10 N.W.3d 591
N.D.2024Background
- In 2005, oil and gas leases were executed for property owned by Kathleen Stroh (surface) and the Schmalzes (mineral) and later acquired by Lime Rock.
- Lime Rock operated wells from 2009–2010, maintaining lease validity via continuous production.
- A 2011 surface use and damage agreement (SUDA), later acquired in interest by Lime Rock, was unrecorded but a memorandum of it was recorded.
- In 2023, Stroh granted ND Energy a one-year exclusive temporary easement to lay freshwater hoses on the property.
- Lime Rock installed layflat hoses for fracking operations in May-June 2023, leading ND Energy to sue for tortious interference and trespass.
- The district court granted summary judgment to Lime Rock, finding Lime Rock's actions authorized under its leases and finding ND Energy had notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether oil and gas leases authorize use of layflat hoses | Leases only grant rights to pipelines; layflat hoses are excluded by express mention of pipelines | Leases grant broad surface use rights necessary for oil and gas operations, including hoses | Leases unambiguously authorize layflat hoses as part of reasonable use for production |
| Whether ND Energy was a good-faith purchaser of layflat easement | Easement was valid as they had no notice of prior surface rights | Recorded memorandum of SUDA gave constructive notice of prior Lime Rock rights | ND Energy had constructive notice and was not a good-faith purchaser |
| Tortious interference with contract | Lime Rock wrongfully interfered with ND Energy’s exclusivity over layflat hose use | Lime Rock was justified due to its pre-existing surface rights under leases/SUDA | Lime Rock’s action justified; no tortious interference |
| Permanent injunction against Lime Rock | Sought to prohibit Lime Rock from using the property | Lime Rock’s prior rights should not be enjoined | No basis for injunction since Lime Rock's rights take precedence |
Key Cases Cited
- Johnson v. Statoil Oil & Gas LP, 918 N.W.2d 58 (N.D. 2018) (applies general contract interpretation principles to oil and gas leases)
- Feland v. Placid Oil Co., 171 N.W.2d 829 (N.D. 1969) (lessee’s right to reasonable use of surface for oil production)
- Berger v. Sellers, 996 N.W.2d 329 (N.D. 2023) (elements for intentional interference with contract)
- Desert Partners IV, L.P. v. Benson, 875 N.W.2d 510 (N.D. 2016) (constructive notice and good-faith purchaser doctrine)