EME Wyo., LLC v. BRW E., LLC

• Decision Date: 10 May 2021
• Docket Number: S-20-0197,S-20-0198
• Citation: 2021 WY 64
• Parties: EME WYOMING, LLC, Appellant (Plaintiff), v. BRW EAST, LLC; BRW WEST, LLC; INDIAN MEADOWS EAST, LLC; INDIAN MEADOWS WEST, LLC and WARREN B. BARTLETT, Appellees (Defendants). BRW EAST, LLC; BRW WEST, LLC; INDIAN MEADOWS EAST, LLC; INDIAN MEADOWS WEST, LLC and WARREN B. BARTLETT, Appellants (Defendants), v. EME WYOMING, LLC, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

2021 WY 64

EME WYOMING, LLC, Appellant (Plaintiff), v. BRW EAST, LLC; BRW WEST, LLC; INDIAN MEADOWS EAST,

LLC; INDIAN MEADOWS WEST, LLC and WARREN B. BARTLETT, Appellees (Defendants).

BRW EAST, LLC; BRW WEST, LLC; INDIAN MEADOWS EAST,LLC; INDIAN MEADOWS WEST, LLC and WARREN B. BARTLETT, Appellants (Defendants), v. EME WYOMING, LLC, Appellee (Plaintiff).

S-20-0197

S-20-0198

SUPREME COURT, STATE OF WYOMING

APRIL TERM, A.D. 2021

May 10, 2021

Appeal from the District Court of Goshen County

The Honorable Patrick W. Korell, Judge

Representing EME Wyoming, LLC:

Isaac N. Sutphin, P.C., and Jeffrey S. Pope, Holland & Hart LLP, Cheyenne, Wyoming. Argument by Mr. Pope.

Representing BRW East, LLC; BRW West, LLC; Indian Meadows East, LLC; Indian Meadows West, LLC; and Warren B. Bartlett:

Randall B. Reed, Kristopher C. Koski, and Kaylee A. Harmon, Long Reimer Winegar LLP, Cheyenne, Wyoming. Argument by Mr. Koski.

Representing Amicus Curiae Petroleum Association of Wyoming:

Michael D. Smith and Casey R. Terrell, Crowley Fleck PLLP, Cheyenne, Wyoming.

Representing Amicus Curiae Wyoming Stock Growers Association:

Conner G. Nicklas and Teresa L. Slattery, Falen Law Offices, LLC, Cheyenne, Wyoming.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.

DAVIS, Chief Justice.

[¶1] In the development of oil and gas resources, Wyoming is a first-to-file state. This means that when two or more entities have the right to produce oil and gas in an area, the Wyoming Oil and Gas Conservation Commission (WOGCC) will grant sole operating rights to the first entity to collect the necessary information and file an application for a permit to drill (APD).¹ The eminent domain dispute now before us arose in part, if not entirely, from these "race to permit" concerns.

[¶2] EME Wyoming, LLC, an oil and gas company, sought access to roughly 52,000 acres of land located primarily in Goshen County, Wyoming for the stated purpose of gathering data to evaluate the property's suitability for condemnation under the Wyoming Eminent Domain Act. The property owners, BRW East, LLC, BRW West, LLC, Indian Meadows East, LLC, Indian Meadows West, LLC, and Warren Bartlett (collectively the BRW Group) believed that EME sought access to the lands, not for a proper purpose under the Act, but solely to collect data with which to file APDs, and it denied EME's request. In response, EME sued under the Act to obtain access.

[¶3] The district court issued two orders. In its first order, it allowed EME access to the 52,000 acres to survey and gather data, but restricted it from using the survey information or filing APDs with the WOGCC, pending further order of the court. In its second order, the court permanently barred EME from using the information it collected to file APDs.

[¶4] The BRW Group appeals the first order allowing EME access to its 52,000 acres, and EME appeals the second order barring it from using the survey and other data to file APDs. We reverse the first order allowing EME access to the BRW Group's property, affirm the second order to the extent that it restricted EME's use of the data it collected, and remand for proceedings consistent with this opinion.

ISSUE

[¶5] The dispositive issue in this appeal is:

Did EME establish that it was a condemnor as that term is defined by statute, and that it was thus entitled to an order allowing access to the BRW Group's 52,000 acres of land?

FACTS

[¶6] Elk Mesa Energy is an oil and gas company operating in the Rocky Mountain region, and EME is its wholly owned subsidiary authorized to do business in Wyoming. EME became interested in the BRW Group's properties because EME's technical and geologic work identified the area as having potential for hydrocarbons.

[¶7] On July 8, 2019, EME wrote the BRW Group to request permission to access 52,000 plus acres of its land. It stated in part:

As you already know, Elk Mesa Energy, LLC ("Elk Mesa") is preparing to develop an oil and gas exploration and production project, together with all related infrastructure and facilities, on or in the immediate vicinity of your property. The proposed oil and gas operations will be conducted on property you own or lease as well as on adjacent properties. Thus, access and surface uses associated with the project may be required on, over, and across your property. The approximate location of the proposed project is shown on the enclosed map.

* * * *

Elk Mesa has a strong desire to reach an agreement with you regarding survey access. Wyoming law requires that Elk Mesa allow you fifteen (15) days to grant written authorization for Elk Mesa and its subcontractors to conduct the requested surveys. See Wyoming Statute § 1-26-506. If Elk Mesa's efforts to reach an agreement for survey access are obstructed or denied, Elk Mesa will apply to the district court for an order permitting entry pursuant to Wyoming Statute § 1-26-507.

[¶8] The BRW Group denied EME's request for access, and on August 1, 2019, EME applied to the district court under the Eminent Domain Act and W.R.C.P. 71.1 for an order permitting entry. The BRW Group objected on several grounds. Most relevant to this appeal, it asserted that EME intended to use the survey information it collected to file APDs with the WOGCC, and it argued that was an impermissible use of access under the Act. It further asserted that although EME requested access to nearly all its property, it had no mineral or leasehold interest in most of it.

[¶9] On September 3, 2019, the district court held a hearing on EME's application. EME offered no mineral leases or other documentation of its asserted mineral holdings and instead offered generalized testimony and exhibits concerning its mineral interests and theirlocations. For example, EME presented Exhibits 3 and 4, which depicted areas shaded in yellow to reflect its purported holdings.

Image materials not available for display.

EME Exhibit 3

Image materials not available for display.

EME Exhibit 4

[¶10] Robert Gardner, president and chief executive officer of EME, testified as follows concerning the exhibits:

Q. Mr. Gardner, are these mineral holdings that are represented in the yellow shading the only mineral holdings that Elk Mesa, as a company, has?

A. In this particular area, yes.

Q. Are there any efforts underway to expand Elk Mesa's holdings in this general vicinity?

A. Yes. Those efforts are ongoing.

Q. And what is the source of the information that sets forth Elk Mesa's mineral holdings in this vicinity?

A. It's a combination of private mineral records combined with federal, state and county ownership records.

Q. Okay. Is there anything else about this exhibit that you think would be helpful for the judge to understand your request today?

A. This exhibit [Exhibit 3] represents close to 40,000 net mineral acres spread amongst several townships underlying several surface owners and consists of 56 separate and discreet [sic] mineral owners that we have reached agreements with.

Q. Okay. So let's take a look now at Exhibit No. 4. Mr. Gardner, this exhibit looks fairly similar. Can you please explain what we are looking at in Exhibit No. 4?

A. Yes. So this is the same map from Exhibit 3. We're just building on the foundation and knowledge. And to the best of our knowledge from the Goshen County Assessor's website we've overlaid the boundaries of the various Bartlett family surface ownership.

* * * *

Q. Okay. So do you have any understanding about what percent of the Bartlett property overlays Elk Mesa mineral holdings?

A. As a rough estimate, 60 to 70 percent of the surface overlays approximately 22,000 net mineral acres that the company has under its control.

[¶11] On cross-examination, Mr. Gardner testified:

Q. And we're dealing with an approximately 52,000-acre ranch here today. Does EME own the entirety of the lease hold [sic] mineral rights under the ranch?

A. The entirety? No.

Q. You indicated in your testimony earlier today, that EME owns approximately 22,000 net mineral acres. Is that underneath the yellow area on Exhibit [4]?

A. Correct.

Q. And how did you come up with that calculation?

A. Our internal records.

Q. And what was included in your internal records to aid you in that calculation?

A. Various agreements, commercial agreements with private parties, as well as any publicly-available mapping and geographic data.

* * * *

Q. And the 22,000 net mineral acres you indicate, those are leases with other parties; correct?

A. They are leases and/or commercial agreements.

Q. And what do you mean by "commercial agreement"?

A. It's an option to execute a lease based on the suitability of the surface.

Q. And who are these commercial agreements that Elk Mesa has entered into with?

A. Those are private agreements, Your Honor. I prefer not to - to divulge that information.

Q. So it's safe to say that Elk Mesa doesn't actually have 22,000 net mineral acres under lease underneath the Bartlett Ranch property; correct?

A. I think the answer to that question is more nuanced, [counsel].

Q. Does Elk Mesa have leases to 22,000 net mineral acres underneath Bartlett Ranch?

A. Elk Mesa has leases and commercial agreements for 22,000 net mineral acres.

[¶12] On November 8, 2019, the district court entered an Order Permitting Entry for Survey. The order authorized EME to enter the BRW Group's property subject to certain conditions, including the following:

3.1. [EME] may perform legal and civil surveys, archaeological surveys, and environmental surveys, for the purposes of surveying the property and determining whether it is suitable and within the power of the condemnor to condemn;

3.2. Pending further order of the Court, [EME] is expressly prohibited from utilizing any survey information

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