Justia Energy, Oil & Gas Law Opinion Summaries

In this case, Jonathan Garaas and David Garaas, serving as co-trustees of multiple family trusts, appealed a dismissal of their complaint against Petro-Hunt, L.L.C., an oil company operating on land in which the trusts own mineral interests. The trusts claimed that Petro-Hunt had decreased their royalty interest without proper basis and sought both a declaratory judgment affirming their higher royalty interest and damages for underpayment. The district court dismissed the complaint without prejudice, stating that the trusts had failed to exhaust their administrative remedies before the North Dakota Industrial Commission.The North Dakota Supreme Court affirmed the lower court's decision, stating that the trusts needed to exhaust their administrative remedies before bringing their claims to the court. The court reasoned that the issues raised by the trusts involved factual matters related to the correlative rights of landowners within the drilling unit, which fall within the jurisdiction of the Industrial Commission. The court held that the commission should first consider these issues, make findings of fact, and develop a complete record before the case proceeds to the district court. It further noted that, after exhausting their administrative remedies, the trusts could then bring an appropriate action for declaratory relief or damages in district court. View "Garaas v. Petro-Hunt" on Justia Law

In this case from the Supreme Court of North Dakota, Fonda Jo Powell and Mary T. Henke, as co-personal representatives of the Estate of June A. Slagle, alongside Helen Verhasselt, the trustee of the June Slagle Family Mineral Trust, filed an appeal against Statoil Oil & Gas LP (now known as Equinor Energy LP). The plaintiffs appealed from a judgment of dismissal entered after the district court granted Statoil's motion for summary judgment, concluding that a dispute of title allowed Statoil to suspend royalty payments and that the plaintiffs were not entitled to statutory interest. The plaintiffs argued that the district court erred in concluding there was a title dispute, while Statoil argued that this action was barred by the statute of limitations.The Supreme Court of North Dakota reversed the decision of the district court, concluding that the action was not barred by the statute of limitations and that the court erred in concluding that Statoil lawfully suspended royalty payments. The court determined that a ten-year statute of limitations applied to the claim for untimely payment of royalties under the oil and gas lease, as per N.D.C.C. § 28-01-15(2). Furthermore, the court concluded that, when a dispute is between the mineral developer and the mineral owner, notice of the dispute is required under N.D.C.C. § 47-16-39.4. As Statoil did not provide evidence that it had notified June Slagle of a title dispute, it was required to pay interest on the unpaid royalties at a rate of 18% per annum. The case was remanded for further proceedings consistent with this opinion. View "Powell v. Statoil Oil & Gas" on Justia Law

Defendants GADECO, LLC, and Continental Resources, Inc. appealed a judgment quieting title in oil and gas leasehold interests in Zavanna, LLC. Zavanna and the Defendants made competing claims to oil and gas leasehold interests covering 1,280 gross acres in Williams County, North Dakota. These interests were located in the Golden Unit; the Golden Well was the only well producing oil and gas from the subject leasehold within the Golden Unit. GADECO operated the Golden Well. Zavanna was the lessee by assignment of the “Top Leases” and GADECO and Continental were the lessees of the “Bottom Leases.” The Top Leases and Bottom Leases covered the same lands and leasehold interests. The Bottom Leases automatically terminated upon cessation of production unless certain express conditions were met. The Bottom Leases stated that a cessation of production after the lease’s primary term would not terminate the lease if the lessee restores production or commences additional drilling or reworking operations within 90 days (or 120 days in the case of the Parke Energy Leases) from the date of cessation of production. After a bench trial, the district court quieted title in Zavanna, concluding the Bottom Leases terminated by their own terms when production ceased and GADECO failed to timely commence drilling or reworking operations. The court found three periods of production cessation. The court concluded Defendants bore the burden to prove that production did not cease or reworking operations were timely commenced. The North Dakota Supreme Court affirmed, concluding the district court did not err in concluding Defendants’ leases terminated under their terms when production ceased and Defendants failed to timely commence reworking operations, and in concluding Defendants failed to show a force majeure condition saved the leases from termination. View "Zavanna v. Gadeco, et al." on Justia Law

Blue Steel owned an unleased oil and gas interest in the Clarks Creek-Bakken Pool, McKenzie County, North Dakota. In 2012, the Commission pooled all pertinent oil and gas interests in the Clarks Creek-Bakken formation for the development and operation of a spacing unit. That unit—The Jore Federal Spacing Unit—had the capacity for 24 wells. White Butte Oil Operations, LLC operated ten wells that were completed in the spacing unit. White Butte was a company affiliated with Slawson Exploration Company, Inc., and which operated oil wells on the Fort Berthold Indian Reservation. In August 2019, Slawson sent Blue Steel a proposal to participate in four wells, but Blue Steel did not return an election to participate. In October 2019, Slawson sent Blue Steel a proposal to participate in two wells. Blue Steel did not return an election to participate or accept the opportunity to lease. Nor did the record show Reeves Dalton, the co-founder of Blue Steel, or any other person acting on behalf of Blue Steel, contacted Slawson about the invitations. Slawson began the risk penalty process for the six wells. In August 2021, Blue Steel applied to the Commission for an order finding Blue Steel was not subject to a risk penalty because Slawson failed to make a proper invitation to participate and a good-faith attempt to lease. In December 2021, the Commission held a hearing on the application. In February 2022, the Commission issued an order denying Blue Steel’s application, finding Slawson met the good-faith attempt to lease requirement. In March 2022, Blue Steel appealed to the district court, which affirmed the Commission’s decision. On appeal, Blue Steel argued the Commission erred when it concluded Slawson could impose a risk penalty on Blue Steel. In particular, Blue Steel claimed the Commission erred by finding Slawson made a good-faith attempt to obtain Blue Steel’s interest without first providing a proposed lease “containing a primary term, a per-acre bonus, a royalty rate, and other clauses.” After review, the North Dakota Supreme Court affirmed the Commission’s order finding Slawson made a good-faith invitation to lease or participate, and concluding Blue Steel was subject to a risk penalty. View "Blue Steel Oil and Gas v. NDIC, et al." on Justia Law

Angus Kennedy owned real property and mineral interests in McKenzie County, North Dakota. In 1960, Angus and his wife, Lois, executed two deeds conveying the surface and “excepting and reserving unto the parties of the first part, their heirs, successors or assigns, all right, title and interest in and to any and all . . . minerals in or under the foregoing described lands.” Lois did not own an interest in the property when Angus and Lois Kennedy executed the deeds. Angus died in 1965, and Lois died in 1980. Angus and Lois did not have children together. Angus had six children from a previous marriage. Angus' heirs executed numerous mineral leases for the property. Lois had one child, Julia Nevin, who died in 1989. In 2016 and 2017, Julia Nevin’s surviving husband, Stanley Nevin, executed mineral leases with Northern Oil and Gas, Inc. In 2018, Stanley sued the successors in interest to Angus, alleging Lois owned half of the minerals reserved in the 1960 deeds. In response, the Angus heirs claimed Angus did not intend to reserve any minerals to Lois because she did not own an interest in the property conveyed in the 1960 deeds. The district court granted Northern Oil’s motion to intervene. Northern Oil appeals the quiet title judgment deciding Northern Oil did not own mineral interests in the McKenzie County property, arguing the district court erred in concluding the deeds at issue were ambiguous as to whether Angus intended to reserve minerals to his wife, Lois. Finding no reversible error in the trial court judgment, the North Dakota Supreme Court affirmed. View "Nevin, et al. v. Kennedy, et al." on Justia Law

Otter Tail Power Company provided electric service to the City of Drayton, North Dakota under a franchise agreement. In August 2019, Drayton annexed to the city property known as McFarland’s Addition. In November 2019, an entity purchased a portion of McFarland’s Addition with the intention of building a truck stop. In April 2020, Drayton passed a resolution requiring Otter Tail to provide electric service to McFarland’s Addition. Nodak Electric Coop provided service to rural customers outside of Drayton, and did not provide services to customers in McFarland’s Addition. Nodak did not have a franchise from Drayton to provide electric service in the city. Nodak filed suit against Otter Tail, requesting the Public Service Commission to prohibit Otter Tail from extending electric service to McFarland’s Addition. Nodak alleged Otter Tail’s service would interfere with Nodak’s existing service and be an unreasonable duplication of services. In response, Otter Tail claimed the PSC lacked jurisdiction over Drayton’s decision on which provider could extend service within the city. The North Dakota Supreme Court determined the PSC lacked jurisdiction to rule on Nodak’s complaint, and reversed and vacated the PSC’s order: Otter Tail’s motion to dismiss should have been granted. View "Nodak Electric Coop. v. N.D. Public Svc. Commission, et al." on Justia Law

The federal district court for the District of North Dakota certified five questions regarding N.D.C.C. § 38-08-08(1) and North Dakota Industrial Commission pooling orders. The litigation before the federal court involved allocation of mineral royalties in the case of overlapping oil and gas spacing units. Allen and Arlen Dominek owned oil and gas interests in Williams County, North Dakota. In 2011, the North Dakota Industrial Commission pooled the interests in Section 13 on the Dominek property with the interests in Section 24 in a 1280-acre spacing unit (the “Underlying Spacing Unit”). In 2016, the Commission pooled the interests in Sections 11, 12, 13, and 14 in a 2560-acre spacing unit (the “Overlapping Spacing Unit). The "Weisz" well terminated in the southeast corner of Section 14. The Defendants (together “Equinor”) operated the Weisz well. The Domineks sued Equinor in federal district court to recover revenue proceeds from the Weisz well. The parties agreed production from the Weisz well should have been allocated equally to the four sections comprising the Overlapping Spacing Unit. Their disagreement was whether the 25% attributable to Section 13 should have been shared with the interest owners in Section 24 given those sections were pooled in the Underlying Spacing Unit. In response to the motions, the federal district court certified five questions to the North Dakota Court. Responding "no" to the first: whether language from N.D.C.C. § 38-08-08(1) required production from Section 13 to be allocated to Section 24, the Supreme Court declined to answer the remaining questions because it found they were based on an assumption that the Commission had jurisdiction to direct how production was allocated among mineral interest owners. "Questions concerning correlative rights and the Commission’s jurisdiction entail factual considerations. ... An undeveloped record exposes this Court 'to the danger of improvidently deciding issues and of not sufficiently contemplating ramifications of the opinion.'” View "Dominek, et al. v. Equinor Energy, et al." on Justia Law

Troubadour Oil and Gas, LLC, petitioned the North Dakota Supreme Court for a supervisory writ after the district court issued a discovery order requiring Troubadour to disclose all communications between Troubadour’s counsel and Troubadour’s owner who also was identified as an expert witness. Troubadour argued the court erroneously required the disclosure of confidential communications protected by the attorney-client privilege and the work product doctrine. After review, the Supreme Court granted the petition and directed the district court to vacate the portion of its March 10, 2022 discovery order requiring disclosure of all communications between Troubadour’s counsel and Troubadour’s owner because the court abused its discretion and misapplied the law by relying on federal rules and case law not applicable in this state court proceeding. The Supreme Court also vacated the court’s award of attorney’s fees and remanded for reconsideration. View "Troubadour Oil & Gas v. Rustad, et al." on Justia Law

J.T. Wilkinson and Evelyn Wilkinson acquired title to property located in Williams County, North Dakota. In 1958, the Wilkinson conveyed the property to the United States for construction and operation of the Garrison Dam and Reservoir, but they reserved the oil, gas and other minerals in and under their property. Plaintiffs are the Wilkinson’ successors in interest. Plaintiffs appealed a judgment dismissing their takings, conversion, unjust enrichment, civil conspiracy and 42 U.S.C. 1983 claims against the Board of University and School Lands (“Land Board”), Department of Water Resources, and Statoil Oil & Gas LP. In 2010 and 2011, the Land Board entered into four oil and gas leases with oil operators in Williams County. The Land Board received and retained bonus payments from the oil operators. In 2012, plaintiffs sued the Land Board and oil operators to quiet title to disputed mineral interests in the conveyed property. Among other things, plaintiffs argued the State effectuated a taking of their royalties, and the State was unjustly enriched while the royalties were held in escrow at the Bank of North Dakota because the Bank was asking as the agent for the Land Board. Finding that the trial court did not err in rendering judgment against plaintiffs, the North Dakota Supreme Court affirmed that court’s judgment. View "Wilkinson, et al. v. Bd. of University and School Lands of the State of N.D." on Justia Law

The underlying dispute before the North Dakota Supreme Court in this case concerned two competing oil and gas leases. In 2006, Ritter, Laber and Associates, Inc. was part of a joint venture that was locating mineral owners and leasing their interests. Eugene and Carol Hanson entered into a lease agreement with Ritter ("EOG lease") and a "Side Letter Agreement" was executed at the same time, allowing Ritter to “exercise its option” to lease the minerals. If Ritter chose not to exercise the option, Ritter was required to “immediately release [the Hansons] from any further obligation.” The EOG Lease was not immediately recorded. In April 2007, Eugene and Carol Hanson executed a warranty deed to their son and daughter-in-law, Kelly and Denise Hanson, which included the minerals in question and was recorded. The deed reserved a 50% life estate in the minerals. In May 2007, Ritter recorded a “Memorandum of Oil and Gas Lease Option” that referenced the EOG Lease. In July 2007, Ritter recorded the EOG Lease and sent Eugene and Carol Hanson a letter stating it “has elected to exercise its option to lease.” In August 2007, Ritter’s partner sent the couple a check for roughly $37,000 “as total consideration for your Paid up Oil and Gas Lease dated December 20, 2006.” In September 2007, Ritter assigned the EOG Lease, along with a batch of other leases, to EOG. The assignment was recorded. In December 2007, Ritter obtained an oil and gas lease from Kelly and Denise Hanson listing the tracts in question ("Northern Lease"). It was recorded in January 2008 and assigned to Northern in June 2008. Northern filed suit seeking a declaration of what it owned. The court determined the transaction between Eugene and Carol Hanson and Ritter created an option to lease, Denise and Kelly Hanson had no notice of the option, and they took title to the minerals free of it. The court entered a partial judgment determining “the EOG Lease is not valid and subsisting insofar as it conflicts with the Northern Lease.” EOG Resources, Inc. appealed and Northern cross appealed, arguing the court erred when it declined to grant additional relief after its title determination. The Supreme Court held the district court erred when it quieted title in Northern. Judgment was reversed and the matter remanded for further proceedings. View "Northern Oil & Gas v. EOG Resources, et al." on Justia Law