Gerrity Oil & Gas Corp. v. Magness

Decision Date15 September 1997
Docket NumberNo. 96SC215,96SC215
Parties138 Oil & Gas Rep. 1, 97 CJ C.A.R. 1939 GERRITY OIL & GAS CORPORATION, Petitioner, v. Bob MAGNESS, Respondent.
CourtColorado Supreme Court

Pendleton, Friedberg, Wilson, & Hennessey, P.C., F. Stephen Collins, Jeffrey R. Fiske, Denver, for Petitioner.

Witwer, Oldenburg, Barry & Bedingfield, L.L.P., R. Sam Oldenburg, Greeley, Fairfield and Woods, P.C., John S. Pfeiffer, Denver, for Respondent.

Welborn, Sullivan, Meck & Tooley, P.C., Scott L. Sells, Denver, for Amicus Curiae the Colorado Oil and Gas Association.

Justice MARTINEZ delivered the Opinion of the Court.

We granted certiorari to review the court of appeals decision in Gerrity Oil & Gas Corp. v. Magness, 923 P.2d 261 (Colo.App.1995). The court of appeals reversed the judgment of the trial court, which had dismissed Magness's counterclaims, and remanded the case to the trial court for a new trial on issues of both liability and damages. Gerrity, 923 P.2d at 266. The court of appeals held that section 34-60-114, 14 C.R.S. (1995), creates a private cause of action for individuals injured by another's violation of the Oil and Gas Conservation Act (the Act), §§ 34-60-101 to 34-60-126, 14 C.R.S. (1995), or regulations (rules or commission rules) promulgated by the Oil and Gas Conservation Commission (commission). Id. at 263-64. The court of appeals also held that the trial court erred in construing Magness's trespass claim as requiring a showing that Gerrity acted unreasonably in conducting its operations. Id. at 266. The court of appeals further held that because the Act and commission rules defined "the relevant duty owed by Gerrity to Magness," the trial court erred in finding that Magness could not prevail in his counterclaims without presenting the testimony of an expert in the oil and gas industry. Id. at 264.

We determine that section 34-60-114 does not create a private cause of action for those damaged by another's violation of the Act or commission rule. We further conclude that, although negligence and trespass are distinct and separate causes of action, the reasonableness of an operator's surface use must be considered in determining if the operator committed a trespass.

We also hold that the determination of whether a surface owner must present testimony of an expert in the oil and gas industry requires the trial court to first identify the cause of action alleged by the surface owner. If the surface owner asserts a claim of negligence, expert testimony must be presented whenever the applicable standard of care is outside the common knowledge and experience of ordinary persons. If the surface owner relies on a statute or commission rule--which we conclude do not establish the standard of care but are evidence of that standard--expert testimony is still a requirement when the statute or rule itself includes a standard of care that is outside the common knowledge and experience of ordinary persons.

If a surface owner brings a trespass claim for alleged excessive surface use, the surface owner need not present expert testimony in order to have the issue reach the trier of fact. Unlike a negligence cause of action, a prima facie case of trespass does not require evidence of an applicable standard of care, but requires evidence that the operator's surface use materially interfered with surface uses. Because such evidence may be presented by lay persons, expert testimony is not necessary to establish a prima facie case of trespass. Once a prima facie case is established, the mineral interest holder may then counter that evidence by a showing of the scope of its surface use privilege and a showing that its operations were within that privilege.

Because we have not previously clarified the distinction between trespass and negligence causes of action in the context of oil and gas operations, a new trial is necessary on the question of Gerrity's liability. In addition, we conclude that a new trial on the damages issue is necessary because the liability and damages issues in this case are not entirely distinct and separable. We therefore reverse in part and affirm in part the judgment of the court of appeals, and affirm the court of appeals grant of a new trial on all issues.

I.

In 1983, Bob Magness purchased a surface estate encompassing approximately 1,270 acres of land in Weld County, Colorado. Magness began using a portion of the land to raise Arabian horses and Limousin cattle. Magness also conducted farming operations to provide pasture land for the livestock. Magness acquired the surface estate in fee simple subject to a reservation of the underlying mineral estate. That estate had been severed prior to Magness's acquisition of the surface estate.

In 1970, the owners of the mineral estate, who are not parties to this litigation, executed an oil and gas lease naming T.S. Pace as lessee. Pace later assigned rights acquired under the lease to Pan American Petroleum Corporation, now doing business as Amoco Production Company (Amoco). On June 30, 1992, Amoco and Gerrity Oil and Gas Corporation (Gerrity) signed an agreement which made Gerrity the lessee of record under the lease.

In October, 1992, Gerrity notified Magness of its intent to drill four oil wells on the parcel. The parties commenced negotiations to determine locations of the wells that would minimize crop damage and disruption of livestock operations. In response to various concerns expressed by Magness's representatives, Gerrity agreed to move the drill sites from their initial proposed locations.

On November 11, 1992, the parties agreed on the location of one of the four wells, the "No. 6" well. The same day, Gerrity began work on this site. However, on November 18, 1992, after Gerrity had expressed a desire to begin work on a second well, the "2-D" well, an agent of Magness informed Gerrity that it did not have authority to commence operations on any additional wells.

By the end of November, negotiations between the parties had broken down and Magness had not consented to Gerrity's entry of the property to drill additional wells. On November 27, 1992, Gerrity filed a motion for a temporary restraining order and preliminary injunction with the District Court of Weld County and requested that the court enjoin Magness from preventing access onto the 2-D well site and order Magness to remove equipment and other materials. The district court granted the motion.

Gerrity later filed a motion to convert the temporary restraining order and preliminary injunction into a permanent injunction. 1 In response to this motion, Magness asserted several counterclaims, including a request for a declaratory judgment. Magness claimed that Gerrity acted negligently

by failing to properly and completely restore and remediate the drill sites to a condition as close as practical as existed before [Gerrity's] operation, by leaving drilling mud and other foreign substances in the excavated pits, by failing to timely restore and remediate the drill sites, by depositing hazardous and toxic substances on [Magness's] property, by contaminating the property with hazardous, toxic and controlled substances, and by contaminating [Magness's] property.

Magness also asserted a claim of trespass based on the same alleged acts.

At trial, both parties presented primarily anecdotal testimony from witnesses who observed or took part in the reclamation of the oil well sites. During the course of the trial, Magness alleged that Gerrity violated commission rules by failing to notify and consult with Magness before commencing reclamation operations, failing to reclaim and restore the well sites in a timely fashion following the completion of operations, failing to remove liquids, plastics, and other materials associated with drilling activity, and otherwise neglecting to restore the well sites to their original condition.

In response to these allegations, Gerrity's field operations manager, Thomas Majors, conceded that Gerrity did not notify or consult with Magness before commencing reclamation operations. However, Majors testified that any delay in restoring the well sites was caused by freezing weather conditions which made earlier restoration impossible, and that Gerrity personnel "took everything out that needed to be taken out" of the well sites.

Gerrity also presented the testimony of a heavy equipment operator, Gene Lawson, who performed most of the reclamation work. Lawson testified that he restored the pits on the Magness property according to the same procedure he had been using for forty years. Lawson conceded that it was possible some solid residue remained in the pits after reclamation, but opined that it is generally impossible to remove all residue.

Gerrity also presented the testimony of Cliff Roberts, a civil engineer hired by Gerrity to clean up oil stains adjacent to the No. 3 and No. 4 well sites. Roberts characterized these stains as "benign" and "shallow."

Witnesses for Magness disputed much of the testimony offered by Gerrity. According to these witnesses, Gerrity failed to remove fluids, drilling mud, and plastic liners from the pits, spilled hydrocarbons and other fluids around certain well sites, and generally failed to restore the sites to the condition in which they existed before Gerrity commenced operations. Wendel Geeslin, a ranch manager for Magness, testified that an excavation of one of the reclaimed pits revealed both plastic and drilling mud, and that, in his opinion, weather conditions permitted reclamation of the sites by March 1, 1993. Geeslin further testified that Magness lost one and one half tons of alfalfa near one well site because of delayed and inadequate reclamation, and was delayed in planting a grass crop and utilizing horse pastures due to Gerrity's alleged untimely reclamation efforts. A farm and ranch appraiser, Virgil Holtgrewe, also testified for...

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