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Fisher v. Cont'l Resources, Inc.

United States District Court, D. North Dakota, Southwestern Division

September 8, 2014

Rick Fisher and Rosella Fisher, Plaintiffs,
v.
Continental Resources, Inc., Defendant

For Rick Fisher, Rosella Fisher, Plaintiffs, Counter Defendants: Charles J. Peterson, Christina M. Wiskus, LEAD ATTORNEYS, Mark C. Sherer, Mackoff Kellogg Law Firm, Dickinson, ND.

For Continental Resources, Inc., Defendant, Counter Claimant: Lawrence Bender, LEAD ATTORNEY, Michael D. Schoepf, Fredrikson & Byron, PA, Bismarck, ND.

Page 638

ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Daniel L. Hovland, United States District Judge.

Before the Court is Defendant Continental Resources, Inc.'s (" Continental" ) motion for summary judgment filed on March 7, 2014. See Docket No. 11. The Plaintiffs, Rick Fisher and Rosella Fisher (" Fishers" ), filed a response in opposition to the motion on April 4, 2014. See Docket No. 18. Continental filed a reply brief on April 18, 2014. See Docket No. 20. For the reasons set forth below, the motion is denied.

I. BACKGROUND

The Fishers are Montana residents who own real property in Bowman County, North Dakota. The real property owned by the Fishers which is the subject of this litigation (" Subject Property" ) is described as follows:

Township 131 North, Range 106 West
Section 17: E1/2NE1/4

Continental is an oil and gas exploration and production company organized under the laws of the State of Oklahoma, with its principal place of business located in Oklahoma City, Oklahoma. Continental conducts operations in western North Dakota, and is the operator of a salt water disposal well located on the Subject Property known as the Lonesome Dove 42-17 SWD well.

The Cedar Hills field was established in 1995. In 1999, Continental and a competing oil company sought to unitize the Cedar Hills Field. When the two companies could not agree on how to proceed, the

Page 639

North Dakota Industrial Commission split the Cedar Hills Field into two units. One of the units created was the Cedar Hills North Red River " B" Unit (" Unit" ). The Unit became effective March 1, 2001, by order of the North Dakota Industrial Commission after the requisite number of mineral owners and working interest owners ratified the Unit Agreement and Plan of Unitization (" Unit Agreement" ). See Docket No. 14-1, pp. 15-16. The Subject Property and the Lonesome Dove 42-17 SWD well are located within the Unit. The record is unclear as to who owns the minerals underlying the Subject Property. It is also unclear from the record whether the minerals underlying the property have been leased.

Continental is the operator of the Unit. The Unit consists of approximately 50,000 acres located in Bowman County and Slope County in southwestern North Dakota. As an oil field ages, the ratio of salt water production to oil production often increases, as it has with the field underlying the Unit in this case. In January of 2014, there were approximately 114 oil and gas wells located in the Unit which produced 355,267 barrels of oil, and 643,070 barrels of salt water. Continental uses salt water disposal wells to dispose of the majority of the waste water produced in the Unit. The record does not reflect how many salt water disposal wells are located in the Unit.

In 2011, Continental began planning to drill the Lonesome Dove 42-17 SWD well. The purpose of the well was to dispose of salt water by injecting it into the Lodgepole formation. This formation is located approximately 10,000 feet below the Subject Property. A number of letters were sent to the Fishers notifying them of Continental's plan to drill the well. There is no dispute the Fisher's received the letters.

The first letter was dated October 26, 2011, and entitled " NOTICE OF DRILLING OPERATIONS." It referenced the Lonesome Dove 41-17 SWD well, and stated the purpose of the letter was to advise the Fishers that Continental was planning to drill for oil and gas on their property. The reference to " 41-17" rather than " 42-17" is presumably a typographical error. Continental offered $7,779.00 in compensation for surface disruption. The letter was sent by Diamond Resources landman Roland Olson. See Docket No. 18-1, pp. 4-5.

The second letter was dated December 6, 2011. It notified the Fishers of Continental's intention to " complete the Lonesome Dove #42-17 well as a Class II Salt Water Disposal Well." There was no offer of compensation made by Continental in the letter. The letter was sent by Terry L. Olson, a Continental Resources Regulatory Compliance Specialist. See Docket No. 18-1, p. 6.

A third letter was sent on December 28, 2011. This letter is virtually identical to the first letter sent on October 26, 2011. The only differences appear to be a correct description of the well using the 42-17 designation and an increase in the offered compensation to $9,279.00. This letter was also signed by Diamond Resources landman Roland Olson. See Docket No. 18-1, pp. 7-8.

Another notification of Continental's intention to " complete the Lonesome Dove #42-17 well as a Class II Salt Water Disposal Well" was sent on March 5, 2012. The letter appears identical to the December 6, 2011, letter. The letter was again sent by Terry L. Olson, a Continental Resources Regulatory Compliance Specialist. See Docket No. 18-1, p. 9.

A fifth letter was sent on October 1, 2012, by Diamond Resources landman Roland Olson and is very similar to his two prior letters. Reference is made to drilling

Page 640

for oil and gas. Two compensation offers are made including a $10,779.00 lump sum offer. See Docket No. 18-1, pp. 11-12.

On May 20, 2013, Continental obtained a permit from the North Dakota Industrial Commission to operate the Lonesome Dove 42-17 SWD well as a salt water disposal well. See Docket No. 14-6, pp. 1-3. The record does not reflect the precise date on which Continental completed the drilling of the well, but it is clear the well was complete by the time the complaint was filed in July of 2013. A pipeline was also constructed across the Subject Property to transport salt water to the well. The record is not clear as to whether the salt water disposal well has been put into operation. Continental states in its brief that it has yet to use the well. It is also unclear from the record whether off-Unit salt water has or will be injected through the well.

The Fishers essentially contend Continental has no legal right to construct a salt water disposal well and pipeline on their property, or dispose of salt water in the pore space underneath the Subject Property. The Fishers commenced this action in state court on or about July 26, 2013. They assert claims for nuisance, trespass, fraudulent misrepresentation, and deceit. They seek monetary damages, an accounting of the salt water injected into the well, and injunctive relief in the form of an order for ejectment. The parties have not entered into any salt water disposal agreement authorizing Continental's activities. Continental contends the Unit Agreement and North Dakota law authorize its activities.

Continental removed the action to federal court on August 19, 2013, citing diversity of citizenship as the jurisdictional basis for removal. Continental filed an answer and counterclaim on August 26, 2013. In its counterclaim, Continental seeks a declaration that it is entitled to use as much of the surface of the Subject Property as is reasonably necessary to construct and operate a salt water disposal well, including the laying of pipeline to the well. The ...


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