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Pennington v. Continental Resources, Inc.

Supreme Court of North Dakota

August 27, 2019

Rhonda Pennington, Steven Nelson, Donald Nelson, and Charlene Bjornson, Plaintiffs and Appellants
v.
Continental Resources, Inc., Defendant and Appellee

          Appeal from the District Court of McKenzie County, Northwest Judicial District, the Honorable Daniel S. El-Dweek, Judge.

          Nathan A. Keever (argued), Grand Junction, CO, and Fintan L. Dooley (appeared), Bismarck, ND, for plaintiffs and appellants.

          Spencer D. Ptacek (argued) and Lawrence Bender (on brief), Bismarck, ND, for defendant and appellee.

          OPINION

          Crothers, Justice.

         [¶1] Rhonda Pennington, Steven Nelson, Donald Nelson, and Charlene Bjornson ("Plaintiffs") appeal a district court judgment ruling a "regulation and delay" provision in their oil and gas leases with Continental Resources extended the term of the leases. We affirm in part, reverse in part, and remand for further proceedings.

         I

         [¶2] On October 25, 2011, the Plaintiffs executed oil and gas leases for property in McKenzie County. Each lease term was three years with a lessee option to extend for an additional year. The leases were assigned to Continental in September 2014, and it exercised the extension option. The leases included a provision that the leases would not terminate if drilling operations were delayed by an inability to obtain permits.

         [¶3] In May 2012, Continental applied for a drilling permit on a 2, 560-acre spacing unit that included the lands covered by the leases. The 2, 560 acres included lands inhabited by the Dakota Skipper butterfly, which is listed as threatened under the Endangered Species Act. Continental could not begin drilling operations until receiving federal approval. In August 2015, the U.S. Fish and Wildlife Service issued a biological opinion relating to the impact of Continental's proposed drilling on the Dakota Skipper. On October 1, 2015, Continental proposed measures to minimize the impact of its operations on the Dakota Skipper.

         [¶4] On October 21, 2015, Continental recorded an affidavit of regulation and delay, stating it had not yet obtained federal regulatory approval to drill, and the primary term of the leases was extended under the "regulation and delay" paragraph of the leases. The following day, Continental applied to terminate the 2, 560-acre spacing unit and create a 1, 920-acre spacing unit to remove the Dakota Skipper habitat. In November 2015, the Industrial Commission approved the 1, 920-acre spacing unit. In January 2016, the commission pooled all of the oil and gas interests in the 1, 920-acre spacing unit for the development and operation of the spacing unit. Following the January 2016 order, Continental began drilling operations.

         [¶5] In August 2017, the Plaintiffs sued Continental, alleging the leases expired on October 25, 2015, and Continental's delay in obtaining regulatory approval to drill did not extend the leases. Both parties moved for summary judgment. The district court granted Continental's motion, concluding the "regulation and delay" provision extended the leases until regulatory approval could be obtained to begin drilling operations.

         II

         [¶6] This Court's standard of review for summary judgments is well-established:

"Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record."

Horob v. Zavanna, LLC, 2016 ND 168, ¶ 8, 883 N.W.2d 855 (quoting Poppe v.Stockert, 2015 ND 252, ΒΆ 4, ...


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