898 N.W.2d 406
N.D.2017Background
- Plaintiffs (surface owners) own a North Dakota quarter-section subject to a 1977 oil & gas lease; Denbury operates a unit well on the property that was converted to a permitted saltwater injection well and injected ≈3.2 million barrels through 2016.
- Plaintiffs sued for nuisance, trespass, and statutory damages under the Oil and Gas Production Damage Compensation Act, N.D.C.C. ch. 38-11.1; the parties agreed Denbury had contractual disposal rights under the older mineral lease, leaving the statutory damages claim as the key dispute.
- The federal magistrate judge held the surface owner owns subsurface pore space under N.D.C.C. ch. 47-31 and that ch. 38-11.1 may cover saltwater disposal into pore space; the magistrate certified seven questions to the North Dakota Supreme Court about ownership and recoverable damages.
- North Dakota statutes (ch. 47-31) vest title to pore space in the owner of the overlying surface estate and generally prohibit severance of pore space from the surface estate after April 9, 2009.
- The central legal issue: whether N.D.C.C. § 38-11.1-04 (requiring a mineral developer to pay surface owners for "lost land value, lost use of and access to the surface owner’s land") applies when a developer injects saltwater into subsurface pore space, and what proof of damages is required.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Does surface owner own subsurface pore space absent a conveyance? | Surface owner: yes, pore space is part of the surface estate. | Denbury: (did not seriously contest below) but statutory definitions control. | Yes — N.D.C.C. ch. 47-31 vests title to pore space in the overlying surface owner absent prior conveyance. |
| 2. Does § 38-11.1-04’s term "land" include pore space for saltwater disposal claims? | Mosser: "land" includes pore space; statute should be construed to benefit surface owners. | Denbury: "land" means the "solid material of the earth" and excludes voids/pore space. | Yes — the Court adopts a three-dimensional conception of "land"; pore space is part of the surface owner’s land for § 38-11.1-04. |
| 3–5. Are damages recoverable only if owner currently uses or plans to use pore space, or can recovery be limited to proven diminution in market value or other concrete interference? | Plaintiffs: recovery available for lost use/access even without current use or immediate plans; per-barrel valuation evidence probative. | Denbury: plaintiffs must show current use, concrete near-future plans, or diminution in market value to prove damage. | No — recovery is not limited to current use or proof of near-term plans or strictly to market-value diminution; statute compensates for lost land value and lost use/access. |
| 6–7. Can damages be calculated from per-barrel rates paid in arm’s-length transactions and can owner recover for unused remaining capacity foreclosed by defendant? | Plaintiffs: per-barrel payments and injected-barrel counts may support damages; might also claim loss of remaining capacity. | Denbury: per-barrel evidence insufficient alone; future-capacity claims speculative. | Yes as to per-barrel evidence — comparable per-barrel payments and evidence of barrels injected can be probative and may support recovery (Q6). No answer to question 7 — Court declines to rule on speculative recovery for remaining capacity. |
Key Cases Cited
- Mosser v. Denbury Res., Inc., 112 F. Supp. 3d 906 (D. N.D. 2015) (district court opinion holding "land" may encompass pore space and applying ch. 38-11.1 to saltwater disposal)
- Burlington Res. Oil & Gas Co. v. Lang & Sons, Inc., 259 P.3d 766 (Mont. 2011) (Montana Supreme Court acknowledged surface-damage statute could encompass pore-space use)
- Western Gas Res., Inc. v. Heitkamp, 489 N.W.2d 869 (N.D. 1992) (discussing statutory ambiguity and interpretation principles)
- Jung v. Gen. Cas. Co., 651 F.3d 796 (8th Cir. 2011) (federal-court certification practice and when certification is appropriate)
- Cray v. Deloitte Haskins & Sells, 925 P.2d 60 (Okla. 1996) (declining state review where district court had finalized liability and cautioning against advisory certifications)