A Fallon County property owner rights case was settled in the state Supreme Court that landowners negotiating with oil and gas drillers should take notice of.
The case is Burlington Resources Oil & Gas Company v. Lang and Sons Inc. Lang owns and operates a cattle ranch in Fallon County, Montana. Burlington Resources Oil & Gas Company (Burlington) leases the rights to oil and gas beneath Lang’s surface estate. Lang purchased the surface rights on the land in 2003. Prior to that, in 1992, the mineral rights owner, as was their undisputed prerogative, leased removal rights to Meridian oil which later was acquired by Burlington. In 2003, Burlington began the permitting process to convert a well on Lang’s property into a waste water well. In 2005 Burlington was acquired by Connoco Phillips. Construction began in 2008, the well went into service in 2009 and by trial in 2010, Burlington had disposed of more than two million barrels of waste water into the well.
Lang sued in District for compensation for Burlington’s actions including injecting waste water into pore space beneath a well on Lang’s property and asserted that the pore space beneath the well was surface and not part of the mineral package. District Court ruled in favor of Burlington. Lang called on four issues property owners should be aware of.
First, Lang asserted that waste water injection into the wells requires additional compensation. The Lang brief asserted that the pores under the well were part of the surface property and that reclamation costs needed to be compensated. The District Court found no statutory or common law right to receive separate compensation for Burlington’s injection of waste water into the pore space beneath the well although they did grant Lang $5,500 in damages for Burlington’s development of a pipeline and pumping station on the surface estate of Lang’s property. That judgment was a result of an assessment and recommendation from an appraiser hired by Burlington. Interestingly enough, the appraiser, George Luther, a well-recognized expert, testified that he had never valued, or heard of any other appraiser valuing pore space. Additionally the District Court found that lease properly allowed for the use of the subterranean pore space.
Next Lang asserted the District Court failed to defer to the expertise of the Montana Board of Oil and Gas Conservation. The District Court found that while the experts were employees of the state board, they were not opining in their capacity as state employees and that as individuals their opinion thus did not equate to the state board’s interpretation of statue. Lang also said District Court was wrong when they said the company lost no statutory or common law rights as the result of the issuance of a state permit authorizing Burlington’s operations on its land. District Court concluded that Lang failed to identify any statutory or common law right to receive separate compensation for Burlington’s injection of waste water in the the pore space beneath the well. The State Supreme Court delved deeply into the history of the area and the mobility of surface, subterranean, and mineral rights as well as the unitization of the mining area and in the Supreme Court ruling took area history into consideration.
Finally, Lang said the District Court failed to order reasonable compensation for Burlington’s use of Lang’s property. The State Supreme Court said that Lang conceded that used of the pore space did not affect agricultural production and income. Additionally Lang provided no evidence to the Court that injecting waste water into the pore space lessened the value of the land and that there was no lost value in improvements to the land. The Court said Lang offered no evidence that the pore space had been degraded, damaged, devalued, or otherwise consumed by the pore space or that there were separate compensable damages from the pore space use.
The Montana State Supreme Court standard of review in appeal for a case heard without a jury considers if the District Court’s finding are supported by substantial evidence. They review a case in the light most favorable to the prevailing party, in this case Burlington, as to whether substantial credible evidence supports the District Court’s findings and they review for correctness in the District Court’s conclusions of law.
This case was heard by District Judge Joe Hegel and on all points of appeal brought forth by Lang the State Supreme Court affirmed Judge Hegel’s order in favor of Burlington Resources Oil & Gas Company.