UNDERGROUND TRESPASS IN THE BAKKEN OIL PATCH
My old professor way back when held forth that man owns everything from heaven to hell. He meant to tell us that a landowner owns all the skies above and the ground deep below. He is to be forgiven for this bold utterance because he was, I believe, born before the invention of airplanes and geologists. His comments about ownership rights however present an interesting question for the Bakken. What is the ground ‘below’? Who owns it? Who has rights to it? Both property owners and producers should be attentive to these questions. North Dakota through the courts and through legislation as well as regulation has anticipated these important questions. Let us take a look. We will learn that in our modern world my old professor was wrong—a man’s ground is not necessarily his castle. To be sure North Dakota does recognize that the owner of land has the right to the surface and to everything permanently situated beneath or above it. But let’s look at this old law in the modern oil patch.
I will leave other issues such as injection well trespass for another discussion. As a general law matter subsurface trespass is the bottoming of a well on the land of another without his consent. In North Dakota the Supreme Court addressed the issue of subsurface trespass in the modern context of horizontal drilling. In an important case a few years ago a mineral rights owner, the Plaintiff claimant, owned an interest in a quarter section of land. The oil company producer Defendant sought a voluntary pooling agreement of all interests in the land in order to drill a horizontal well. The Plaintiff refused to do a deal. The Plaintiff also told the producer that it would consider any subsurface action affecting its leasehold interests as a subsurface trespass. The producer then petitioned the ND Industrial Commission to ‘force pool’ the Plaintiff’s interest so that the property including the Plaintiff’s claims could be drilled. The Commission approved the application. When the well was drilled the Plaintiff sued the producer Defendant under the legal theory of trespass. The Supreme Court held that in North Dakota the state has created a pro development policy and certain statutory and regulatory powers to promote, manage and develop natural resources in the state. The Court said that the state had the right to “impose such restrictions upon private (property) rights as are practically necessary for the general welfare of all.” The state some time ago also adopted an act which modifies the old English practice called the ‘rule of capture’ by authorizing the Industrial Commission to set spacing units for a common source of supply ‘when necessary to prevent waste, to avoid the drilling of unnecessary wells, or to protect correlative rights.’ These powers include so called spacing and pooling powers. The court in effect held that the long established legal right to sue in trespass was nullified by these special modern statutes and policies. Not discussed in the case was the legal concept of a ‘taking’ of a man’s property and the right to just compensation for the taking. In North Dakota that issue is dealt with in the spacing or pooling order issued by the Industrial Commission where the nonconsenting party is to have their fair share determined if such a taking is to occur.
Subsurface trespass could still be an enforceable legal claim in situations that do not involve spacing and pooling powers. Courts have and could uphold a trespass claim in circumstances such as a slant well entering an adjoining parcel. An improperly located or directed well can occur from bad planning, bad surveying, bad mapping or bad faith. The public policy considerations outlined by the Court in the forced pooling case do not apply in traditional trespass claims. The law’s preference to promote and develop natural resources is not an argument that would win against a producer who has drilled a slant or deviated well causing entrance onto someone else’s property without permission.
Surface trespass still exists as a damage claim in North Dakota. Problems and possible damages from surface claims in the oil patch are also partially addressed by modern North Dakota legislation. The state has adopted a special oil and gas production compensation act to address harm to surface owners whether or not they hold an oil and gas lease. This act changes the way harm or damages are calculated. The law creates a statutory ‘baseline’ of strict liability rather than negligence.
Producers, developers and surface owners can reduce potential problems in trespass by full disclosure, complete professional research of the legal and geological issues before starting a project, and by putting everything on the table at a very early stage in a project.
Author: David Ganje. David Ganje of Ganje Law Offices practices in the area of natural resources, environmental and commercial law in North and South Dakota and has offices in Rapid City
