Opinion
Case No. 1:20-cv-34
2021-05-07
Lee WIDDEL, Plaintiff, v. CONTINENTAL RESOURCES, INC., Defendant.
Dennis E. Johnson, Aaron J. Weber, Johnson & Sundeen Law Firm, Watford City, ND, for Plaintiff. Andrew D. Sims, Harris Finley & Bogle, PC, Fort Worth, TX, Hays Doan, Hugh Q. Gottschalk, Wheeler Trigg O'Donnell LLP, Denver, CO, for Defendant.
Dennis E. Johnson, Aaron J. Weber, Johnson & Sundeen Law Firm, Watford City, ND, for Plaintiff.
Andrew D. Sims, Harris Finley & Bogle, PC, Fort Worth, TX, Hays Doan, Hugh Q. Gottschalk, Wheeler Trigg O'Donnell LLP, Denver, CO, for Defendant.
ORDER GRANTING CONTINENTAL'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING WIDDEL'S MOTION FOR PARTIAL SUMMARY JUDGMENT
Daniel M. Traynor, District Judge
[¶1] THIS MATTER comes before the Court on Motions for Partial Summary Judgment filed by the Plaintiff Lee Widdel ("Widdel") and Defendant Continental Resources, Inc. ("Continental"). On September 30, 2020, Widdel and Continental each moved for Partial Summary Judgment. Doc. Nos. 14, 16. On October 26, 2020, the Parties filed their respective Responses to the Motions. Doc. Nos. 21, 22. On November 4, 2020, the Parties each filed a Reply in support of their respective Motions. Doc. Nos. 24, 25. For the reasons explained below, the Defendant's Motion for Partial Summary Judgment is GRANTED , and the Plaintiff's Motion for Partial Summary Judgment is DENIED .
FACTS
[¶2] Continental conducts large-scale oil and gas operations in North Dakota. Doc. No. 15-3, Ex. J. Specific to this case concerns Continental's oil and gas operation in McKenzie County, North Dakota. Doc. No. 15-3, Ex. J. In order to facilitate its operations for oil and gas development, Continental secured from a number of landowners and other interested parties the working interest mineral rights to a number of tracts of land within the area of interest to Continental. Doc. No. 15-3, Ex. J. Continental also entered into Surface Use Agreements ("SUA") with landowners to facilitate the use of the surface estates for its oil and gas operations in the area. Lee Widdel is one such landowner.
[¶3] Widdel holds surface rights to land Continental currently utilizes for its operations in McKenzie County. Doc. No. 15-1, ¶2. The instant dispute, however, specifically involves a large tract of land located in Township 152 North, Range 99 West, McKenzie County, North Dakota ("the Property"). Doc. No. 15-1, ¶2. This includes portions of Sections 7 and 10 and all of Sections 8 and 9. Doc. No. 15-3, ¶3. Continental holds the working interest mineral rights to the E/2 SE/4 of Section 7, Township 152 North, Range 99 West through oil and gas leases and operates a number of oil and gas wells on the Property. Doc. No. 15-1, ¶5. Continental also holds the working interest mineral rights to tracts of land in the vicinity. Doc. No. 15-1, ¶5.
[¶4] Continental is the Unit Operator for the Pittsburgh-Uhlman Unit, which is comprised of Sections 6, 7, 18, and 19 of Township 152 North, Range 99 West. Doc. No. 15-1, ¶6. The E2/SE/4 of Section 7 is included in this Unit. Doc. No. 15-1, ¶6. The Pittsburgh 3, Uhlman Federal 2, and Uhlman Federal 3 wells were drilled from one well location in the SE corner of Section 7 on the Property. Doc. No. 15-1, ¶6. Continental is also the Unit Operator of the Garfield Unit, which is located north of the Property. Doc. No. 15-1, ¶7. The Garfield Federal 4-7 wells in the Garfield Unit were drilled from one well location partially on the Property. Doc. No. 15-1, ¶7. In addition, Continental operates the Jamestown Unit, which is located south of the Property. Doc. No. 15-1, ¶8. The Jamestown 2 and 3 wells were drilled from one well location partially on the Property, and the Jamestown 6 and 7 wells were drilled from a separate well location partially located on the Property. Doc. No. 15-1, ¶8.
[¶5] In 2011, Widdel and Continental executed a SUA to facilitate Continental's oil and gas operations on the Property and others in the vicinity. Doc. No. 15-1, Ex. A. On August 30, 2013, a "Memorandum of Access, Surface Use and Damages Agreement" between Continental and Widdel (the "Memorandum SUA") was recorded in the real property records of McKenzie County, North Dakota. Doc. No. 15-1, Ex. B.
[¶6] In 2018, Continental began the process of installing a freshwater and saltwater pipeline system, known as the "Boulder Gathering System," through part of the Property in order to further facilitate its overall oil and gas operation in the area. Doc. No. 15-1, Ex. C. On June 12, 2018, Continental sent Widdel a "Notice of Entry Drilling, Pipeline(s) and/or Construction Operations," notifying Widdel that Continental would be entering his land to install pipelines for the Boulder Gathering System. Doc. No. 15-1, Ex. C.
[¶7] On July 11, 2018, Widdel's previous counsel sent Continental an objection to the installation of the water pipelines. Doc. No. 18-3. Counsel stated the SUA did not grant Continental the authority to lay the pipelines, further noting "had the parties contracted for pipelines this would have been something clearly laid out within the agreement." Doc. No. 18-3, p. 1. Continental responded to Widdel on July 26, 2018, explaining why it believed it had the authority to lay the water pipelines for the Boulder Gathering System. Doc. No. 18-4. Specifically, Continental asserted it had the right to go upon Widdel's property "as Continental may reasonably require for well locations, roads, and associated facilities" further asserting, "[p]ipelines are associated facilities.’ " Doc. No. 18-4, p. 1. Continental also argued that ¶13(h) of the SUA specifically referenced compensation for pipelines. Doc. No. 18-4, p. 1. Continental stated it would move forward with the project. Doc. No. 18-4, p. 2. On August 2, 2018, Widdel responded to Continental, again objecting to the installation of the water pipelines. Doc. No. 18-5. On April 8, 2019, Continental again notified Widdel it would be moving forward with the water pipelines, notifying him Continental would compensate him for the installation of the pipelines. Doc. No. 15-1, Ex. D.
[¶8] Continental tendered payment to Widdel on September 26, 2018 in the amount of $55,290, at $75 per rod, as compensation for partial installation of the water pipelines for the Boulder Gathering System. Doc. No. 15-1, Ex. E. The letter accompanying the payment included a breakdown of how the amount was calculated pursuant to the SUA. Doc. No. 15-1, Ex. E. Continental tendered payment again on October 16, 2018 in the amount of $55,762.50, calculated at $75 per rod. Doc. No. 15-1, Ex. F. Continental then tendered payment to Widdel on November 19, 2018 in the amount of $185,087.50, calculated at $250 per rod. Doc. No. 15-1, Ex. G. Widdel did not accept any of the payments.
[¶9] The Boulder Gathering System was completed in June of 2019. Doc. No. 15-2, ¶11. Continental has drilled and completed eleven (11) total wells on the Property. Doc. No. 15, p. 13. Each of Continental's wells on the Property is located on a drillsite connected to the Boulder Gathering System. Doc. No. 15, p. 13. The saltwater pipelines transport saltwater and freshwater from and to the wells Continental operates on the Property and in the vicinity. Doc. No. 15, p. 13. These pipelines service not only oil and gas wells on Widdel's Property but also other spacing units in the vicinity owned by unrelated third parties.
PROCEDURAL HISTORY
[¶10] On March 2, 2020, Widdel filed a Complaint against Continental in McKenzie County District Court, North Dakota, asserting eight counts: Count 1-Breach of Contract – Installation of Pipelines, Count 2 – Trespass – Installation of Pipelines, Count 3 – Breach of Contract – Failure to Compensate – Pipelines, Count 4 – Breach of Contract – Failure to Compensate – Roads and Well Sites, Count 5 – Breach of Contract – Failure to Reclaim, Count 6 – Breach of Contract – Failure to Consult, Count 7 – Breach of Contract – Failure to Make Reasonable Efforts, and Count 8 – Injunction. Doc. No. 1-1. On March 3, 2020, Continental removed the case to this Court, invoking this Court's Diversity and Removal Jurisdiction under 28 U.S.C. § 1332, 1441. Doc. No. 1. Continental thereafter filed an Answer and Counterclaim. Doc. No. 2. Widdel answered the Counterclaim on March 23, 2020. Doc. No. 4. The instant Motions followed and only concern Counts 1, 2, and 8.
LEGAL DISCUSSION
I. Summary Judgment Standard
[¶11] Summary judgment is required "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "An issue is ‘genuine’ if the evidence is sufficient to persuade a reasonable jury to return a verdict for the nonmoving party." Schilf v. Eli Lilly & Co., 687 F.3d 947, 948 (8th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "A fact is material if it ‘might affect the outcome of the suit.’ " Dick v. Dickinson State Univ., 826 F.3d 1054, 1061 (8th Cir. 2016) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505 ). Courts must afford "the nonmoving party the benefit of all reasonable inferences which may be drawn without resorting to speculation." TCF Nat'l Bank v. Mkt. Intelligence, Inc., 812 F.3d 701, 707 (8th Cir. 2016) (quoting Johnson v. Securitas Sec. Servs. USA, Inc., 769 F.3d 605, 611 (8th Cir. 2014) ). "At summary judgment, the court's function is not to weigh the evidence and determine the truth of the matter itself, but to determine whether there is a genuine issue for trial." Nunn v. Noodles & Co., 674 F.3d 910, 914 (8th Cir. 2012) (citing Anderson, 477 U.S. at 249, 106 S.Ct. 2505 ).
[¶12] If the movant demonstrates the absence of a genuine issue of material fact, "[t]he nonmovant ‘must do more than simply show that there is some metaphysical doubt as to the material facts,’ and must come forward with ‘specific facts showing that there is a genuine issue for trial.’ " Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Id.
II. Count 1 - Breach of Contract – Installation of Pipelines
[¶13] In Count 1 of the Complaint, Widdel alleges Continental breached the SUA when it installed the Boulder Gathering System, other pipelines, and associated pipeline equipment. Specifically, Widdel argues the SUA did not grant Continental the authority to install the freshwater and saltwater pipeline system. Continental asserts the SUA gave it authority to install the saltwater and freshwater pipelines on Widdel's land, and even if the SUA did not, Continental had the authority to install the pipelines through other legal means, including its status as a mineral lease holder under North Dakota law, pursuant to orders issued by the North Dakota Industrial Commission, and through oil and gas leases it possessed for the minerals underlying the Property and in the areas in the vicinity. The Court must first determine if the SUA explicitly authorized Continental to install the water pipelines. The Court finds it does.
i. The SUA explicitly authorized Continental to install saltwater and freshwater pipelines on the Property.
[¶14] The parties agree North Dakota law applies to the interpretation of the SUA. "A contract is an agreement to do or not do a certain thing." N.D.C.C. § 9-01-01(1). "The interpretation of a written contract generally is a question of law for the court, making summary judgment an appropriate method of disposition in contract disputes." Burk v. State by & through Bd. of Univ. & Sch. Lands, 2017 ND 25, ¶ 9, 890 N.W.2d 535, 539.
[¶15] "Contracts are construed to give effect to the mutual intention of the parties at the time of contracting." Id. at 539. "The parties' intention must be ascertained from the writing alone if possible." Id. (citing N.D.C.C. § 9–07–04 ). "A contract must be construed as a whole to give effect to each provision, if reasonably practicable." Id. (citing N.D.C.C. § 9–07–06 ). "[Courts] construe contracts to be definite and capable of being carried into effect, unless doing so violates the intention of the parties." Id. (citing N.D.C.C. § 9–07–08 ). "Unless used by the parties in a technical sense or given a special meaning, words in a contract are construed in their ordinary and popular sense, rather than according to their strict legal meaning." Id. (citing N.D.C.C. § 9–07–09 ). "The ordinary meaning is the definition a non-law-trained person would attach to the term." Martin v. Allianz Life Ins. Co. of N. Am., 1998 ND 8, ¶ 12, 573 N.W.2d 823, 826.
[¶16] "If the language of the contract is clear and unambiguous, and the intent is apparent from its face, there is no room for further interpretation." Bendish v. Castillo, 2012 ND 30, ¶ 16, 812 N.W.2d 398, 403. "[A] contract is ambiguous when reasonable arguments can be made for different positions on its meaning." Moen v. Meidinger, 547 N.W.2d 544, 547 (N.D. 1996). "Whether or not a contract is ambiguous is a question of law." Id. "If a written contract is unambiguous, extrinsic evidence is not admissible to contradict the written language." Lire, Inc. v. Bob's Pizza Inn Restaurants, Inc., 541 N.W.2d 432, 434 (N.D. 1995). "However, if a written contract is ambiguous, extrinsic evidence may be considered to show the parties' intent." Id.
[¶17] Continental argues the SUA expressly authorized it to install pipelines on the Property, including water pipelines. In particular, Continental argues the SUA gives it both broad and specific authority to install freshwater and saltwater pipelines. Continental argues the SUA gives it "broad, general authority" for pipeline "Operations", with the installation of saltwater and freshwater pipelines being included in the term "Operations" and pipelines being included in the definition of "facilities." Doc. No. 15, pp. 18-20. While Continental has put forth this argument that it has broad, general authority to install the pipelines, the Court need not address that argument because it finds there are specific provisions in this particular SUA that permit Continental's installation of freshwater and saltwater pipelines. See Fortis Benefits Ins. Co. v. Hauer, 2001 ND 186, ¶ 17, 636 N.W.2d 200, 205 ("[I]t is a well-accepted rule of contract interpretation that when a conflict exists between a specific provision and a general provision in a contract, the specific provision ordinarily prevails over the general provision.) see also N.D.C.C. § 31-11-05(25) ("Particular expressions qualify those which are general.").
[¶18] Paragraph 13(h) of the SUA states "any pipelines leading to or from the well site location require additional compensation." Doc. No. 15-1, Ex. A, ¶13(h). Widdel argues this is nothing more than a vague reference with no enforcement power, as the SUA provides no specifications for the installation of pipelines, including the size of the pipeline corridor, depth of pipelines, reclamation specifics, etc. Additionally, Widdel argues no separate consideration was exchanged for the right to install pipelines, so this provision is unenforceable. Widdel, however, concedes the SUA itself is a valid and enforceable contract.
[¶19] The SUA and the SUA Memorandum both acknowledge consideration was paid between the parties for the SUA. Doc. No. 15-1, Ex. A, B. "Consideration is a sine qua non to the existence of a contract." Harrington v. Harrington, 365 N.W.2d 552, 555 (N.D. 1985). Separate consideration is not required for each provision in a contract. PMX Indus., Inc. v. LEP Profit Int'l, 31 F.3d 701, 704 (8th Cir. 1994) ("Under Iowa law, there is no requirement that each promise in an agreement containing multiple promises be supported by separate consideration."). The fact Continental would be required to pay additional compensation if it did install pipelines does not negate the fact the initial exchange of consideration was for Continental's right to install the pipelines under ¶13(h). No additional consideration was required. Continental's right to install the pipelines was not conditioned upon a sum certain damage amount pre-calculated in the SUA for the installation of pipelines.
[¶20] Furthermore, the Court finds reading ¶13(h) in conjunction with other provisions in the SUA unambiguously shows Continental contracted for and has the authority to install pipelines on the Property so long as compensation is provided. Looking at other provisions of the SUA, the Court notes the SUA discussed instances where Continental was prohibited from undertaking a certain action in regard to the Property and was required to obtain additional prior consent from Widdel, presumably by separate agreement whether oral or written. For example, the SUA states Continental agreed to obtain Widdel's consent prior to developing the Property for saltwater disposal well(s) or prior to drilling any water well on the Property. Doc. No. 15-1, Ex. A. ¶¶13(a),(g). Widdel, therefore, required a separate agreement be made for his consent for Continental to install saltwater and freshwater wells on the property. Reading these provisions with Paragraph 13(h), requiring additional compensation not additional consent for pipelines, the SUA shows the parties' intent was to include a provision in the SUA that granted the future installation of pipelines. Unlike the SUA provision contemplating a separate agreement for saltwater and freshwater wells, no such separate writing is suggested for future saltwater and freshwater pipelines.
[¶21] Even though Widdel has filed affidavits stating he did not intend to allow pipelines without consent, the Court must ascertain the parties' intention from the writing alone if possible. Doc. No. 18, Riverwood Commercial Park, LLC v. Standard Oil Co., Inc. 2011 ND 95, ¶ 7, 797 N.W.2d 770, 772 ; see also Lenthe Investments, Inc. v. Serv. Oil, Inc., 2001 ND 187, ¶ 9, 636 N.W.2d 189, 192 ("It is the words of the contract and the manifestations of assent which govern, not the secret intentions of the parties."); Burk v. State, 2017 ND 25, ¶14, 890 N.W.2d 535 ("[T]he law looks to what the parties said as expressing their real intention."). In this instance, the SUA speaks for itself and no ambiguity exists. The Court has construed the SUA as a whole to give effect to each provision, using each provision to help interpret the others, and has concluded the terms of the SUA, specifically ¶13(h) granted Continental the authority to install freshwater and saltwater pipelines under the Subject Property. See Riverwood, 797 N.W.2d at 770.
[¶22] In addition, the Court also finds that even though water pipelines were not expressly described in the SUA, there is no violation of N.D.C.C. § 47-05-02.1. Section 47-05-02.1, N.D.C.C., requires that "the area of land covered by the easement, servitude, or nonappurtenant restriction on the use of real property shall be properly described and shall set out the area of land covered by the interest in real property." Widdel argues the exact descriptions of the water pipelines and corresponding easements were not set out in the SUA, so therefore they are not properly described and run afoul of the statute. In contrast, Continental explains the SUA properly describes the entire area of the Property to which its rights attach, and the statute does not require a description of the exact location for the easement. The Court agrees.
[¶23] Exhibit A to the SUA and the SUA Memorandum properly describe Widdel's Property to which Continental's rights attach. Even though all of the terms of an easement for future water pipelines are not spelled out exactly in the SUA, the North Dakota Supreme Court has said this is not required under N.D.C.C. § 47-05-02.1. Krenz, 890 N.W.2d at 233. Furthermore, the Supreme Court noted, a court cannot "invalidate an otherwise binding, voluntary contract between parties." Id. This is true even when the location of the pipeline is not known at the time of the agreement. Id. (citing Strauch v. Coastal States Crude Gathering Co., 424 S.W.2d 677, 681 (Tex. Civ. App. 1968) ) (failure to spell out all terms in an easement does not render rights granted unenforceable); Armstrong v. Skelly Oil Co., 81 S.W.2d 735, 736 (Tex. Civ. App. 1935) (where neither party to the right-of-way agreement knew at the time of execution where the pipeline would be laid, holding that "the written lease vested the right in [the grantee], within reasonable limitations, to select the location for a pipeline."); 61 Am. Jur. 2d Pipelines § 31 (2016) ("Even if a grant does not describe the route over which the line is to be laid, the grant is not nullified.").
[¶24] Here, even though the exact location of where a water pipeline and corresponding right-of-way would be placed was not described in the SUA, the SUA does properly describe the wider area of where Continental would be able to exercise its rights under the SUA, which includes the installation of future pipelines. As noted in Krenz, the purpose of N.D.C.C. § 47-05-02.1 is to prevent fraud - a worry not present in this situation. Krenz, 890 N.W.2d at 233. Additionally, as pointed out by Continental, Widdel does not dispute Continental's authority to install well sites and roads despite the absence of the metes and bounds descriptions for the same but is now asserting exact metes and bounds are required for the pipelines. Widdel cannot have his cake and eat it too.
[¶25] The Court finds the SUA explicitly authorized Continental to install freshwater and saltwater pipelines through the Property. Even if Continental did not have express authority to install the freshwater and saltwater pipelines under the SUA, the Court believes Continental possessed authority through other legal means, including by leases, unitization orders, and its status a mineral lease holder under North Dakota law.
ii. Continental has authority to install the freshwater and saltwater pipelines pursuant to North Dakota law and relevant leases.
[¶26] Continental argues in addition to the SUA's explicit authority to install the water pipelines, it also possessed the authority pursuant to other legal means including Unitization Orders issued by the North Dakota Industrial Commission, provisions within the relevant leases with landowners underlying and in the vicinity of the subject Property, and its status as a mineral lessee and unit operator under North Dakota law. It points out certain provisions of the SUA recognize these additional authorities. For example, the SUA Recital B acknowledges Widdel was on notice that Continental was using his Property to conduct oil and gas operations on not only this land but also land in the vicinity. See Doc. No. 15-1, Ex. A. ¶B ("[Continental] owns or operates a number of mineral leases and rights, including but not limited to oil and gas leases underlying and in the vicinity of the Property, and desires to enter onto the Property for purposes of conducting oil and gas operations related to the Leases."). The SUA includes a provision entitled "Shall Not Diminish Other Rights" and states:
Except as otherwise specifically provided for in this Agreement, no other rights held by Operator to and in the Property relating to the Leases or other acquisition of rights shall be diminished by this Agreement. Except as provided in this Agreement, no other rights held by Owner to and in the Property shall be diminished by this Agreement.
Doc. No. 15-1, Ex. A, ¶26.
[¶27] Continental first states that its status under North Dakota law as a "Unit Operator" for the subject Property and others in the vicinity gives it the authority to install the freshwater and saltwater pipelines on the Subject Property. Widdel counters that even as Unit Operator, Continental's right to develop the mineral estate is limited in scope and Continental cannot use its property to benefit tracts of land off the unit. Both parties rely upon Fisher v. Continental Res., Inc., 49 F.Supp.3d 637 (D.N.D. 2014) to support their respective positions.
[¶28] In Fisher, District Judge Daniel L. Hovland previously discussed and outlined the process and rationale behind unitization of working mineral interest rights under North Dakota law:
North Dakota, like most oil-producing states, has a compulsory unitization statute. See N.D.C.C. §§ 38–08–09.1 to 38–08–09.16. "Unitization, as opposed to pooling, is the consolidation of mineral or working interests covering all or part of a common source of supply. Within the unitized area there may be many spacing, drilling, or pooled units." Bruce M. Kramer & Patrick H. Martin, The Law of Pooling and Unitization § 6.02 (3d ed. 2013).
...
The purpose of unitization is to permit the entire unit "to be operated without regard to surface boundary lines." Patrick H. Martin and Bruce M. Kramer, Williams & Meyers, Oil and Gas Law § 901 (2013). Unitization gives the unit operator the right and obligation to conduct oil and gas recovery operations throughout the unit. See Kuntz, supra § 78.4. "If the unit operator is unable to gain access to and unable to use the land for unit operations, ... the purpose sought to be attained by the state conservation order may be defeated." Kramer & Martin, The Law of Pooling and Unitization , § 20.06[1]. Since unitization is usually favored "courts frequently find that there is an implied easement to use the land for unit operations" ... "or that an order of the conservation agency gives the right of use for unit operations." Id.
North Dakota's unitization statute recognizes the need of the unit operator to have access to the entire unit in order to carry out oil field operations. "Wells drilled or operated on any part of the unit area no matter where located must for all purposes be regarded as wells drilled on each separately owned tract within such unit area." N.D.C.C. § 38–08–09.8. In the closely-related context of forced pooling, the North Dakota Supreme
Court has recognized the creation of a pooled spacing unit gives the unit operator the right to make reasonable use of the surface and subsurface of the entire pooled unit, without regard to whether the operator holds a lease covering that particular part of the pooled unit. Cont'l Res. Inc. v. Farrar Oil Co., 559 N.W.2d 841, 846 (N.D. 1997).
The Unit Agreement sets out the rights and obligations of the oil and gas company which has been selected to act as the Unit Operator.
The right of the unit operator to use the surface for unit operations is more than a collection of rights under the various leases. The right to the use of the surface of each tract is not restricted to drilling, producing, and marketing oil or gas from that particular tract. The unit operator has the right to use any of the surface within the unit for the purpose of carrying out the unit plan so long as such use is reasonable and does not unduly burden any particular tract. Accordingly, he may use land in the unit for purposes of constructing a pipeline to market unit production which was not produced from the land so used, and he is not required to obtain an easement from the owner of the surface.
5 Eugene Kuntz, Law of Oil and Gas § 78.4 (2014).
Fisher, 49 F. Supp. 3d at 641.
[¶29] The Fisher Court thereby found a unit operator could use the land in the unit for constructing a pipeline without obtaining an easement from the surface owner. The Court ultimately held Continental had an implied right to drill a saltwater disposal well within the discussed Unit in order to dispose of saltwater pursuant to the North Dakota unitization statutes, the unitization orders, the Unit Agreement, and the Unit Operating Agreement. Fisher, 49 F.Supp.3d at 646. The Court, however, conditioned that right upon a finding Continental's acts were reasonable under the accommodation doctrine and the well did not dispose of saltwater produced outside of the Unit. Id. The Court noted "[i]f this were not so, the purpose of compulsory unitization could never be attained." Id. In addition, the Court in Fisher came to the conclusion Continental had the authority to install the saltwater well even without an oil and gas lease. See Fisher, 49 F.Supp.3d at 644 ("In this case it is unclear whether the minerals underlying the Subject Property have been leased.").
[¶30] Continental recognizes this distinction and observes that in the present case not only did Continental have authority to install the water pipelines through its status as unit operator, but it also negotiated for and obtained the right to install water pipelines through leases underlying and in the vicinity of the property. Widdel attempts to discredit this argument by arguing the oil and leases provided by Continental do not contain any special reference to pipelines. Nonetheless, Widdel further argues even with the leases and even with the unitization orders, Continental has exceeded its authority by installing a multi-network pipeline system that benefits other Units outside of those in the leases and orders. Widdel relies upon the North Dakota Supreme Court's opinion in Krenz v. XTO Energy, Inc., 2017 ND 19 ¶ 42, 890 N.W.2d 222, 237 to support his contention the saltwater and freshwater pipelines are unlawful in this instance. The Krenz Court stated "[A] lessee generally cannot, in the absence of contractual permission, use the surface of one lease to benefit mining operations on adjacent land." Krenz, 890 N.W.2d at 237 (citing 1 Williams & Meyers, Oil & Gas Law § 218.4 (2016); Annotation, Right of Owner of Title to or Interest in Minerals Under One Tract to Use Surface, or Underground Passages, in Connection With Mining Other Tract, 83 A.L.R.2d 665, 670 (1962) ).
[¶31] The holding in Krenz, however, must be considered in context of holdings from other cases and the specific facts of this case. It is true that an operator has the implied right to drill and install a saltwater well on a property but only if they dispose of on-unit saltwater. See Fisher, 49 F.Supp.3d at 645 ; see also 4 SUMMERS OIL AND GAS § 41:11 (3d ed. 2017) ("An oil and gas lease, by implication, conveys upon the lessee the right to drill and operate a saltwater disposal well on the leased premises and dispose of on-lease water. However, absent an express agreement, a lessee may not use a well on the premises to dispose of saltwater form operations on other lands."). However, a lease may also give operators a right to install pipelines to benefit other tracts of land outside of the lease, so long as the operator is also conducting operations upon the leased tract:
Leases sometimes provide that the lessee may have certain specified privileges ‘and all other rights and privileges necessary, incident to and convenient for the operation of this land alone, and conjointly with neighboring lands for oil, gas and gasoline." Under this type of grant, the lessee may build pipelines across the land for use in conveying oil and gas from adjoining lands, but may not do so unless it is also conducting operations upon the leased tract.
4 SUMMERS OIL AND GAS § 41:10 (3d ed. 2017) (emphasis added).
[¶32] The Ula and Lawrence Widdel Lease, which gives Continental the working interest mineral rights to the NE/4 SE/4 and SE/4 SE/4 of Section 7 of Lee Widdel's Property, contains this type of granting clause. See Doc. No. 15-3, Ex. G ("Lessor ... hereby grants ... together with the right to construct and maintain pipelines , telephone and electric lines, tanks, ponds, roadways, plans, equipment, and structures thereon to produce, save, and take care of said oil and gas ... any all other rights and privileges necessary, incident to, or convenient for the economical operation of said land, alone or conjointly with neighboring land, for the production, saving and taking care of oil and gas and the injection of air, gas, water, brine, and other fluids into the subsurface strata , said lands being situated in the County of McKenzie, State of North Dakota."). With this granting language, Continental argues the Boulder Gathering System pipelines are used in connection with its drilling, completion, and production operations for oil and gas, and therefore, authorize the installation of water pipelines, and therefore, authorize the installation of water pipelines. The Court agrees.
[¶33] In this case, Continental may be using Widdel's surface estate to convey saltwater and freshwater to and from adjoining lands and other units, but Continental is also conducting operations upon the leased tract. Continental has asserted it has drilled 11 wells on the Subject Property and those are serviced by the Boulder-Gathering System. Continental is not using Widdel's Property to dispose of off-unit water. In fact, it is using other landowners' property to dispose of saltwater produced from Widdel's Property.
[¶34] As a result, in this specific case, the leases and the unitization orders together gave Continental the additional authority to install the water pipelines. Even if these additional authorities did not give Continental the authority to install the pipelines, the accommodation doctrine under North Dakota law gives Continental the authority to install the pipelines so long as its use of Widdel's Property is reasonable.
[¶35] "Where the mineral estate is severed from the surface estate, the mineral estate is dominant." Hunt Oil v. Kerbaugh, 283 N.W.2d 131, 135. In this regard, "dominant" means "the law implies, where it is not granted, a legitimate area within which mineral ownership of necessity carries with it inherent surface rights to find and develop minerals, which rights must and do involve the surface estate." Id. As such, the surface estate is "servient" to the mineral estate "in the sense it is charged with servitude for those essential rights of the mineral estate." Id. In North Dakota, this implied right to use of the surface estate is "limited to so much of the surface and such use thereof as are reasonably necessary to explore, develop, and transport minerals." Id.
[¶36] "The test for reasonableness under the ‘accommodation doctrine’ requires a consideration of all the pertinent circumstances including what are the usual, customary, and reasonable practices in the industry, and the nature, condition, location, and current use of the servient estate." Fisher, 49 F.Supp.3d. at 641. "It is clear and undisputed under North Dakota law that whether the use of the surface estate by the mineral estate is reasonable is a question of fact." Id. "Further, the burden of proof rests on the surface estate to establish the use is not reasonable." Id.
[¶37] Widdel contends Continental's actions in installing the multi-unit system were unreasonable for a number of reasons. First, he asserts Continental has operated wells on his Property and surrounding areas for years without the Boulder Gathering System. Doc. No. 23, ¶14. He further asserts saltwater and freshwater have been previously transported on trucks, lay-flat lines, or other means. Doc. No. 23, ¶¶16. Further, Widdel submits Continental disturbed an unreasonable amount of the surface property, and Continental failed to sufficiently reclaim the area utilized. Doc. No. 23, ¶¶18-19. Specifically, Widdel attests he suffered damages "including, but not limited to, loss of at least some use of its land due to the pipelines, damages caused by the installation and construction of the pipelines, reduction in the value of its property due to the presence of the pipelines, costs of additional reclamation, attorney fees, and court costs." Doc. No. 18, ¶20. Widdel also claims Continental did not work with him to determine the best location for the boulder gathering system. Doc. No. 23, ¶17. Widdel asserts these factual issues make summary judgment improper because they are questions of fact a trier of fact should determine. [¶38] Whether Continental's use of Widdel's surface estate was reasonable, while ultimately a fact question, does not negate the fact that the burden to bring forth sufficient facts showing the use is unreasonable is on Widdel. Hunt Oil, 283 N.W.2d at 137 (the servient estate owner has the burden of proving whether or not the surface use by the mineral estate owner is reasonable). The Court finds Widdel has failed to meet his burden in this instance.
[¶39] Widdel puts forth only generalized statements unsupported by any evidence. He asserts the value of his land has gone down and he has suffered damages due to the damage to his land, court costs in litigating this matter, and attorney fees. In addition, he essentially argues because Continental did not use water pipelines in the past it is unreasonable for them to do so now when they can just truck the water, lay flat-lines, etc.
[¶40] These generalized assertions have not worked in other cases:
However, in relying upon the accommodation doctrine, it is not enough for the Reems to demonstrate that Continental has alternatives, i.e. , trucking the oil and production water as an alternative to the pipelines or using onsite generators instead of an electrical service line. Rather, they must also point to their uses of the surface that warrant reasonable accommodation. See [ Hunt Oil Co. v. Kerbaugh, 283 N.W.2d 131, 135-38 (N.D. 1979) ]. This they have not done in response to Continental's motion for summary judgment. Most likely, this is because the two underground pipelines (which have already been installed and the Reems now profess not to complain about except for the price for an express easement) do not unduly interfere with any existing uses and that the same would be true for the electrical service line that also would be buried.
Cont'l Res., Inc. v. Reems, No. 1-15-CV-76, 2016 WL 5376179, at *7 (D.N.D. Sept. 26, 2016). [¶41] As for the argument Continental did not consult with Widdel about where to place the Boulder Gathering System pipelines, North Dakota law does not give the surface owner the ability to approve specific plans of the surface estate, which is essentially what Widdel demands here. See Kartch v. EOG Resources, Inc., 845 F.Supp.2d 995, 1015 (D.N.D. 2012) ("It is clear that in 2008 the law did not require EOG to negotiate with the Kartches regarding the use of a reserve pit, nor does the law provide the surface owner (the Kartches) the right to make specific demands as to how EOG uses the surface estate."); Duncan Energy Co. v. U.S. Forest Serv., 50 F.3d 584, 588 (8th Cir. 1995) ("Although North Dakota law protects the surface owner's property rights by limiting the mineral holder to the "reasonable use" of the surface, North Dakota law does not, and could not, cloak the [surface owner] with the specific authority to approve surface use plans. Indeed, there is not even specific authority to allow a surface owner to enjoin the unreasonable use of the surface.").
[¶42] Widdel has failed to meet his burden in coming forward with facts to create a genuine dispute of material fact showing Continental's use of his surface estate in installing the pipelines was unreasonable. See Thomas v. Corwin, 483 F.3d 516, 527 (8th Cir. 2007) ("Mere allegations, unsupported by specific facts or evidence beyond the nonmoving party's own conclusions, are insufficient to withstand a motion for summary judgment.").
[¶43] The Court finds Continental did not breach the contract in this case because it possessed the authority to install the freshwater and saltwater pipelines. As a result, Continental's Motion for Partial Summary Judgment as to count 1, breach of contract, is GRANTED , and Widdel's Motion for Partial Summary Judgment as to count 1 is DENIED .
TRESPASS AND INJUNCTION
[¶44] Widdel argues Continental committed a trespass when it installed the water pipelines on the Property. Continental counters because it was authorized to install them, a trespass is not present. The Court agrees.
[¶45] Civil trespass is defined as "an ‘intentional harm,’ where a person ‘intentionally and without a consensual or other privilege ... enters land in possession of another or any part thereof or causes a thing or third person so to do.’ " Tibert v. Slominski, 2005 ND 34, ¶ 15, 692 N.W.2d 133, 137. "A person who commits a trespass is liable as a trespasser to the other irrespective of whether harm is thereby caused to any of his legally protected interests." Id. The Court has found Continental was authorized by the SUA and other authorities to install freshwater and saltwater pipelines on the Property. As a result, the Court finds Continental has not committed a trespass upon the Property. In addition, because the Court has found Continental's installation of the water pipelines was authorized, the question of injunctive relief is moot.
[¶46] As a result, Continental's Motion for Partial Summary Judgment as to counts 2 and 8, trespass and injunctive relief, is GRANTED , and Widdel's Motion for Partial Summary Judgment as to counts 2 and 8, is DENIED .
CONCLUSION
[¶47] Based on the foregoing, the Court GRANTS [Doc. No. 14] Continental's Motion for Partial Summary Judgment and DENIES [Doc. No. 16] Widdel's Motion for Partial Summary Judgment.
[¶48] IT IS SO ORDERED.