Abell v. GADECO, LLC
2017 ND 163
| N.D. | 2017Background
- In 2007 Abell leased mineral rights to GADECO with a five‑year primary term and extension while "operations are conducted," with "operations" defined to include preparation of the drill site.
- In late 2011 GADECO surveyed and staked two potential well locations on Abell’s property, negotiated a surface use/damage agreement which Abell declined to sign, and applied for an Industrial Commission drilling permit on January 6, 2012 (approved Jan. 23, 2012).
- Abell leased the same minerals to Kodiak on January 25, 2012; GADECO ultimately relocated the well off Abell’s property within the spacing unit and completed a producing well in May 2013.
- Abell gave notice of termination and sued declaring the GADECO lease terminated; GADECO counterclaimed for breach of contract and damages (including delay in granting an easement for electric service).
- The district court granted summary judgment finding the GADECO lease had expired, dismissed GADECO’s counterclaim, and awarded Abell costs and fees; GADECO appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GADECO performed "operations" during the primary term so as to extend the lease | Abell: surveying/staking alone do not begin "well‑site preparation" under the administrative rule; no operations occurred before term expired | GADECO: surveying/staking, permit application, staking changes, and negotiations constitute preparatory "operations" under the lease and caselaw | Reversed district court: genuine factual disputes exist about whether GADECO commenced operations and whether Abell’s conduct prevented operations; summary judgment improper |
| Whether GADECO’s breach‑of‑contract/damages claim re: refusal to grant easement was properly dismissed | Abell: court ordered easement executed; damages tied to Kodiak lease not before court | GADECO: entitled to damages for delay before court‑ordered easement and while acting as operator | Reversed dismissal and remanded for clarification/reconsideration because factual disputes remain and district court gave no adequate rationale |
Key Cases Cited
- Anderson v. Hess Corp., 733 F. Supp. 2d 1100 (D.N.D. 2010) (surveying, pad work, permit, moving equipment constituted operations that extended lease)
- Murphy v. Amoco Prod. Co., 590 F. Supp. 455 (D.N.D. 1984) (preparatory acts with intent to drill can commence drilling operations)
- Serhienko v. Kiker, 392 N.W.2d 808 (N.D. 1986) (principles for what constitutes reworking/drilling operations)
- Sheffield v. Exxon Corp., 424 So. 2d 1297 (Ala. 1982) (operations must be associated with physical site of the well)
- Johnson v. Yates Petroleum Corp., 981 P.2d 288 (N.M. 1999) (staking/survey, permit, site clearing found sufficient preparatory acts)