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Valentina Williston, LLC v. Gadeco, LLC

Supreme Court of North Dakota

April 21, 2016

Valentina Williston, LLC, Plaintiff and Appellant
v.
Gadeco, LLC, Defendant and Appellee

Appeal from the District Court of Williams County, Northwest Judicial District, the Honorable David W. Nelson, Judge. AFFIRMED.

Charles L. Neff (argued), for plaintiff and appellant.

Monte L. Rogneby (appeared) and Diane M. Wehrman (argued), defendant and appellee.

McEvers, Justice.

[¶ 1] Valentina Williston, LLC, appeals from a district court's summary judgment dismissing its claims against Gadeco, LLC, with prejudice. Valentina Williston argues the district court erred, as a matter of law, in concluding the lease continued in full force and effect beyond the primary term, and erred in concluding the doctrine of promissory estoppel did not bar Gadeco from extending the primary term of its oil and gas lease, based on the terms set forth in a letter to Leroy and Norma Seaton by a Gadeco land manager. We affirm.

I

[¶ 2] On May 4, 2007, Leroy and Norma Seaton entered into an oil and gas lease with Gadeco 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 are not at issue. The Barney 18-1H well, spaced in Section 18, was spud and completed within the five-year primary term. The Gene 8-1H well, spaced in Sections 5 and 8, was spud within the primary term on August 31, 2011.

[¶ 3] On February 9, 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 "top lease" is "a lease granted by a landowner during the existence of a recorded mineral lease which is to become effective if and when the existing lease expires or is terminated." Sandvick v. LaCrosse, 2008 ND 77, ¶ 4, 747 N.W.2d 519 (quoting Howard R. Williams & Charles J. Meyers, Manual of Oil and Gas Terms 1285 (8th ed. 1991)).

[¶ 4] On March 5, 2012, a Gadeco land manager mailed a letter to the Seatons, tendering a shut-in royalty payment, and stating, in pertinent part:

The oil and gas lease you have with us is currently held as follows;
T154N, R98W held by the Gene 8-1H well
Section 5: Lot 3 drilled by Hess, spaced in Sections 5, 8
Section 8: NWNW
...
T154N, R98W held by the Barney 18-1H well
Section 18: NE, NESE drilled by Hess, spaced in Sections 7, 18
...
T154N, R98W There are no wells on this acreage as yet
Section 6: ESE
Section 7: Lot 1, NENE, NENW, SENE, NWNE, ...

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