Cont'l Res. v. Fisher
| Decision Date | 27 December 2022 |
| Docket Number | 1:18-cv-181 |
| Parties | Continental Resources, Inc., an Oklahoma corporation, Plaintiff, v. Rick Fischer and Rosella Fisher, Defendants. |
| Court | U.S. District Court — District of North Dakota |
ORDER DENYING MOTION FOR JUDGMENT OF DISMISSAL NOTWITHSTANDING THE VERDICT OR FOR NEW TRIAL; ORDER AWARDING FEES AND COSTS
Before the court now are two post-trial motions. The first is a motion by Continental Resources Inc. (“Continental”) for judgment of dismissal notwithstanding the jury verdict or, in the alternative, for a new trial. The second is a motion by defendants Rick and Rosella Fisher (the “Fishers”) for attorney fees expert fees, and costs.
What follows is an outline of evidence supporting the verdict. Unless otherwise indicated, the evidence was not disputed. Additional evidence, both undisputed and disputed, will be discussed later as relevant.
Continental is an oil and gas exploration and production company. It operates numerous wells in western North Dakota. (Tr. 138-39, 326).
The Fishers are Montana residents. They own a 575-acre farm in Bowman County, North Dakota located on the following contiguous tracts:
The Fishers' ownership interest includes the surface estate and a very small portion of the mineral estate. (Tr. 300, 317, 332-33; Ex. 200). The Fishers bought the farm in 1982 and actively worked it for several years before putting its acreage into CRP. One of the Fishers' sons now lives on the property. (Tr. 138-39, 294-95).
The Fishers' farm is located within the Cedar Hills North Red River “B” Unit (“Unit”) established by the North Dakota Industrial Commission (“NDIC”) in 2001 to unitize oil-and-gas operations within approximately 50,000 acres located in Bowman and Slope Counties in southwestern North Dakota. Continental is the operator of the Unit. (Tr. 303, 324, 328-31 254; Ex. 200).
In 2013, Continental drilled a salt water disposal (“SWD”) well on the NE% of Section 17, T131, R106W owned by the Fishers. The well is formally known as the Lonesome Dove 42-17 SWD well and will be referred to herein as the “42-17.” (Tr. 259, 354; Ex. 2).
The formation into which the 42-17 injects saltwater is located approximately 1% miles below the surface and is known as the Lower Oolitic Zone of the Lodgepole Formation (“Lodgepole”). The Red River “B” formation (“Red River”) from which Continental is producing oil and gas is deeper and located below the Lodgepole. (Tr. 224-26).
The 42-17 is a horizontal well and injects saltwater along the entire length of the horizontal run of its wellbore. Only about a of the horizontal portion of the wellbore is on the Fishers' property. The remaining b extends into adjoining property owned by third parties. (Tr. 428-34; Exs. 264, 315).
Prior to drilling and operating the 42-17, Continental needed to and did obtain an “aquifer exemption” from the EPA and the NDIC to allow it to dispose of saltwater into the Lodgepole. This is because the water quality in the Lodgepole is sufficient to meet federal drinking-water standards. The aquifer exemption granted by the NDIC is in the form of an order dated May 17, 2013. It allows Continental to inject saltwater into an area of the Lodgepole that is within % mile of its lateral, with the dimensions of the “exempted area” being 4,128 feet in length, 2,640 feet in width, and 85 feet in thickness. In addition to the geographic limit, the aquifer exemption also limits the amount of saltwater that may be disposed of through the 42-17 to 38,813,976 barrels. The volume limitation is an amount calculated by the NDIC based on the volume of the exempted area and the ability of the formation to receive and hold the saltwater, which is dependent upon several factors, including the formation's porosity and reservoir pressures. (Tr. 264-66, 285, 345-51; Exs. 247-48, 250).
Although Continental commenced drilling of the 42-17 in 2013, it did not make its first injection of saltwater until October 2018. Up to the time of trial, Continental had injected 1,339,317 barrels of saltwater using the 42-17. (Tr. 263, 355; Ex. 2).
Continental's expert testified that the injected saltwater is dispersed evenly along the length of the 42-17's horizontal wellbore and that only 33.51% of the horizontal wellbore is on the Fishers' property. (Tr. 434). During final argument, Fishers' counsel stated that his clients were not quibbling with the 33.51% or that the jury could multiply that percentage times the total amount of injected saltwater to determine how much of the injected saltwater uses and occupies their subsurface. (Tr. 502).
There is no evidence that Continental violated the requirement of its aquifer exemption that the injected saltwater not be permitted to migrate outside of the “exempted area.” Hence, the jury could reasonably have concluded that the injected saltwater occupies and uses pore space within the exempted area, which includes a portion of the Fishers' property. And, given the undisputed evidence of the uniform distribution of saltwater along the length of the lateral run, the jury could reasonably have concluded that approximately 33.5% of the injected saltwater occupies and uses the Fishers' subsurface.
The jury concluded in an answer to an interrogatory in the verdict form that the Fishers suffered loss of use or access to their property as a result of Continental's operation of the SWD 4217 up to the time of trial.[1] It then awarded the Fishers $22,440.25 as compensation. (Doc. No. 191).
While the verdict form did not require the jury to set forth how it calculated its award, clearly the jury decided to award the Fishers $.05 per barrel for the amount of saltwater injected to date that the evidence demonstrated uses and occupies the Fishers' subsurface. This is because the total amount of saltwater injected up to the time of trial of 1,339,317 barrels times 33.51% equals 448,805.1267 barrels. And, multiplying that amount times $.05 per barrel equals $22, 440.25---the exact unrounded amount of the jury verdict down to the penny
As discussed later, $.05 per barrel is in the lower range of what the jury could have concluded was the going rate for saltwater disposal in the subsurface based on the record evidence. Notably, it is less than the $.10 per barrel the State of North Dakota receives for the use of its property for saltwater injection and the $.10 per barrel the Fishers requested during the trial. The $.05 per barrel is within the range of what the jury could have concluded Continental was paying for injected saltwater at other locations.
It is helpful for purposes of what follows to understand: (1) why the parties were litigating in this case only what compensation was due for injection of saltwater into the subsurface and not also Continentals use of the surface for the 42-17 and its associated facilities; (2) why the Fishers were limiting their claim for compensation to the amount of saltwater injected as of the time of trial; and (3) why the Fishers were relying upon evidence of what others were paying on a per-barrel basis for injection of saltwater to support their claim for compensation. To that end, the court will briefly review: (a) the initial action between the parties relating to the 42-17 and the settlement of that action; (b) relevant decisions of the North Dakota Supreme Court; and (c) the earlier rulings in this action limiting the scope of the Fishers' claim for compensation.
Before the 42-17 became operational, the Fishers sued Continental in state court for claims of nuisance, trespass, fraudulent misrepresentation, deceit, and statutory damages under N.D.C.C. § 38-11.1-04. Continental removed the action to this court, which was docketed as Fisher v. Continental Resources Inc., No.1:13-cv-00097 (“Fisher”).
In Fisher, the Fishers contested Continental's claim that it had the right to use their property for saltwater disposal, both as a general matter and as it being an unreasonable exercise of the rights of the dominant mineral interests in this particular instance. In the alternative, the Fishers claimed they were entitled to statutory compensation under N.D.C.C. § 38-11.1-04 for the use of their surface acreage as well as the underlying pore space to which they claimed ownership. Fishers also sought other relief not relevant now.
In opposition, Continental contended it had the right to use the Fishers' property for the 4217 based on it having acquired an implied easement arising as a consequence of the dominancy of its mineral interest and as unit operator for the other mineral interest owners. With respect to the Fishers' § 38-11.1-04 claim for damages, Continental agreed it owed money for use of the surface of the Fishers' property but claimed with respect to the subsurface that no money was owed because the Fishers did not own the “pore space.” In the alternative, Continental contended N.D.C.C. § 3811.1-04 did not provide compensation for use of subsurface pore space and, even if it did, there would be no compensable damage.
In a 2014 order in Fisher, this court concluded that Continental had the right as the unit operator to use the Fishers' property for a SWD well but only if the use was reasonable, which the court stated to be a question of fact to be resolved in further proceedings. At the same time, the court declined to take up the pore space ownership issue but did indicate in a footnote that good arguments existed for concluding that the Fishers, as owners of the surface estate owned the...
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