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Mosser v. Denbury Resources, Inc.

Supreme Court of North Dakota

July 12, 2017

Randall Mosser, Douglas Mosser, Marilyn Koon, and Jayne Harkin, Plaintiffs
v.
Denbury Resources, Inc., and Denbury Onshore, LLC, Defendants

         Certified Questions of Law from the United States District Court for the District of North Dakota, the Honorable Charles S. Miller.

          Stephen D. Easton (argued), Laramie, WY, and Christina M. Wenko (appeared), Dickinson, ND, for plaintiffs.

          Amy L. De Kok (argued) and Lawrence Bender (on brief), Bismarck, ND, for defendants.

          OPINION

          Kapsner, Justice.

         [¶ 1] Under N.D.R.App.P. 47, the magistrate judge for the United States District Court for North Dakota certified seven questions to this Court involving a surface owner's right to recover compensation under N.D.C.C. ch. 38-11.1 for a mineral developer's use of pore space beneath the surface of the surface owner's estate for saltwater disposal. We conclude that under N.D.C.C. § 38-11.1-04 a mineral developer may be liable to a surface owner for saltwater disposal into pore space, and we answer the certified questions accordingly.

         I

         [¶ 2] Randall Mosser, Douglas Mosser, Marilyn Koon, and Jayne Harkin ("plaintiffs") own a surface estate in a quarter section of land in Billings County. When the plaintiffs acquired their surface estate, it was subject to a 1977 oil and gas lease granted by the plaintiffs' predecessors-in-interest, who had owned both the surface and mineral estate in several tracts of land included in the lease. The 1977 lease remains in effect as a result of continuous production from oil and gas wells on the leased acreage.

         [¶ 3] In 2003, the Industrial Commission approved a plan for unitization of several tracts of land in Billings County, including the plaintiffs' surface estate, and Denbury Resources, Inc., through its subsidiary Denbury Onshore, LLC, is the current operator of the unit. Denbury is the operator of a well located on the plaintiffs' surface estate, which was an oil and gas well from 1979 to 2006 and was later permitted by the Industrial Commission as an injection well for saltwater disposal into the pore space beneath the surface. The permit authorized Denbury to dispose of production water from other wells at a depth 5, 340 to 5, 496 feet below the plaintiffs' surface estate. Denbury has used the well for saltwater disposal since September 2011 and, according to the plaintiffs, Denbury had disposed of about 3.2 million barrels of saltwater into the pore space through March 2016.

         [¶ 4] The plaintiffs sued Denbury for saltwater disposal into their pore space, alleging claims for nuisance, for trespass and for damages under the Oil and Gas Production Damage Compensation Act in N.D.C.C. ch. 38-11.1. The plaintiffs moved for partial summary judgment on liability, claiming Denbury's liability was clear and the only issue for trial was the amount of their damages. Denbury moved for summary judgment dismissal of the plaintiffs' action, contending it had the right to dispose of saltwater into the plaintiffs' pore space without providing them compensation. The federal magistrate judge denied the parties' motions, but ruled the plaintiffs owned the pore space beneath their surface estate and Denbury may be liable for saltwater disposal into their pore space under N.D.C.C. ch. 38-11.1. Mosser v. Denbury Res., Inc., 112 F.Supp.3d 906 (D. N.D. 2015).

         [¶ 5] The parties thereafter agreed Denbury has the right to dispose of saltwater generated from the unit through the permitted well into the pore space beneath the plaintiffs' surface estate under the mineral lease executed by the plaintiffs' predecessors-in-interest. The parties also agreed the only remaining unresolved issue in the plaintiffs' complaint is their statutory claim for damages under N.D.C.C. ch. 38-11.1.

         [¶ 6] Denbury filed a second motion for summary judgment, seeking dismissal of the plaintiffs' statutory claim for damages on the ground they failed to proffer any evidence to establish that they were currently using the pore space beneath their surface estate, that they had any concrete plans to do so in the near future, or that their property had diminished in value. The federal magistrate judge deferred ruling on that motion and certified seven questions to this Court involving the plaintiffs' right to recover compensation for Denbury's disposal of saltwater into the pore space beneath the plaintiffs' surface estate under N.D.C.C. ch. 38-11.1.

         II

         [¶ 7] The plaintiffs generally argue that as owners of the surface estate, they own the pore space beneath the surface of that estate and Denbury's disposal of saltwater into their pore space entitles them to damages for the "lost use of and access to the surface owner's land" under N.D.C.C. § 38-11.1-04. Denbury initially argues some or all of the certified questions should not be answered because the federal court has already answered some of the questions, there is sufficient guidance in existing law for the federal court to answer some or all the questions, and the answer to some or all of the questions is unnecessary or not determinative of issues currently before the federal court. Denbury alternatively argues the use of the term "land" in N.D.C.C. § 38-11.1-04 does not include "pore space" and the statute contemplates damages only for a mineral developer's use of the surface estate and does not contemplate damages for a developer's use of pore space beneath a surface estate. Denbury also argues if N.D.C.C. § 38-11.1-04 authorizes compensation for saltwater disposal into pore space beneath a surface estate, the plaintiffs' proffered evidence in this case does not establish damages.

         III

         [¶ 8] Under N.D.R.App.P. 47, this Court's authority to answer a properly certified question of law from a federal district court is discretionary. See N.D.R.App.P. 47 (explanatory note). Rule 47(a), N.D.R.App.P., authorizes certification of questions to this Court by federal courts and by other state appellate courts when the legal issue "may be determinative" of the proceeding pending in that court and "it appears to the certifying court there is no controlling precedent in the decisions" of this Court. In contrast, certified questions from a North Dakota court to this Court must meet the more stringent requirement that the legal question "is determinative" of the proceeding. N.D.R.App.P. 47.1(a)(1)(A).

         [¶ 9] In Bornsen v. Pragotrade, LLC, 2011 ND 183, ¶ 7, 804 N.W.2d 55 (quoting McKenzie Cty. v. Hodel, 467 N.W.2d 701, 704 (N.D. 1991)), this Court discussed the reason for the disparate treatment of certified questions:

"A less stringent standard will be applied, however, in exercising our discretion to answer certified questions from courts of other jurisdictions under Rule 47, N.D.R.App.P. There is a logical policy basis for this apparent dichotomy. If we decline to answer questions certified by a court of this State, the parties may, as a matter of right, appeal from the final judgment or order of the trial court and obtain resolution of the relevant questions of law in this court. Thus, in the interest of judicial economy and orderly procedure, we will only answer certified questions which are dispositive of the issues in the case. However, if we decline to respond to questions certified by a federal court or court of another state, we leave that court to speculate upon unsettled issues of North Dakota law, and the parties have no recourse in the appellate courts of this State."

         [¶ 10] Some courts have recognized that certification is not appropriate to answer questions already decided by the federal district court. See Jung v. Gen. Cas. Co., 651 F.3d 796, 801 (8th Cir. 2011) (stating federal courts have duty to address matters of state law even when that law is unsettled, federal courts generally do not allow certification after case has been decided, and appellate court reviews denial of certification by federal district court under abuse-of-discretion standard); Rural Water Sys. v. City of Sioux Ctr., 202 F.3d 1035, 1037 n.6 (8th Cir. 2000) (affirming denial of motion to certify question to state supreme court and stating parties should be discouraged from seeking certification after adverse judgment rendered by district court); Cray v. Deloitte Haskins & Sells, 925 P.2d 60, 62 (Okla. 1996) (declining state appellate review of federal district court's ruling on liability under guise of certified question where district court had finalized its determination on liability).

         [¶ 11] Here, the federal magistrate judge recognized it had affirmatively answered the first two certified questions about liability and had addressed the third certified question about damages to a limited extent, but explained its ruling could be revisited because a final judgment had not been entered. The court said there were two reasons to ...


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