Anderson v. Hess Corp.
649 F.3d 891
| 8th Cir. | 2011Background
- Five mineral leases (May 3 and May 10, 2004) on 468.8 acres in Mountrial County, ND, originally to Diamond Resources, later Hess became lessee (Dec 30, 2004).
- Leases contain Pugh (pooling) and habendum clauses with termination unless lessee is engaged in drilling or reworking operations.
- Hess prepared for drilling and conducted extensive pre-drilling activities in 2008–2009, including surveying, permitting, site prep, and pit construction; rig arrival delayed but drilling commenced May 11, 2009 and the well was completed June 30, 2009.
- Andersons sued for quiet title; district court granted Hess summary judgment finding Hess engaged in drilling operations to extend the primary terms.
- Andersons appeal arguing ambiguity and that Hess was not yet drilling at term expiry; district court declined to certify a ND Supreme Court question; court held that phrase includes drilling and reworking operations and affirmed district court’s grant of summary judgment.
- Question presented on appeal whether the phrase requires spudding before expiration to extend the lease; court declines to certify and affirms interpretation and decision in Hess’s favor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of 'engaged in drilling or reworking operations' | Andersons: ambiguous; 'or' may modify only reworking, so 'engaged in drilling' required. | Hess: phrase includes both drilling and reworking operations; no ambiguity; preparatory work can constitute engagement. | Not ambiguous; includes drilling or reworking operations; Hess entitled to summary judgment. |
| Whether district court should certify ND Supreme Court question | Andersons: certification appropriate to resolve state-law issue. | Hess: question not determinative; state guidance exists. | District court did not abuse discretion; certification not warranted. |
| Whether summary judgment was proper on quiet-title claim | Andersons: lease terms require drilling, not merely operations, to extend term. | Hess: habendum/terms support extension via 'drilling or reworking operations'. | Summary judgment proper; lease language interpreted to include drilling operations. |
Key Cases Cited
- Serhienko v. Kiker, 392 N.W.2d 808 (N.D. 1986) (interprets 'drilling or reworking operations' language guidance for ND court)
- Sheffield v. Exxon Corp., 424 So.2d 1297 (Ala. 1982) (drilling/reworking operation principles applied to leases)
- Rogers v. Osborn, 261 S.W.2d 311 (Tex. 1953) (definition of 'drilling or reworking operations' in lease context)
- Guleke v. Humble, 126 S.W.2d 38 (Tex.App. 1939) (interpretation of 'drilling or reworking operations' in leases)
- Manzano Oil Corp. v. Chesapeake Operating, Inc., 178 F. Supp. 2d 1217 (D.N.M. 2001) (addressing drilling/reworking language in leases)
- Lamoco, Inc. v. Hughes, 850 So.2d 67 (La.Ct.App. 2003) (interpretation of 'drilling or reworking operations' in leases)
- Whelan v. Lacy, 251 S.W.2d 175 (Tex.App. 1952) (lease termination and operations interpretation guidance)