Anr Pipeline Co. v. 60 Acres of Land

• Decision Date: 28 February 2006
• Docket Number: No. 1:04 CV 824.,1:04 CV 824.
• Citation: 418 F.Supp.2d 933
• Parties: ANR PIPELINE COMPANY, Plaintiff/Counter-Defendant, v. 60 ACRES OF LAND, more or less, in Lake County, Michigan; Earl G. Coon; Marlene F. Coon; Carl H. Meyer; Dorothy L. Meyer; William O. Lutz, Trustee of the Eleanor G. Nyquist Lutz Revocable Trust; and Unknown Owners, Defendants/Counter-Plaintiffs.
• Court: U.S. District Court — Western District of Michigan

418 F.Supp.2d 933

ANR PIPELINE COMPANY, Plaintiff/Counter-Defendant, v.60 ACRES OF LAND, more or less, in Lake County, Michigan; Earl G. Coon; Marlene F. Coon; Carl H. Meyer; Dorothy L. Meyer; William O. Lutz, Trustee of the Eleanor G. Nyquist Lutz Revocable Trust; and Unknown Owners, Defendants/Counter-Plaintiffs.

No. 1:04 CV 824.

United States District Court, W.D. Michigan, Southern Division.

February 28, 2006.

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Brian M. Andrew, John M. Devries, William A. Horn, Mika Meyers Beckett & Jones PLC, Grand Rapids, MI, for Plaintiff/Counter-Defendant.

Matthew D. Zimmerman, Peter A. Smit, Jason Leonard Budd, Adam John Brody, Varnum, Riddering, Schmidt & Howlett LLP, Grand Rapids, MI, for Defendants/Counter-Plaintiffs.

OPINION

ROBERT HOLMES BELL, Chief Judge.

PlaintiffANR Pipeline, Inc.("ANR") filed this condemnation action to acquire certain subsurface strata and formations for the storage of natural gas.ANR seeks to condemn only the subsurface formations for storage and not the native gas itself.Defendants/Counter-PlaintiffsEarl G. Coon, Marlene F. Coon, Carl H. Meyer, Dorothy L. Meyer, and William O. Lutz, Trustee of the Eleanor G. Nyquist Lutz Revocable Trust, (collectively referred to as "Defendants"), the owners of the subsurface strata and formations at issue, have filed a counterclaim alleging inverse condemnation, de facto condemnation, conversion and unjust enrichment.

This matter is currently before the Court on ANR's motions for summary judgment on all four counts of Defendants' counterclaim and on Defendants' motion for summary judgment on ANR's affirmative defense # 2 asserting statute of limitations and laches.

I.

Summary judgment may be entered if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.FED. R. Civ. P. 56(c).In evaluating a motion for summary judgmentthe Court must look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial.Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538(1986).If the moving party carries its burden of showing there is an absence of evidence to support a claim then the non-moving party must demonstrate by affidavits, depositions, answers to interrogatories, and admissions on file, that there is a genuine issue of material fact for trial.Celotex Corp. v. Catrett,477 U.S. 317, 324-25, 106 S.Ct. 2548, 91 L.Ed.2d 265(1986).The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient to create a genuine issue of material fact.Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202(1986).The proper inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law."Id. at 251-52, 106 S.Ct. 2505.

II.

The essential facts are not in dispute.The Reed City Stray natural gas field was discovered in 1940.Native gas was produced from the field from 1941 to 1947.(GentgesAff. ¶ 11).ANR, a natural gas company within the meaning of the Natural Gas Act, 15 U.S.C. §§ 717-717z, obtained a Certificate of Public Convenience and Necessity from the Federal Power Commission, the predecessor to the Federal Energy Regulatory Commission("FERC"), on July 12, 1950, to operate the Reed City Storage Field in the Stray formation as part of ANR's interstate natural gas transportation and storage system.ANR commenced storage operations at the Reed City Storage Field in 1952.(Appl. for Amend'tat 3).ANR uses the subsurface storage fields for the primary purpose of delivering natural gas during the winter months.ANR injects gas into the formation in the warmer months and then withdraws the gas in the winter months for distribution.(GentgesAff. ¶ 5).The gas is stored in pores within the subsurface rock formation.The average porosity of the Reed City Stray formation is 17%.(Brock Dep.at 68-69;GentgesAff. ¶ 9).

Defendants' property is located on the fringe or edge of the Reed City Stray formation.Although no test wells were drilled on the Defendants' property when the Reed City Stray field was discovered, test wells in the vicinity revealed that the formation under the Defendants' property most likely contained formation water (brine) rather than natural gas.(Brock Dep.at 51-52;Gentges Dep.at 111-12, 175-76).After the formation began to be used as a storage facility and gas was injected into it, the native gas was pushed toward the fringes of the formation, and into the area under the Defendants' property.Every year an average of 140,000 mcf Of native gas is pushed under and then pulled out from under Defendants' property.(MacDonald Dep.at 166).There is no evidence that any injected gas has migrated or been forced under Defendants' property.(MacDonald Dep.at 155).

In 1996the Defendants drilled a well— the Coon 1-36 well—on the Coon parcel into the Loreed formation which is below the Reed City Stray formation.Defendants were joint participants in the well.(M. Coon Dep.at 11-12).The construction of that well led to previous litigation between ANR and Defendants.ANR claimed the extraction impacted its storage operations in the Loreed formation because the gas that was being extracted included gas which had been injected by ANR into the Loreed storage field.Defendants contend that their extraction merely reduced the base gas in the field.In any event, as a result of the litigation, the well's perforation into the Loreed formation was plugged.

On July 29, 1999, ANR obtained an amendment of its Certificate of Public Convenience and Necessity from the FERC.The amended certificate extends the boundaries of the storage field to include that portion of the Reed City Stray formation that is under Defendants' property.With the revised boundaries, the Reed City Storage Field now encompasses over 16,000 acres of land.(GentgesAff. ¶ 9).The certificate authorizes the holder to operate the storage field and to exercise the federal eminent domain authority of the United States within the boundaries of the field to acquire the property interests necessary for that operation.15 U.S.C. § 717f(h).

In 2000Defendants raised the Coon 1-36 well so that it perforated the Reed City Stray formation.They have been extracting minimal quantities of gas from the well, primarily for residential heating.A sample of gas produced by the Coon 1-36 well was analyzed in 2001 and ANR determined that the well was producing native gas, not the injected working gas of ANR.(Gentges Dep.at 190, 198).ANR determined that the Defendants' extraction of native gas from the Reed City Stray formation did not affect ANR's interests, and accordingly elected not to condemn Defendants' mineral rights in the Reed City Stray formation.ANR states in its complaint that its acquisition of the storage area is without prejudice to Defendants' rights to drill into the formation and to produce and remove native oil, gas or other minerals.(2nd Am.Compl¶ 11).

Defendants filed a counterclaim for the value of the native gas under their property.They allege that since 1952 ANR has taken control over and has been continuously using the Defendants' native gas as base gas and using their formations for ANR's storage operations.(Countercl.¶ 9).Defendants' counterclaim is the subject of these motions.

III.

Defendants allege in Counts I and II of their amended counterclaim that ANR's past and current use, without authorization, of Defendants' formations and their base gas constitutes a taking of their property rights for which they have not been compensated.(Countercl.¶ 18).Defendants allege that ANR has taken their property by its physical intrusion onto Defendants' property beginning in at least 1960, and by impressing Defendants' property into serving a public use from at least that date, and that it has effectuated a de facto taking through its announcements of condemnation and subsequent actions.(Def. Br. in Opp.at 2).

"Inverse condemnation is a taking of private property for a public use without the commencement of condemnation proceedings.Under the Michigan and United States Constitutions, a victim of such a taking is entitled to just compensation for the value of the property taken."Hart v. City of Detroit,416 Mich. 488, 494, 331 N.W.2d 438, 441(1982)(footnotes omitted).Michigan recognizes a cause of action for inverse condemnation "when the state fails to utilize the appropriate legal mechanisms to condemn property for public use."Peterman v. Dep't of Natural Res.,446 Mich. 177, 187-88, 521 N.W.2d 499(1994).See alsoVanderlip v. Grand Rapids,73 Mich. 522, 41 N.W. 677(1889).

ANR moves for summary judgment on Defendants' inverse condemnation claims because it contends there is no evidence of any unlawful intrusion onto Defendants' property, because there has been no action by ANR directed at Defendants' property that has had any detrimental impact on or has caused any interference with the Defendants' use, and because its actions do not amount to a de facto taking.The Court will address each of Defendants' inverse condemnation theories separately.

A.Physical Intrusion

Defendants contend that ANR has physically invaded or intruded onto its property because all of the experts in this case have acknowledged that ANR has pushed native gas under their property.Gas is physical.It has mass.And it has been forced under Defendants' property.According to Defendants, this constitutes a physical intrusion sufficient to support their inverse condemnation claim.

There is no dispute that a condemning authority's physical intrusion onto private property may be the basis of an inverse condemnation claim.Neither is there any dispute that ANR's injection of gas into the Reed City Stray...