pilot renew the RV permit when it expired in September 2012 and for the mobile homes in September 2013. In 2014, the Board became aware that Pilot continued to use the property for temporary housing after the expiration of Western Petroleum’s permit. Pilot was out of compliance on 40 RVs, seven mobile home units, and two two-story framed houses on the property that were not permitted under Western Petroleum’s conditional use permit. The Board assessed a $29,635,000 penalty against Pilot for violating the temporary housing regulations during the period of noncompliance until June 10, 2014, calculating the penalty by treating each non-permitted use as a violation subject to a $1,000 penalty per day.

On appeal, Pilot argued that the Board acted in an arbitrary, capricious and unreasonable way by penalizing Pilot $29,635,000 for violating Williams County’s temporary housing regulations. The court found the temporary housing regulations required an applicant for a conditional use permit to indicate the number of proposed housing units; however, the Board did not issue a separate permit for each housing unit on the property. Instead, the Board issued a single permit regardless of the number of housing units on the property. Moreover, the plain language of the regulations stated the penalty for violating the provisions is $1,000 per violation. Here, the Board only penalized Pilot for violating the conditional use permit provision. Accordingly, the court determined that Pilot was only subject to a $1,000 penalty per day for violating the conditional use permit provision.

Western Petroleum, LLC and Maxum Petroleum Operating Company, Inc.v  Williams County Board of Commissioners, 2016 WL 7368813 (ND 12/20/2016)