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Langved v. Continental Resources, Inc.

Supreme Court of North Dakota

July 17, 2017

Arthur Langved, Petitioner and Appellant
v.
Continental Resources, Inc., Appellee
v.
State of North Dakota by and thru the North Dakota Industrial Commission, and Wayne Stenehjem, Attorney General and Commissioner, Jack Dalrymple, Governor and Commissioner, Respondents and Appellees

         Appeal from the District Court of Mountrail County, North Central Judicial District, the Honorable Richard L. Hagar, Judge.

          Fintan L. Dooley, Bismarck, ND, for petitioner and appellant.

          Lawrence Bender, Bismarck, ND, for appellee Continental Resources, Inc. David P. Garner (argued) and Matthew A. Sagsveen (appeared), Office of the Attorney General, Bismarck, ND, for respondents and appellees.

          OPINION

          Kapsner, Justice.

         [¶ 1] Arthur Langved appeals from a judgment affirming an order of the Industrial Commission to grant Continental Resources, Inc.'s application to terminate existing oil and gas well spacing units, to create new spacing units, and to modify well setback requirements for portions of the Elm Tree-Bakken and Sanish-Bakken pools located in McKenzie and Mountrail counties. Because the Commission regularly pursued its authority and its findings and conclusions are sustained by the law and by substantial and credible evidence, we affirm the judgment.

         I

         [¶ 2] Langved owns leased and unleased mineral interests in property covered by spacing units created by the Commission in 2013 and 2014. In 2015, Continental filed an application to amend these Commission orders to terminate the existing spacing units and to create new spacing units. The Commission explained:

[Continental] made application to the Commission for an order amending Order No. 21151 for the Elm Tree-Bakken Pool to terminate an overlapping 2560-acre spacing unit comprised of Sections 17, 18, 19, and 20, Township 153 North, Range 93 West, McKenzie and Mountrail Counties, North Dakota (Sections 17, 18, 19, and 20), and amending Order No. 24889 for the Sanish-Bakken Pool to terminate two standup 1280-acre spacing units comprised of Sections 15 and 22; and Sections 16 and 21, Township 153 North, Range 93 West, Mountrail County, North Dakota (Sections 15, 22, 16, and 21); and create a 480-acre spacing unit comprised of the E/2 W/2 NE/4, E/2 W/2 SE/4, and E/2 E/2 of Sections 15 and 22; create a 1280-acre spacing unit comprised of Sections 18 and 19; and create two 1680-acre spacing units comprised of Sections 16 and 17, and the W/2, W/2 W/2 NE/4, and W/2 W/2 SE/4 of Section 15; and Sections 20 and 21 and the W/2, W/2 W/2 NE/4, and W/2 W/2 SE/4 of Section 22, for the Elm Tree and/or Sanish-Bakken Pool, authorizing the drilling of multiple wells on each 480, 1280, and 1680-acre spacing unit, eliminating any tool error setback requirements and also reducing the minimum setbacks from the "heel and toe" from 200 feet to 50 feet, and such other relief as is appropriate.

         Three horizontal wells had been completed on Langved's leased mineral acreage under the spacing units created by the Commission's 2013 and 2014 orders.

         [¶ 3] The Commission held an evidentiary hearing on Continental's application. At the hearing, Continental offered exhibits and expert testimony that the existing development plan for the spacing units was inefficient and would cause the drilling of unnecessary wells. Continental submitted evidenced that surface access problems justified the application. Available surface locations for drilling were limited and Continental had been unsuccessful in negotiating and obtaining surface use agreements from surface owners, including Langved. Langved appeared at the hearing and testified in opposition to Continental's application. Langved did not present expert evidence at the hearing, but cross-examined Continental's witnesses. Langved essentially argued the application should be denied because it would damage his property right to bargain with Continental for the use of his surface estate for a drilling pad location and his royalty payments would be reduced under the new configuration.

         [¶ 4] The Commission approved Continental's application. The Commission found that Continental's proposed new well locations would be further from Lake Sakakawea than the locations previously proposed and its proposed use of common drilling pads:

will reduce surface impact and the expenditure of funds on surface facilities and enhance the economics of production, thereby preventing economic waste and promoting the greatest ultimate recovery of oil and gas from the Elm Tree and Sanish-Bakken Pools; and will improve the timing and economics of connecting wells to gas gathering systems thereby reducing gas flaring and will minimize surface disturbance and enhance the aesthetic values resulting from fewer production facilities.

         [¶ 5] The Commission further found that "[e]vidence and testimony... clearly shows the proposed spacing units and well configurations will prevent waste, prevent the drilling of unnecessary wells, and best protect correlative rights, by recovering more oil with fewer wells than the previous configurations which will ultimately benefit all owners in the proposed lands." The Commission based its decision on evidence that the estimated ultimate recovery from the existing spacing units was 36.2 million barrels of oil from 56 wells, while the estimated ultimate recovery from the proposed spacing units would be 37.352 million barrels of oil from 42 wells. The Commission estimated the ultimate recovery attributed to Langved's mineral acres under the existing spacing units to be 4.852 million barrels of oil and under the proposed new spacing units to be 4.125 million barrels of oil. Regarding Langved's argument about surface ownership rights, the Commission determined that "establishing surface locations and property rights outside of a spacing unit are beyond [its] jurisdiction." The Commission concluded, "If Continental's activities are successful, greater ultimate recovery of oil and gas from the pool will be achieved which will prevent waste and the drilling of unnecessary wells in a manner which will not have a detrimental effect on correlative rights."

         [¶ 6] Langved petitioned the Commission for reconsideration based on seven grounds. In a six-page decision addressing each ground, the Commission denied the petition. ...


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