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Roloff v. Continental Resources, Inc.

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

January 1, 2015

Verdean Roloff, Plaintiff and Counter-Defendant,
v.
Continental Resources, Inc. and Reid Energy Investments, LLC Defendants and Counter-Claimants.

ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

DANIEL L. HOVLAND, District Judge.

Before the Court is a Motion for Summary Judgment filed by Defendants Continental Resources, Inc. ("Continental") and Reid Energy Investments, LLC ("Reid Energy") on September 12, 2014. See Docket No. 21. The Plaintiff, Verdean Roloff, filed a response opposing the motion on October 17, 2014. See Docket No. 31. The Defendants filed a reply brief on November 3, 2014. See Docket No. 34. For the reasons set forth below, the motion is granted.

I. BACKGROUND

The Plaintiff owns an interest in the oil and gas in and under the following lands located in Williams County, North Dakota:

See Docket No. 32, ¶ 2. On November 14, 2003, Roloff leased his mineral rights in this property to Joliette Oil (USA), Inc. The lease grants to the lessee the "exclusive right for the purpose of mining, exploring by geophysical and other methods, and operating for and producing therefrom oil and all gas." Docket No. 32-1. The lease has been assigned numerous times, although it is currently owned by Continental and Reid Energy. See Docket No. 32, ¶ 4. Continental is responsible for conducting the oil and gas exploration and performing all production operations on the property, while Reid Energy is the non-operating working interest owner of the lease.

The lease contains a Pugh clause[1] which states:

Notwithstanding the provisions of this lease to the contrary, this lease shall terminate at the end of the primary term as to all of the leased lands except those within a producing or spacing unit prescribed by law or administrative authority on which is located a well producing or capable of producing oil and/or gas or on which lessee is engaged in drilling or reworking operations. However, this lease shall not terminate as to any of the leased lands so long as drilling or reworking operations are being continuously prosecuted, that is, if not more than one (1) year shall elapse between the completion or abandonment of one well and the beginning of operations for the drilling of another well.

Docket No. 32-1.

The lease also contains a habendum clause, [2] which provides:

1. It is agreed that this lease shall remain in force for a term of Five (5) years from this date and as long thereafter as oil or gas of whatsoever nature or kind is produced from said leased premises or on acreage pooled therewith, or drilling operations are continued as hereinafter provided. If, at the expiration of the primary term of this lease, oil or gas is not being produced on the leased premises or on acreage pooled therewith but Lessee is then engaged in drilling or re-working operations thereon, then this lease shall continue in force so long as operations are being continuously prosecuted on the leased premises or on acreage pooled therewith; and operations shall be considered to be continuously prosecuted if not more than ninety (90) days shall elapse between the completion or abandonment of one well and the beginning of operations for the drilling of a subsequent well. If after discovery of oil or gas on said land or on acreage pooled therewith, the production thereof should cease from any cause after the primary term, this lease shall not terminate if Lessee commences additional drilling or re-working operations within ninety (90) days from date of cessation of production or from date of completion of dry hole. If oil or gas shall be discovered and produced as a result of such operations at or after the expiration of the primary term of this lease, this lease shall continue in force so long as oil or gas is produced from the leased premises or an acreage pooled therewith.

Docket No. 32-1.

The lease's primary term of five years ended on November 14, 2008. The parties dispute whether the lease remained in effect after that date. At the end of the primary term, the Defendants admit that no oil or gas was being produced from the property. However, the Defendants contend that Continental was engaged in drilling operations at the end of the primary term which Continental continuously pursued.

The Defendants assert several facts which they claim demonstrate Continental's engagement in drilling operations. First, Continental took a series of steps to prepare for drilling, beginning several weeks before the end of the primary term. On August 21, 2008, Continental obtained a spacing order from the North Dakota Industrial Commission for the first well it planned to drill-the Lawrence 1-24H Well. See Docket No. 24-2. On October 1, 2008, Continental's contractor, Brosz Engineering, Inc. staked and surveyed the well pad, bottom hole location, and access road for the Lawrence 1-24 H Well. See Docket No. 24-4. On October 21, 2008, the Standard Planning Report was completed for the well. See Docket No. 24-5. The North Dakota Industrial Commission approved the drilling permit for the Lawrence 1-24H Well on October 24, 2008. See Docket No. 24-7.

The Defendants also submitted an affidavit of Chad Newby, the Operations Land Supervisor for Continental. See Docket No. 23. According to Newby, on November 4, 2008, Hexom Earth Construction began building the reserve pit, well site location, and the access road for the Lawrence 1-24H Well. See Docket No. 23, ¶ 2. Between November 11, 2008 and November 19, 2008, "Hexom Earth Construction hauled and furnished crushed gravel, leveled scoria and moved additional equipment to the Lawrence Well site [while] Continental simultaneously moved casing for the Lawrence Well to the well site." Id. at ¶ 3. Further, sometime before November 14, 2008, "Continental lined the reserve pit and completed the access road ...


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