Northern Natural Gas Co. v. Approximately 9117.53 acres in Pratt, CIVIL ACTION No. 10-1232-MLB

CourtUnited States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
Writing for the CourtMonti L. Belot
PartiesNORTHERN NATURAL GAS COMPANY, Plaintiff, v. Approximately 9117.53 acres in Pratt, Kingman, and Reno Counties, Kansas, and as further described herein; Tract No. 1062710 containing 80.00 acres more or less, located in Kingman County, Kansas, and as further described herein; et al., Defendants.
Docket NumberCIVIL ACTION No. 10-1232-MLB
Decision Date13 March 2012

Approximately 9117.53 acres in Pratt,
Kingman, and Reno Counties, Kansas,
and as further described herein;
Tract No. 1062710 containing 80.00 acres more or less,
located in Kingman County, Kansas, and as further described herein; et al., Defendants.



Dated: March 13, 2012


On November 16, 2011, Magistrate Judge Donald Bostwick issued a Report and Recommendation regarding Northern's Motion for a Temporary Restraining Order. That same day he also filed a Report and Recommendation addressing Northern's Motion for Preliminary Injunction and for Supplementary Confirmation of Condemnation Authority. (See Docs. 414 & 415, addressing Docs. 403 & 202). The parties filed various objections to the Reports. Docs. 426, 427, 428. Following Judge Brown's death, the case was transferred to the undersigned judge. Accordingly, the matter is now before the court on the parties' objections to Judge Bostwick's reports and recommendations.

Judge Bostwick's first Report recommended that the court grant Northern's motion to temporarily restrain L.D. Drilling, Inc. from recompleting the Brown A1 well. The second Report recommended that the court confirm Northern's supplemental condemnation authority request and grant its motion for preliminary injunction to allow it immediate

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access to, and possession of, the property to be condemned (including the Brown A1 well and seven other wells Northern seeks to condemn), subject to several conditions. Those recommended conditions include the posting of a bond in the amount of $6.7 million and the deposit of just over $3.8 million in funds into the court's registry, with the latter funds subject to being drawn down by defendants affected by Northern's immediate access.1 If an amount drawn down should exceed the ultimate award of just compensation at the end of the case, the affected defendant would be liable for return of the excess plus interest. With regard to the eight wells that Northern seeks to convert to observation wells, Judge Bostwick recommended an additional requirement that any draw-down of funds be accompanied by the consent of any landowners, royalty owners, working interest owners or lienholders who have an interest in the tract upon which the well is located.


a. Northern. Northern objects to the recommendation for a $3.2 million deposit to secure access to defendants' eight wells, arguing that a bond would be sufficient security and asserting that neither case law nor Rule 65 requires a deposit. Alternatively, Northern argues it should be allowed to post a $1.2 million bond as security

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for access to Nash's wells, instead of a cash deposit, due to concerns about Nash Oil & Gas, Inc.'s ability to repay any excess draw-down. Northern also requests clarification as to whether the conditions require defendants to apply any withdrawn funds toward the actual cost of drilling a new well, and whether and to what it extent the conditions require defendants to provide evidence of the landowners' consent to a withdrawal.

b. L.D. Drilling, Inc., Nash Oil & Gas, Inc., et al.2 These defendants first object to Judge Bostwick's recommendation that the court has the power to grant a preliminary injunction allowing Northern immediate access to the property. They point out that the Natural Gas Act contains no "quick take" provision for immediate taking of property, in contrast to other condemnation statutes where Congress specifically provided such authority. Defendants assert the court should follow the reasoning of Northern Border Pipeline Co. v. 86.72 Acres of Land, 144 F.3d 469 (7th Cir. 1998) and Transwestern Pipeline Co., LLC v. 17.19 Acres of Property Located in Maricopa County, 550 F.3d 770 (9th Cir. 2008) which hold that, in the absence of an order of condemnation, a federal district court has no authority to grant a preliminary injunction for immediate access because the condemnor has no substantive right to immediate possession of the property. Defendants reject the reasoning of East Tennessee Natural Gas Co. v. Sage, 361 F.3d 808 (4th Cir. 2004), which holds that a district court has the inherent equitable power to grant this type of

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injunctive relief.

As a fall-back position, defendants assert that even if the court concludes it has such authority, Northern has failed to show that it will suffer irreparable harm without an injunction. Defendants point out that no gas production has occurred in the Expansion Area for nearly a year, notwithstanding Northern's claim that third-party production is the cause of storage gas migration.

Defendants additionally raise an objection to Northern's authority to condemn the well bores. They argue that even if the wells are covered by Northern's Blanket Certificate of authority, the NGA limits condemnation to properties that are "necessary" to the proper operation of the facility. They say the well bores are not necessary because Northern can obtain or drill other well bores to achieve its purposes.

As to the $3.2 million deposit of funds pertaining to the eight wells sought by Northern, defendants contend that the funds are based on the cost of drilling replacement wells and that defendants alone - and not the landowners - own the eight wells and will bear any well replacement costs. For that reason, they argue they should not be required to obtain the consent of landowners or royalty owners before drawing down deposits that are intended to cover the costs of wells.

Defendants also object to Judge Bostwick's recommendation that L.D. Drilling be temporarily restrained from recompleting the Brown A1 well pending a ruling by the court on Northern's motion for immediate access. They argue Judge Bostwick impermissibly relied on an ex parte affidavit to find a likelihood of harm to the Brown A1 well, and that he erred in concluding that damage to the well bore

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will constitute irreparable harm to Northern because the well bores are not "necessary" to operate Northern's facility.


The foregoing motions were referred to Judge Bostwick pursuant to 28 U.S.C. § 636(b)(1)(B). On such a referral, the court makes a de novo determination of those portions of the report, findings or recommendations as to which objection is made. The court may accept, reject, or modify the findings or recommendations, and it may receive further evidence or recommit the matter to the Magistrate. Id.

The standards for issuing a temporary restraining order or a preliminary injunction are well established. When seeking a TRO or a preliminary injunction, the moving party must demonstrate: (1) a likelihood of success on the merits; (2) a likelihood that the movant will suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in the movant's favor; and (4) that the injunction is in the public interest. See Little v. Jones, 607 F.3d 1245, 1251 (10th Cir. 2010). In addition, the movant must establish "a relationship between the injury claimed in the party's motion and the conduct asserted in the complaint." Id. (citing Devose v. Herrington, 42 F.3d 470, 471 (8th Cir. 1994)). Certain types of injunctions are disfavored, including mandatory injunctions to compel the nonmoving party to take action and injunctions that disrupt the status quo. See Little, 607 F.3d at 1251; Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, 562 F.3d 1067, 1070 (10th Cir. 2009). Northern's request for immediate access to and possession of defendants' wells and other property falls within the disfavored category. Before a court may grant such relief, the movant must make

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a heightened showing of the four factors. O Centro Espirita Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 975-6 (10th Cir. 2004) (en banc). The court must more closely scrutinize the request to assure that the exigencies of the case support the granting of relief that is extraordinary even in the normal course. Id. at 975.


A. Motion to Confirm Supplemental Authority to Condemn. In March 2011, the court confirmed Northern's authority to condemn the property listed in the initial complaint, including the right, title and exclusive possession of the Viola and Simpson formations in the Expansion Area approved by FERC (Doc. 183). Northern later amended the complaint to include property interests to be taken to implement a proposed water injection program (see Docs. 202, 183.)3 The latter interests include the right to install, acquire and operate various wells, including specified existing wells to be converted to observation wells; installing electrical and telecommunication lines; the right to inject water into the Viola formation; and the right of ingress and egress across the Expansion Area to facilities that are part of Northern's containment plan.

Defendants contend some or all of these property rights are not "necessary" within the meaning of 15 U.S.C. § 717f(h), and that Northern does not have authority to condemn them because Northern can use newly-drilled wells or well bores other than the ones specified (Doc. 428 at 12-13). The court agrees with Judge Bostwick, however,


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