112 F. Supp. 3d 906
D.N.D.2015Background
- Plaintiffs own the surface estate (NW¼ Section 26, T.113N, R.101W) subject to a 1977 Mosser oil & gas lease that remains effective due to continuous production. Denbury is the current unit operator of the NDIC-approved T.R.-Madison Unit that includes the leased lands.
- The Mosser oil well produced 1979–2006; Encore applied in 2008 to convert it to a deep injection (saltwater disposal) well, received permit approvals and multiple extensions, and Denbury completed conversion and first injected saltwater on Sept. 30, 2011.
- Plaintiffs allege Denbury unlawfully used plaintiffs’ subsurface pore space as a permanent saltwater disposal site (trespass, nuisance) and seek damages under North Dakota’s surface-owner protection statute (N.D.C.C. ch. 38-11.1) for lost land value and lost opportunity to use/lease pore space.
- Denbury claims lease-based express/implied rights to use surface and subsurface for operations (including saltwater disposal), regulatory approval by NDIC, and that ch. 38-11.1 does not reach pore space or that plaintiffs suffered no compensable injury.
- The court found: (1) Mosser Lease language (including subsurface rights and catchall ‘‘necessary, incident to, or convenient’’ language) and unitization support Denbury’s express or implied right to subsurface saltwater disposal for waste produced within the Unit; (2) factual issues (e.g., whether Denbury disposed of saltwater produced outside the Unit) preclude summary dismissal of trespass/nuisance; (3) ch. 38-11.1 likely encompasses pore space (owner’s rights below surface), so plaintiffs’ statutory claim survives summary judgment; and (4) factual disputes remain about notice timeliness and actual damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mosser Lease (and unitization) permits subsurface injection disposal on plaintiffs’ land | Lease does not authorize permanent disposal without compensation; accommodation doctrine requires balancing and alternatives exist | Lease’s express language (and unitization/ implied rights) grants right to use subsurface for disposal; ‘‘convenient’’ language precludes balancing | Court: Lease language and unitization convey express or implied right to dispose of saltwater generated within the Unit; accommodation balancing not reached because plaintiffs failed to show existing/imminent use of the specific pore space; factual issues remain re: waste from outside the Unit, so trespass/nuisance claims survive. |
| Whether N.D.C.C. ch. 38-11.1 provides compensation for use of subsurface pore space | Statute compensates surface owners for lost land value and lost use/access; ‘‘land’’ should include pore space and owner’s subsurface rights | ‘‘Land’’ could be limited to solid material; statute doesn’t explicitly mention pore space so it shouldn’t apply | Court: Likely that North Dakota Supreme Court would read "surface owner's land" to include subsurface rights/pore space; plaintiffs’ statutory claim survives. |
| Whether plaintiffs gave timely notice under § 38-11.1-07 | Notice is timely when given within two years after a reasonable person would become aware of injury; plaintiffs’ communications in 2013 can be timely | Notice must be within two years of first injection (Sept. 30, 2011); earlier 2008 permit application notice made plaintiffs vigilant | Court: § 38-11.1-07 is disjunctive — notice must be within two years after injury occurs OR within two years after it would become apparent to a reasonable person; factual issues exist about when plaintiffs reasonably became aware and whether 2008 notice sufficed, so summary judgment denied on timeliness. |
| Whether plaintiffs can prove compensable damages under ch. 38-11.1 for unused pore space | Lost land value or lost use/access can be shown even if pore space was unused; damages may be inferred or proven by diminished market value | Plaintiffs show no actual damage; best evidence (industry fees) insufficient; statute requires proof of actual damages | Court: Plaintiffs may recover for lost land value or lost use/access; existing record is undeveloped on damages, so summary judgment denied; Burlington Resources suggests proof is required but does not preclude recovery. |
Key Cases Cited
- Feland v. Placid Oil Co., 171 N.W.2d 829 (N.D. 1969) (express lease language can authorize subsurface/injection rights and supports lessee’s surface uses)
- Kerbaugh v. Hunt Oil Co., 283 N.W.2d 131 (N.D. 1979) (North Dakota adopted the accommodation doctrine requiring due regard for existing surface uses when mineral estate is dominant)
- Burlington Resources Oil & Gas Co. v. Lang and Sons, 259 P.3d 766 (Mont. 2011) (Montana high court: surface-owner statute could encompass pore-space use but evidence of compensable damage is required)
- Murphy v. Amoco Production Co., 729 F.2d 552 (8th Cir. 1984) (discussing North Dakota surface-owner statute and that compensation covers actual damage to the surface estate)
- Peacock v. Sundre Twp., 372 N.W.2d 877 (N.D. 1985) (recurring trespasses may give rise to repeated actions; limitations/election issues relevant to continuing injury)