The opinion of the court was delivered by: Daniel L. Hovland, District Judge United States District Court
ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND GRANTING PARTIAL SUMMARY JUDGMENT TO DEFENDANTS ON BREACH OF CONTRACT CLAIM AND COUNTERCLAIM
Before the Court are the parties' cross-motions for summary judgment. See Docket Nos. 40 and 46. For the reasons set forth below, the Court denies the Plaintiffs' motion for summary judgment, and denies in part and grants in part the Defendants' motion for summary judgment
The plaintiffs, Phillip D. Armstrong and Leila R. Armstrong, are North Dakota residents. Plaintiff Filco Incorporated is a North Dakota corporation with it principal place of business in North Dakota. Defendant Berco Resources, LLC ("Berco") is a Delaware limited liability company with its principal place of business in Colorado. Defendant Encore Acquisition Company was a Delaware corporation with its principal place of business in Texas until March 9, 2010, when it merged with Denbury Resources Inc. Encore Operating, LP ("Encore Operating"), is a Delaware limited partnership with its principal place of business in Texas. Prior to March 9, 2010, Encore Operating was a subsidiary of Encore Acquisition Company.*fn1
On June 1, 2001, Berco assigned to Phillip D. Armstrong all its right, title, and interest in two oil wells located in McKenzie County, North Dakota. See Docket Nos. 48-4 and 48-6. Armstrong states in his affidavit that the transfer documents, including the Assignment and Bill of Sale, were drafted by Berco. See Docket No. 20-1, p. 2. The subject property is located in the Charlson Field/Charlson Bakken pool and is described as follows:
Well Name Legal Description
G L Thompson 8-34 SE1/4 Section 8, Township 153 North, Range 95 West USA Yttredahl 33-43 NW1/4 Section 34, Township 154 North, Range 95 West See Docket No. 48-4. Exhibit "A" to the Assignment and Bill of Sale specified in a footnote that the interest assigned to Armstrong was "limited to the wellbores, associated equipment and production from the Bakken formation found at footage depths between 9,800 feet and 10,350 feet only."*fn2 See Docket No. 48-6. The Assignment and Bill of Sale contains a reservation which states as follows:
Assignor expressly reserves and excepts from this conveyance all interests in the associated leasehold, other than the interests in the Bakken formation conveyed hereunder and associated contracts and easements, including the right to develop and/or drill through the Bakken formation to produce oil and gas from other formations.
See Docket No. 48-6, p. 1.
On or about January 1, 2002, Berco assigned to Westport Oil and Gas Company, L.P. all of its remaining right, title, and interest in all oil and gas properties owned by Berco at that time in the Charlson Field, including the subject property. See Docket No. 16-2. Encore Operating is the successor in interest to Westport Oil and Gas Company with respect to the property. Encore Operating operates a horizontal well known as the Charlson 14X-35H, which has a surface location in Section 35, Township 154 North, Range 95 West. This well has tapped the Charlson Bakken pool formation under Section 34 and is currently producing. The Plaintiffs contend the Charlson 14X-35H well constitutes a trespass and that the value of the oil and gas which has been removed is in excess of $300,000.
The record reveals that in March 2001, Phillip Armstrong contacted a landman that worked with Berco about purchasing an interest in two wells known as Thompson 8-34 and the USA-Yttredahl Bakken 33-43. On March 23, 2001, Armstrong sent a letter to Berco offering to purchase Berco's interest in the two wells. On May 3, 2001, Berco responded with a written counteroffer in a letter which provides as follows:
Re: Purchase and Sale Agreement
SWSE Sec. 8, 153N-95W USA Ytterdahl [sic*fn3 ] Bakken #33-43 SWNW Sec. 34, 154N-95W McKenzie County, North Dakota Dear Mr. Armstrong: Berco Resources, LLC ("Berco") is in receipt of your letter, dated March 23, 2001, offering to purchase the captioned wells for $50,000.00. Be advised that Berco is agreeable to selling Phillip D. Armstrong (Buyer) its captioned wells subject to the following terms and conditions:
1. The effective date shall be June 1, 2001. Closing shall occur on or before May 31, 2001 in Berco's offices at the address depicted below. At Closing, Buyer shall reimburse Seller for oil inventory in the tanks on the effective date, less a reasonable volume adjustment for tank bottoms. Said oil inventory shall be valued at NYMEX settlement pricing for the month of May, less $1.85 per barrel.
2. This transaction will only cover all of Berco's interest in the two wellbores, associated equipment and production from the Bakken formation as described on Exhibit "A".
3. Berco will convey the interests using an Assignment and Bill of Sale form identical to the form attached hereto as Exhibit "B".
4. Berco expressly reserves and excepts all interests in the associated leasehold, contracts and easements including the right to develop and/or drill through the Bakken formation to produce oil and gas from other formations.
5. Berco expressly reserves and excepts the ownership and access to the Thompson water supply well, associated facilities and applicable easements located in Section 8, 153N-95W.
6. Buyer will be responsible for properly restoring the surface for the Ytterdahl #33-43 (Minnelusa) that has been plugged and abandoned but not yet reclaimed immediately adjacent to the USA Ytterdahl #33-43 producing from the Bakken.
7. The sole remedy in the event of default hereunder shall be to compel specific performance of the terms contained herein.
If the terms and conditions contained herein are acceptable to you, please so indicate by signing in the space provided below and faxing or returning one copy of this letter to the undersigned. This offer will remain open until the close of business on May 9, 2001, at which time it will expire.
See Docket No. 48-4 (emphasis in original). The letter references an Exhibit "A" and "B." However, only Exhibit "A" was enclosed and that exhibit provides as follows:
Attached to that certain letter agreement, dated May 3, 2001, by and between Berco Resources, LLC and Phillip D. Armstrong
Well Name Interest % Interest % GL Thompson 8-34 91.6667 76.04167* USA Ytteredahl 33-34 [sic*fn4 ] 100.0000 87.5000*
* limited to the Bakken formation found in both wellbores at footage depths between 9,800' and 10,350' only See Docket No. 48-4, p. 3. Armstrong signed Berco's letter offer and returned a copy to Berco. Thereafter, the parties referred to the letter agreement as the "Purchase and Sale Agreement."
On May 23, 2001, Berco sent the following letter to Armstrong:
Re: Purchase and Sale Agreement
SWSE Sec. 8, 153N-95W USA Ytterdahl [sic] Bakken #33-43 SWNW Sec. 34, 154N-95W McKenzie County, North Dakota Dear Mr. Armstrong: Find enclosed two copies of an executed Assignment and Bill of Sale that will be recorded by Berco in accordance with the term of our Purchase and Sale Agreement, dated May 3, 2001. Please execute and return one copy to the undersigned at your earliest convenience and ...