49 F. Supp. 3d 637
D.N.D.2014Background
- Fishers own property in Bowman County, North Dakota, within the Cedar Hills Unit; Continental operates the Unit and the Lonesome Dove 42-17 SWD well.
- Unitization created to pool multiple tracts for oil and gas development; the Unit covers about 50,000 acres and operates under ND law allowing surface use for unit purposes.
- It is uncertain who owns the minerals beneath the Subject Property or whether they are leased; the Unit Operator may need access to surface to conduct unit operations.
- Continental planned to drill a salt water disposal well to inject produced water ~10,000 feet below the surface; several letters offered surface compensation or notification of drilling plans.
- Fisher claims Continental lacks right to drill/dispose on/under their property and seeks damages, injunctive relief, and accounting; Continental seeks a declaration of rights to surface use for unit operations.
- District court denies summary judgment on trespass and nuisance, rejects outright denial of unit rights, but finds on law that unitization and rights may permit disposal well if reasonable; issues of fact remain on reasonableness and use.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether unitization and the Unit Agreement authorize a salt water disposal well | Fisher: disposal well not reasonably necessary; not within unit rights | Continental: Unit Operator rights extend to surface use for unit operations, including disposal; reasonable use under accommodation doctrine | Generally permissible if reasonable; genuine issues of fact remain as to reasonableness |
| Whether the Unit Operator has an implied covenant to drill a salt water disposal well within the Unit | Fisher: no implied covenant to dispose salt water on/under their land | Continental: Unit and granting clauses imply disposal rights for unit operations | Implied covenant to drill disposal well can be read from unit statutes, agreements; depends on reasonableness; facts unresolved |
| Whether the notices given to Fishers were so unclear as to render reliance for fraudulent misrepresentation possible | Fisher: notices were confusing about oil/gas vs. salt water disposal; reliance possible | Continental: letters not misleading and reliance is contested | Questions of fact exist about notice clarity and reliance; not dismissed at summary judgment |
| Whether damages under N.D.C.C. § 38-11.1-04 may include pore space use | Fisher: damages may include pore space use; pleaded under 38-11.1-04 | Continental: pore-space damages unclear; ND law permits surface damage but pore space is unsettled | Pleadings support damages under 38-11.1-04; pore-space damages open question; not resolved on SJ |
Key Cases Cited
- Hunt Oil Co. v. Kerbaugh, 283 N.W.2d 131 (N.D. 1979) (mineral estate dominant; surface use limited to reasonably necessary use)
- Buchholz v. Burlington Resources Oil & Gas Co. LB, 755 N.W.2d 914 (N.D. 2008) (unitization does not automatically modify preexisting salt water disposal agreements)
- Colburn v. Parker & Parsley Dev. Co., 842 P.2d 327 (Kan. 1992) (implied covenant to dispose salt water on leased premises; broad granting clause implications)
- Leger v. Petroleum Eng’rs, Inc., 499 So.2d 953 (La. Ct. App. 1986) (implied disposal rights for salt water as necessity of lease performance)
- Gill v. McCollum, 311 N.E.2d 741 (Ill. App. 1974) (salt water disposal must relate to oil production; disposal rights implied under lease)
- Farrar Oil Co. v. Cont’l Res. Inc., 559 N.W.2d 841 (N.D. 1997) (forced pooling; unit operations supersede individual lease preferences; trespass considerations context)