Justia Energy, Oil & Gas Law Opinion Summaries

GEM Razorback, LLC appealed a judgment dismissing its declaratory judgment action because GEM failed to exhaust administrative remedies, and dismissing its claim for specific performance because GEM could not establish that it was a third-party beneficiary of a contract. GEM and Zenergy, Inc. owned working interests in two oil and gas wells located in McKenzie County. Zenergy operated the wells, but GEM had not consented to pay its share of the drilling and operating costs. GEM did not execute a joint operating agreement for the wells and consequently was assessed a risk penalty as a nonconsenting owner. In 2013, Zenergy assigned its interest in the wells to Oasis Petroleum North America LLC. The assignment conveyed all assets, including "all files, records and data maintained by" Zenergy. After the assignment, GEM requested the same information from Oasis. Oasis provided Zenergy with the requested information. However, according to Oasis, some of the requested information for the time period before the assignment was not in its possession. Because of differences in the numbers provided by Zenergy and Oasis, GEM filed applications for hearing with the Industrial Commission requesting that the Commission determine the actual reasonable costs plus risk penalty for the two wells. After a hearing, Oasis agreed to allow GEM to conduct an audit of the wells. The Commission then dismissed the applications without prejudice. During the ensuing audit process, GEM discovered there were documents it requested that were not in Oasis' possession for the time period before the assignment when Zenergy operated the wells. GEM contacted Zenergy and requested an extensive list of 39 specific types of information regarding the wells. Zenergy refused to provide GEM with the requested information. GEM then commenced its declaratory judgment and specific performance action against Zenergy. Zenergy argued the district court lacked subject matter jurisdiction over the request for declaratory relief because GEM failed to exhaust its administrative remedies with the Commission before filing the complaint. Zenergy further argued the claim for specific performance failed to state a claim upon which relief could be granted because a provision of the assignment agreement specifically bars third-party beneficiary status. The court agreed with Zenergy's arguments and dismissed GEM's action. Finding no reversible error, the Supreme Court affirmed the district court’s ruling. View "GEM Razorback, LLC v. Zenergy, Inc." on Justia Law

XTO Energy, Inc., appealed and Darwin and Jean Krenz cross-appealed a judgment awarding the Krenzes $800,000 for a pipeline trespass and ordering the parties to abide by certain documents for their future relationship after the district court construed a pipeline easement to authorize one pipeline on the Krenzes' land and found XTO's unauthorized construction and operation of a second pipeline on the Krenzes' land and use of their private road was a trespass. After review of this matter, the North Dakota Supreme Court concluded an April 2007 pipeline easement was ambiguous and the court erred in construing the easement as a matter of law. The Court therefore reversed the trial court's decision construing the pipeline easement and awarding the Krenzes $800,000 for the pipeline trespass and the court's decision requiring the parties to abide by their unexecuted negotiations involving their future relationship. View "Krenz v. XTO Energy, Inc." on Justia Law

Willard Burk appealed a judgment declaring his claim that the State, through the Board of University and School Lands, and the Tax Commissioner (collectively "State"), wrongfully withheld gross production and extraction taxes from his share of oil and gas royalties was frivolous, entitling them to an award of attorney fees. After review, the North Dakota Supreme Court affirmed the district court's decision that, as a matter of law, the State's settlement agreement with Burk did not exempt him from paying gross production and extraction taxes on his royalty interest, but reversed the award of attorney fees because Burk's claim against the State was not frivolous. View "Burk v. North Dakota" on Justia Law

Sandra Horob, Steven Poeckes, Steve Shae, Mike Shae and Paul Shae, the successors to the interests of John and Bernice Shae ("Horob plaintiffs"), appealed the grant of summary judgment deciding ownership of an oil and gas lease in favor of the successors to the interest of the William Herbert Hunt Trust Estate (collectively "defendants") and declaring the lease did not terminate and remained in effect. The Horob plaintiffs argued the Shae lease expired under the cessation of production clause because production from the well on the interest at-issue ceased, and additional drilling or reworking operations were not commenced within 60 days of the cessation. The district court concluded the lease did not expire because the cessation of production clause was not triggered. The court alternatively concluded the lease did not expire because: (1) it remained in effect under the terms of a communitization agreement with the United States; and (2) the Horob plaintiffs ratified the lease by accepting royalty payments after the lapses in production. After review, the North Dakota Supreme Court concluded the Shae lease's cessation of production clause was triggered, however, the lease remained in effect under the terms of the communitization agreement. View "Horob v. Zavanna, LLC" on Justia Law

Sarah Vogel appealed a district court judgment dismissing without prejudice her complaint against Marathon Oil Company. Marathon operated the Elk USA 11-17H well in Mountrail County. The well began producing in 2011 and continued through at least January 2014. Vogel owned mineral interests and received royalties from the oil or gas produced and sold from the well. Vogel, individually and on behalf of those similarly situated, sued Marathon seeking declaratory relief as well as money damages for failure to pay royalties on flared gas. Vogel argued her claims should not have been dismissed by the district court because she had a private right of action for violations of the statute restricting the flaring of gas produced with crude oil from an oil well, N.D.C.C. 38-08-06.4, and she was not required to exhaust administrative remedies. Finding no reversible error, the Supreme Court affirmed the district court. View "Vogel v. Marathon Oil Corporation" on Justia Law

In 2007, Leroy and Norma Seaton entered into an oil and gas lease with Gadeco, LLC covering Sections 5, 6, 7, 8, and 18 in Township 154 North, Range 98 West, Williams County, North Dakota. The lease had a primary term of five years. The lease contained a "continuing operations clause," which enabled Gadeco to extend the primary term of the lease if "not more than ninety . . . days . . . elapse between the completion or abandonment of one well and the beginning of operations for the drilling of a subsequent well." The lease also contained a Pugh clause (the terms of which were not at issue here). In 2012, the Seatons entered into an oil and gas top lease with Valentina Exploration, LLC, covering Sections 5, 6, 7, and 8 in Township 154 North, Range 98 West, Williams County, North Dakota, sections already under contract by Gadeco's lease. A Gadeco land manager mailed a letter to the Seatons, tendering a shut-in royalty payment. The Seatons did not immediately contact Gadeco in response to the land manager's letter, but later had their attorney mail a certified letter to Gadeco demanding that it "sign and file a formal Release of Oil and Gas lease as to the Seaton lease acres in Sections 6 and 7, . . . pursuant to [N.D.C.C. § 47-16-36]." The letter alleged the lease had expired as to Sections 6 and 7 based on the terms of the lease, stating: "[d]ue to the "unless" lease term provisions contained in the 2007 Gadeco, L.L.C. lease and the letter of March 5, 2012, the lease rights held by Gadeco, L.L.C. under the May 4, 2007 Seaton lease have expired as to the acreage in Section 6 and 7 terminated as of May 4, 2012." 2013, Valentina Exploration recorded and assigned its top lease to Valentina Williston, its wholly-owned subsidiary, to litigate the dispute. The Seatons entered into a litigation agreement with Valentina Williston in which the Seatons agreed to Valentina Williston acting "as the agent and Lessee of Seaton," in the impending litigation. Valentina Williston sued for declaratory judgment and to quiet title. Valentina Williston moved for partial summary judgment arguing the lease had terminated, as a matter of law, due to the effect of the land manager's letter. Gadeco filed a cross-motion for summary judgment asking the district court to dismiss Valentina Williston's claims and conclude the lease continued in full force and effect beyond the primary term due to continuing drilling operations. The district court granted Gadeco's motion for summary judgment and dismissed Valentina Williston's claims with prejudice. Valentina Williston appealed. Finding no reversible error, the North Dakota Supreme Court affirmed. View "Valentina Williston, LLC v. Gadeco, LLC" on Justia Law

Capital Electric Cooperative, Inc. appealed a judgment affirming a Public Service Commission order granting Montana-Dakota Utilities Company ("MDU") a certificate of public convenience and necessity to extend its electric service in Burleigh County. Because the Commission's order was in accordance with the law, its findings of fact were supported by a preponderance of the evidence and sufficiently addressed the evidence presented, and those findings supported the conclusions of law, the North Dakota Supreme Court affirmed the judgment. View "Capital Electric Cooperative, Inc. v. N.D. Public Service Commission" on Justia Law

The successors to the interest of the Grynberg Petroleum Company appealed a trial court's conclusion that Grynberg wrongfully deducted certain costs from gas royalties paid to Tyronne Kittleson, as trustee of the Tyronne B. Kittleson Real Estate and Oil Trust ("Kittleson"), under a lease between the parties. The royalty clause of the lease at issue here contained a "no deductions" clause. The gas produced from the well on the leased premises was a sour gas with little to no market value. Grynberg does not operate the gas-producing well. The well is operated by Missouri River Royalty Corporation under a joint operating agreement with Grynberg. Missouri River entered into agreements for third parties to gather and process the gas. After the gas and liquids were processed and sold, Grynberg calculated Kittleson's royalty using the work-back method. Under the work-back method, market value of the gas at the well is calculated by deducting post-production costs incurred in making the sour gas a marketable product from the plant tailgate proceeds. Grynberg paid Kittleson by subtracting post-production costs from the sales price Grynberg received for the processed gas. In 2005, Kittleson sued Grynberg, claiming that under the "no deductions" language in the royalty clause of the lease, Grynberg was prohibited from deducting the costs of processing the sour gas from Kittleson's royalty. Kittleson alleged Grynberg began wrongfully deducting post-production costs from Kittleson's royalties in 1997. Grynberg denied liability, claiming the royalties paid to Kittleson did not violate the terms of the lease. Grynberg argues the district court erred in its interpretation of the lease. Grynberg argues the lease allows it to subtract post-production costs from Kittleson's royalty. After review, the North Dakota Supreme Court affirmed, concluding the district court correctly interpreted the lease, the amount of damages was not clearly erroneous, and the correct statute of limitations was applied. View "Kittleson v. Grynberg Petroleum Company" on Justia Law

Nathaniel Fleck and Alma Bergmann as trustees of the George J. Fleck Trust ("Fleck") appealed the grant of summary judgment quieting title to an oil and gas lease in favor of Missouri River Royalty Corp., Exxon Mobil Corp. and Mountain Pacific General, Inc. (collectively "defendants"). Fleck owns mineral interests in McKenzie County described as the south half of section 10 in range 100 west of township 150 north. In 1972, Fleck's predecessors in interest executed an oil and gas lease in favor of the defendants' predecessor in interest. The lease term was ten years and as long thereafter as oil or gas was produced. The lease also provided it would not expire if production ceased after expiration of the primary term if the lessee resumed operations to drill a well or to restore production within ninety days. In 1982, the Fleck 1 well was completed and the lease extended. In 2012, Fleck served the defendants with a notice of forfeiture and a demand for release of the lease. Fleck sued the defendants to quiet title, alleging the oil and gas lease expired due to a failure to produce oil or gas in paying quantities. The defendants answered, counterclaimed and requested the court declare the lease remained valid and in effect by the continued production of oil and gas from the Fleck 1 well and by the commencement of operations to restore production. Fleck moved for summary judgment, arguing they were entitled to a declaration quieting title to the mineral interests because the lease terminated when the Fleck 1 well stopped producing in paying quantities in 2010 and the defendants failed to engage in new drilling or reworking operations within ninety days. Pacific Mountain General and Missouri River Royalty separately moved for summary judgment, arguing the lease extended into its secondary term and remains valid and in effect based on the continued production of oil and gas by the Fleck 1 well. Exxon Mobil joined Missouri River Royalty's motion. The district court interpreted the lease and found production in paying quantities was not required to extend the lease, the well consistently produced an average of a few barrels per day, production was continuous at all relevant times and any cessation of production was temporary. The Supreme Court reversed, finding that the district court misapplied the law in interpreting the lease and that summary judgment was not appropriate. View "Fleck v. Missouri River Royalty Corp." on Justia Law

Wenco, a North Dakota limited partnership, appealed a judgment quieting title to certain Mountrail County royalty and mineral interests in EOG Resources, Inc. ("EOG"), and QEP Energy Company ("QEP"), and dismissing Wenco's claims for conversion and unjust enrichment against EOG and QEP. Upon review, the Supreme Court concluded that the district court did not err in ruling as a matter of law that Wenco's interest bore the entire burden of a prior royalty interest conveyance in the subject property, that EOG and QEP did not waive their rights to claim the prior royalty interest conveyance burdened only Wenco's interest, and consequently, that Wenco had no viable claims against EOG and QEP for conversion and unjust enrichment. View "Wenco v. EOG Resources, Inc." on Justia Law