Entek GRB, LLC v. Stull Ranches, LLC

Decision Date29 March 2013
Docket NumberCivil Action No. 11–cv–01557–PAB–KLM.
PartiesENTEK GRB, LLC, Plaintiff, v. STULL RANCHES, LLC, Defendant.
CourtU.S. District Court — District of Colorado

OPINION TEXT STARTS HERE

L. Poe Leggette, Lucy H. Deakins, Fulbright & Jaworski, LLP, Denver, CO, for Plaintiff.

Dudley W. Von Holt, James M. Cox, Thompson Coburn, LLP, St. Louis, MO, for Defendant.

ORDER

PHILIP A. BRIMMER, District Judge.

This matter is before the Court on the Motion for Summary Judgment filed by plaintiff Entek GRB, LLC (Entek) [Docket No. 149] and the Motion for Partial Summary Judgment filed by defendant Stull Ranches, LLC (Stull) [Docket No. 146]. The Court has jurisdiction over this case pursuant to 28 U.S.C. § 1331.

I. BACKGROUND1

This case arises out of a dispute regarding the rights of a mineral lessee to traverse a surface owner's estate to develop subterranean minerals from a well located on an adjacent property. Entek is the lessee of mineral estates granted by the Bureau of Land Management (“BLM”). Entek is the successor-in-interest of Stone & Wolf, LLC (“Stone & Wolf”), Clayton Williams Energy, Inc. (Clayton Williams), and New Frontier Energy, Inc. (“New Frontier”). Entek's mineral estates are located in the Focus Ranch Unit (“FRU”), which is a collection of mineral leases combined to facilitate development. See Docket No. 149–3. Stone & Wolf created the FRU in 1999 and Entek is the current unit operator of the FRU. Id. Stull is not a party to the FRU.

The majority of the land located in the FRU is leased pursuant to two federal statutes: the Stock–Raising Homestead Act of 1916 (“SRHA”), 43 U.S.C. § 291 et seq. (repealed in part by Pub. L. 94–579 (1976)), and the Mineral Leasing Act of 1920 (“MLA”), 30 U.S.C. § 181 et seq.2 The SRHA severed the surface and mineral estates for public lands in the western states to facilitate the concurrent development of both the surface and subsurface resources. Watt v. W. Nuclear, Inc., 462 U.S. 36, 42–45, 103 S.Ct. 2218, 76 L.Ed.2d 400 (1983). Pursuant to the SRHA and the MLA, the federal government leased the surface estates for improvement of the land and reserved the rights to the mineral estates to realize a proper return from the extraction of minerals through separate leasing. 43 U.S.C. § 299(a); Kinney–Coastal Oil Co. v. Kieffer, 277 U.S. 488, 504–05, 48 S.Ct. 580, 72 L.Ed. 961 (1928).

Entek's mineral leases and patents in the FRU are granted pursuant to the SRHA, and Entek owns the rights to certain minerals subjacent to Stull's surface estate. Stull does not challenge Entek's ownership rights to the leases and patents at issue.3 The terms of Entek's leases and patents do not expressly grant a mineral lessee the right to use Stull's surface estate to access a well located on a surface estate owned by a third party.

Entek filed this case to secure access to a well called the 3–1 well and a well called the 12–1 well. Entek owns the mineral estates subjacent to these wells. The 3–1 well and the 12–1 well are located on surface estates owned by the BLM and are part of the FRU.4 Currently, there is only one available road (the “Access Road”) by which Entek may reach the 3–1 well. See Docket No. 126–2 5; Docket No. 133–1 (map of Access Road). To reach the 3–1 well, Entek must use the Access Road to cross Stull's surface estate on Leases COC–59666, COC–69894, and COC–59491. Entek applied to the BLM for bonds to secure access to the surface estates overlying these three leases. Docket No. 126–17. The BLM granted the bond only for Lease COC–59491. Docket No. 126–34. Entek states that it does not know whether the BLM will approve the bonds for the remaining two leases. Stull claims that the BLM did not grant the bonds for Leases COC–59666 and COC–69894 because the BLM does not grant bonds for leases on which no drilling activity is conducted.

Entek's predecessors-in-interest Clayton Williams and New Frontier accessed the 3–1 well by using an easement (“Stull Easement”) obtained through an agreement with Stull. The Stull Easement utilized the northwest portion of the Access Road, which travels across Section 33, Township 12 North, Range 88 West into Section 3, Township 11 North, Range 88 West. See Docket No. 126–2. However, Stull revoked the easement after New Frontier violated its terms and has refused to grant Entek an easement to access the 3–1 well. Entek does not claim any rights of access arising out of the Stull Easement.

Entek alleges that, if it is granted access to the 3–1 well, it intends to drill directionally from the 3–1 well to reach minerals located subjacent to Stull's surface estate under Lease COC–59491 and Patent 985094. See Docket No. 163–4 at 4. Stull argues that Entek cannot determine whether any minerals extracted by the 3–1 well will be located subjacent to Stull's surface estate until the 3–1 well is fully drilled.

On September 2, 2011, Entek filed a motion for a preliminary injunction [Docket No. 45] to gain access to the 3–1 wells.6 The Court denied Entek's motion on procedural grounds. Docket No. 54.

On October 7, 2011, Entek filed an amended complaint [Docket No. 81]. Entek's first claim seeks a declaratory judgment that it has the right to: (1) stake, survey, drill, and develop well locations on Stull's surface (Count One); (2) use Stull's surface to reach well locations on adjacent property if those wells will develop Entek's mineral estate subjacent to Stull's surface (Count Two); and (3) access all surface areas within the unitized federal exploratory unit because of the unitization agreement (Count Three). 7 Docket No. 81 at 11–14. The second claim for relief is for a permanent injunction. Id. at 14.

On July 31, 2012, Stull filed a motion for partial summary judgment [Docket No. 146] requesting that the Court enter judgment in its favor and against Entek on Counts Two and Three of the first claim for relief and on the second claim for relief. That same day, Entek filed a motion for summary judgment [Docket No. 149] requesting that the Court enter a declaratory judgment in its favor on all three counts in its first claim for relief and on Stull's counterclaim based on the accommodation doctrine.8 Docket No. 149 at 9–10. Entek also requests that the Court permanently enjoin Stull from interfering with its rights of access. Id.

On June 15, 2012, Entek filed a second motion for a preliminary injunction [Docket No. 126] to enjoin Stull from restricting its access to the 3–1 well. After an evidentiary hearing on Entek's motion on August 1, 2012, Docket No. 150, the Court denied the motion, finding that nothing in Entek's leases, patents, and the unitization agreement granted Entek the right to use Stull's surface estate to reach the 3–1 well located on BLM surface. See Docket No. 151 at 16–22.

II. STANDARD OF REVIEW

Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In deciding whether summary judgment is appropriate, the Court construes all facts and reasonable inferences drawn from the record in the light most favorable to the nonmoving party. See McBeth v. Himes, 598 F.3d 708, 715 (10th Cir.2010). Where, as here, the parties file cross-motions for summary judgment, the Court “assume[s] that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts.” James Barlow Family Ltd. P'ship v. David M. Munson, Inc., 132 F.3d 1316, 1319 (10th Cir.1997); Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir.2000).

Because Stull does not bear the ultimate burden of persuasion at trial, it will be entitled to summary judgment if it can establish ‘a lack of evidence for [Entek] on an essential element of [Entek's] claim[s].’ Adler v. Wal–Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir.1998). If Stull can show a lack of evidence on an essential element of one of Entek's claims, Stull will be “entitled to a judgment as a matter of law” because Entek, the nonmoving party, would have failed to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). By contrast, Entek will be entitled to summary judgment if it can “show that there is no genuine issue as to any material fact” with regard to any of its claims. Id.

III. ANALYSIS

In its motion for summary judgment, Entek requests that the Court enter a declaratory judgment finding that Entek has the right to use:

(1) Stull's surface to explore for, extract, and remove minerals located under that surface. The types of wells covered by this Count are typified by the “5 wells” identified in [Docket No. 149–5 at 5 (the five wells with pink headings) ].

(2) Stull's surface to reach a well pad or access road located off Stull's surface where exploring for or developing minerals located under Stull's surface. The type of well covered by this Count is typified by the 3–1 well, shown on [Docket No. 149–5 at 5].

(3) Stull's surface within the FRU to reach a well pad located off Stull's surface but also within the FRU when exploring for or developing minerals located anywhere within the FRU. Count Three logically includes all wells covered in Counts One and Two ... [however,] [t]he type of well covered by this Count is typified by the 12–1 well, shown on [Docket No. 149–5 at 5].

Docket No. 149 at 9.

Entek contends that it is entitled to a declaratory judgment because the federal government granted it an express right of access over Stull's surface estate pursuant to its patents and leases, the SRHA, 43 C.F.R. §§ 3101.1–2, and the unitization agreement. See Docket No. 163 at 1. Entek states that it does not seek to enforce any implied rights...

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