Bay v. Anadarko E&P Onshore LLC
Opinion of the Court
This appeal concerns a trespass claim by Plaintiffs-Appellants Marvin and Mildred *1252Bay that Defendants-Appellees Anadarko E&P Onshore LLC and Anadarko Land Corp. (together, "Anadarko"), through their lessee, exceeded the scope of an easement by using excessive surface land to drill for oil and gas. The district court had diversity jurisdiction over the case and entered final judgment against the Bays pursuant to Federal Rule of Civil Procedure 54(b). See 4 Aplt. App. 883-84.
We decide whether a deed reserving mineral rights in land - and the specific right to use the surface as "convenient or necessary" to access the minerals - requires applying a different test than the one prescribed in Gerrity Oil & Gas Corp. v. Magness,
Background
The Bays are farmers in Weld County, Colorado, who (through a family trust) own the surface estate of their land. 6 Aplt. App. 1234, 1236, 1241. Their deed can be traced back to 1907, when the Union Pacific Railroad Company conveyed the surface to the Bays' predecessors in interest but reserved the underlying mineral estate. See 9 Aplt. App. 1984. Specifically, the deed reserved to "Union Pacific Railroad Company, its successors and assigns":
First. All coal and other minerals within or underlying said lands.
Second. The exclusive right to prospect in and upon said land for coal and other minerals therein, or which may be supposed to be therein, and to mine for and remove, from said land, all coal and other minerals which may be found thereon by anyone.
Third. The right of ingress, egress and regress upon said land to prospect for, mine and remove any and all such coal or other minerals; and the right to use so much of said land as may be convenient or necessary for the right-of-way to and from such prospect places or mines, and for the convenient and proper operation of such prospect places, mines, and for roads and approaches thereto or for removal therefrom of coal, mineral, machinery or other material.
The Bays' farm sits above a large oil and gas deposit called the Wattenberg Field. 5 Aplt. App. 1018. Prior to 2000, Union Pacific would enter into agreements with surface owners before drilling for oil or gas. 8 Aplt. App. 1719. These agreements typically included payments to surface owners and also provided that Union Pacific would pay for surface property damages, including damages to crops. 6 Aplt. App. 1132. In 2000, Anadarko bought Union Pacific's mineral rights in the Wattenberg Field, 4 Aplt. App. 831, and discontinued the practice of entering into agreements with surface owners, 8 Aplt. App. 1720.
*1253In 2004, Anadarko leased the mineral rights beneath the Bays' farm to United States Exploration, which drilled three vertical wells on the Bays' south farm. 4 Aplt. App. 831-32. Noble Energy bought United States Exploration in 2006, and Noble drilled four additional vertical oil and gas wells on the Bays' north farm between 2007 and 2011.
Despite the prevalence of vertical drilling at the time, the Bays asked Noble Energy to drill directionally instead because directional drilling would require using fewer well sites, thus reducing the surface impacts on the Bays' property.
The Bays filed a putative class action against Anadarko on behalf of themselves and similarly situated surface owners, which was certified for the purpose of addressing common questions of law. See A-W Land Co. I,
The district court first interpreted the portion of the deed granting Anadarko the right to use as much of the surface as is "convenient or necessary" to access the underlying minerals, given the background rule of reasonable use in Gerrity. A-W Land Co. I,
Second, the district court decided whether Anadarko could be held vicariously liable for its lessee's trespasses. See id. at *8-11. It noted that Anadarko could theoretically be held liable but declined to make a ruling on a class-wide basis, determining that this question was factually intensive and required individual proof in each plaintiff's case. Id.
After addressing all the questions of law capable of resolution on a class-wide basis, the district court decertified the class and directed the parties to select a plaintiff for a bellwether trial. See A-W Land Co. II,
At trial, the Bays adduced testimony about how the drilling operations and well sites had affected the surface land and their ability to farm. Mr. Bay testified that the equipment used to drill the wells occupied a space of two to two-and-a-half acres during the three to five days that a well is drilled. 6 Aplt. App. 1315-16. He noted that the equipment compacts his farmland, making the land less productive. Id. at 1315. Once drilling is completed and the wells are finished, the wellheads occupy a space between 100 to 196 square feet (i.e., 10-by-10 to 14-by-14 feet). Id. at 1316. These wellheads make it more difficult for Mr. Bay to tend fields because some of his farming machinery is very wide (up to 66 feet) and the wellheads impede his free movement over the land in this machinery. Id. at 1311-12. In addition, the wellheads and buried flow lines emanating from them made operating his center-pivot irrigation sprinklers more difficult. Id. at 1313-14. Mr. Bay concluded by testifying that he was concerned about the possibility of asbestos and radiation contamination resulting from the operations, but he admitted to having no direct knowledge of any such contamination during cross examination. Id. at 1324-25, 1327-28; 7 Aplt. App. 1425.
The Bays, however, did not produce any evidence that vertical drilling was contrary to industry practice or commercially unreasonable (i.e., evidence showing that vertical wells were "inconsistent with prevailing standards in the oil and gas industry at the time"), despite the district court's earlier ruling requiring such a showing. 9 Aplt. App. 1974, 1976-77. Indeed, it is unlikely that the Bays could have produced such testimony when vertical drilling remained a common technique in the Wattenberg Field. Id. at 1974; see 8 Aplt. App. 1633, 1638-39.
On the sixth day, after the close of both parties' cases, Anadarko moved for judgment as a matter of law (JMOL), arguing that (1) the Bays had consented to any trespass; (2) Anadarko could not be held vicariously liable for Noble's conduct; (3) the Bays, as trustees, could not collect damages for discomfort and annoyance; and (4) the Bays failed to present evidence sufficient to show other damages. See 9 Aplt. App. 1889-99. After hearing the Bays' response, the district court then entered JMOL pursuant to Federal Rule of Civil Procedure 50(a). Id. at 1970, 1980. The district court determined that Anadarko had produced unrebutted evidence that vertical drilling was commercially reasonable. Id. at 1976-78. Therefore, given the district court's earlier rulings, "Anadarko was free, consistent with the terms of the surface reservation, to allow its lessees to drill vertically rather than directionally. In such circumstances, the undisputed evidence compels the conclusion that the *1255Bays could not establish their claim of trespass here." Id. at 1978.
Accordingly, the district court entered JMOL and, because the Bays were only two of many plaintiffs, directed entry of a final judgment against the Bays pursuant to Rule 54(b). Id. at 1981. On appeal, the Bays argue that Anadarko was not entitled to JMOL, and they ask that we reverse and remand for a new trial. Aplt. Br. at 25.
Discussion
We review a district court's decision under Rule 50(a) de novo and apply the same standards as the district court. Elm Ridge Expl. Co. v. Engle,
When a district court grants JMOL instead of submitting the case to a jury, we review the elements of the claim or defense at issue and discuss whether the nonmovant has satisfied those elements such that submission to a jury was required. See, e.g., Bannister v. State Farm Mut. Auto. Ins. Co.,
A. The Gerrity Approach
Gerrity is the leading Colorado case addressing surface use rights held by mineral owners and the elements of trespass. Amoco Prod. Co. v. Thunderhead Investments, Inc.,
The surface owner in Gerrity raised horses and cattle on the surface estate that had previously been severed from the mineral estate.
The Colorado Supreme Court granted certiorari to determine, inter alia, whether reasonableness is relevant to determine whether an operator's activities on the surface estate constitute trespass.
In describing the reasonable use approach, Gerrity noted that a mineral owner may access and use "that portion of the surface estate that is reasonably necessary to develop the severed mineral interest."
Getty concerned a dispute that resembles the one between the Bays and Anadarko, and the Colorado Supreme Court appears to have relied on it. We therefore discuss the reasoning of Getty with particular relevance to this case. In Getty, a farmer sued to enjoin an oil developer (Getty Oil Co.) from using pumping units on its wellheads that were tall enough to obstruct the farmer's center-pivot irrigation system.
Mirroring the approach used in Getty, the Colorado Supreme Court detailed what evidence would be required to support a trespass claim based on unreasonable surface use and concluded that the plaintiff need not produce expert testimony. Gerrity,
B. The Deed's "Convenient or Necessary" Clause Does Not Expand Anadarko's Rights Beyond Those Implied by Common Law
The district court concluded that the phrase "convenient or necessary" granted Anadarko (or its lessee) the right to decide which method of drilling "it deems most suitable in a given situation," "even if one alternative will result in greater surface disruption than the other," so long as the method is not "commercially unreasonable or contrary to accepted industry practices." A-W Land Co. I,
In reaching this conclusion, the district court determined that "convenient or necessary" should be viewed from the mineral owner's perspective, meaning that the use should be either convenient for the mineral owner or necessary for the mineral owner. Id. at *6-7. In construing the deed, the court inferred that Union Pacific would have had no reason to include language in the deed other than to expand the mineral owner's rights when the common law rule of reasonable use was already established. Id. at *6. The Bays, however, argued that "convenient or necessary" is internally inconsistent when viewed solely from the mineral owner's perspective because it pairs a permissive with a restrictive term. See id. at *7. The district dismissed this argument, noting that some of an operator's actions might be convenient for the operator but not necessary while others might be necessary but not convenient, and consequently, there is no inconsistency in reading the terms independently. Id.
The district court then stated that the terms "convenient" and "necessary" are "properly interpreted according to their dictionary definitions," id. at *8, but it did not explicitly reference any dictionary to determine their definitions. It noted, though, that "the plain meaning of the term 'convenient' " would be honored "by allowing Anadarko to choose the alternative that it deems most suitable in a given situation." Id. This suggests that the district court gave the term its modern meaning. See Convenient, Merriam-Webster's *1258Dictionary, https://www.merriam-webster.com/dictionary/convenient (last visited Dec. 7, 2018) (defining "convenient" as "suited to personal comfort or to easy performance," "suited to a particular situation," or "affording accommodation or advantage").
We conclude that the district court erred when it interpreted the deed's language to expand the mineral owner's rights beyond the common law. We reach this conclusion for several reasons. First, under Colorado law, our goal when interpreting a deed is to give effect to the instrument by ascertaining the parties' intent at the time of execution. Notch Mountain Corp.,
Some definitions of "convenient" from around 1907 suggest that the word took a more constrained meaning than it does today. The second edition of Black's Law Dictionary from 1910 defined "convenient" as "[p]roper; just; suitable." Convenient, Black's Law Dictionary (2d ed. 1910); see also Convenient, Merriam-Webster's Dictionary, supra (recognizing "suitable" and "proper" as obsolete definitions of "convenient"). This is very similar to how Black's defined "reasonable" in 1910: "Agreeable to reason; just; proper. Ordinary or usual." Reasonable, Black's Law Dictionary (2d ed. 1910).
On the other hand, some dictionaries contemporary with the execution of the 1907 deed suggest that "convenient" might be more broadly defined. The Bays argue that Webster's New International Dictionary of 1909 supports the understanding that "convenient" meant "fit or adapted, suitable, proper, becoming, appropriate," Aplt. Br. at 21, but Webster's described the Bays' preferred definition as "archaic." Convenient, Webster's New International Dictionary 491 (1909). Indeed, that same dictionary provides another definition: "suited to one's personal ease or comfort or to one's easy performance of some act or function; affording accommodation, advantage, or saving of trouble; well adapted to one's ready use; handy."Id. Comparing dictionary definitions from around the turn of the century with more modern definitions supports the notion that the meaning probably was more constrained than the modern understanding.
Second, the Colorado Supreme Court's interpretation of a deed with identical terms supports the understanding that the "convenient or necessary" clause does not grant mineral owners more rights than *1259those already provided at common law. In Barker v. Mintz,
Third, this understanding is consistent with the common law in other jurisdictions. In Baca Land & Cattle Co. v. Savage,
We acknowledge cases from West Virginia and Kentucky interpreted instruments employing the term "necessary or convenient" from the early twentieth-century more broadly. In Comley v. Ford,
Zeiler Farms, Inc. v. Anadarko E&P Co., No. 07-CV-01985-WYD-MJW,
Fourth, under Colorado law we doubt whether a deed's mineral reservation can expand surface or mineral ownership rights unless the reservation clearly defines the right. Gerrity notes that its rule applies "[i]n the absence of statutes, regulations, or lease provisions to the contrary."
Although we do not decide how clear, explicit, or specific a deed must be to grant the surface owner or mineral owner more rights than the due regard each already *1261owes the other under Gerrity, we conclude the deed's reservation was insufficient here.
C. The District Court Improperly Required the Bays to Show that the Operator's Use Was Not Commercially Reasonable
The district court concluded that the deed's "convenient or necessary" clause expanded the mineral owner's rights beyond the common law, and it consequently decided "that to fully honor the intention of the surface reservation, the rule of Gerrity had to be modified slightly." 9 Aplt. App. 1971-72. Gerrity provides that the surface owner may introduce evidence of a reasonable alternative at the rebuttal stage, but the district court modified the approach by requiring the Bays to present evidence that vertical drilling was "unreasonable and contrary to industry standards." Id. at 1977. As we have concluded, however, the deed did not expand Anadarko's rights beyond the right to reasonable surface use under common law. Consequently, requiring the Bays to meet an increased burden on rebuttal was inappropriate, and the district court should have applied the Gerrity test without any modifications.
Because we can affirm the district court for any reason supported by the record, we now apply Gerrity's burden-shifting approach to see whether the district court reached the correct result despite having applied an inappropriate test. See Spring Creek Expl. & Prod. Co. v. Hess Bakken Inv., II, LLC,
1. The Surface Owner's Prima Facie Case
Under Gerrity, the surface owner must first prove a prima facie case by showing that an operator's conduct caused a material interference with surface uses.
The Getty case cited in Gerrity provides further guidance on what effects create a material interference and suggests that surface use must be infeasible or nearly impossible under the circumstances. In Getty the surface owner entered evidence that he had no other way to irrigate his farm than to use center-pivot irrigation, and he would be unable to continue farming altogether without it.
Given the factual differences between the Bays' claims, Gerrity, and the aforementioned Texas authorities, we question whether the record before us supports a legally sufficient finding of material interference. But we do not resolve this issue because Anadarko has not raised it on appeal;
2. Mineral Owner's Burden of Production
After the surface owner makes a showing of material interference, the mineral owner must then produce evidence to explain the necessity of its conduct and to show that its conduct conformed to industry practices. Gerrity,
3. Surface Owner's Rebuttal
Once the mineral owner satisfies its burden of production, the surface owner may provide rebuttal evidence that reasonable alternatives were available to the operator. Gerrity,
Anadarko argues, however, that the Bays failed to satisfy their burden under Gerrity because the Bays did not offer evidence that vertical drilling was unreasonable or that the proposed alternative was "more reasonable." Aplee. Br. at 42-45. This argument misunderstands Gerrity. Nowhere does Gerrity require the surface owner to show that another alternative was "more reasonable." Instead, Gerrity's third step permits the surface owner to introduce evidence that "reasonable alternatives were available."
D. We Cannot Conclude as a Matter of Law that Anadarko May Not Be Held Vicariously Liable for Noble's Potential Trespass
In the alternative, Anadarko argues that the Bays failed to present evidence that Anadarko can be held vicariously liable for any of Noble Energy's alleged trespasses. Because the district court granted JMOL based on the trespass theory, it did not rule on this issue. See Aplt. App. 1970-80. Anadarko nevertheless asks the court to affirm because JMOL would have been warranted even if the district court erred when it ruled that the Bays had failed to establish their trespass claim as a matter of law. See Aplee. Br. at 57-60. Again, we may affirm for any reason supported by the record. See Spring Creek Expl. & Prod. Co.,
Ordinarily, a lessor is not liable for its lessee's trespasses. See Orphan Belle Mining & Milling Co. v. Pinto Mining Co.,
REVERSED and REMANDED for further proceedings consistent with this opinion.
"Other minerals" includes oil and gas resources under Colorado law. McCormick v. Union Pac. Res. Co.,
The parties have competing theories regarding why Union Pacific entered into agreements with surface owners. The Bays theorize that the agreements were used to avoid excessive-surface-use claims, like the one at issue here. See 6 Aplt. App. 1132. Anadarko contends that the agreements were used because it was unclear what mineral rights reservations "other minerals" included until the Colorado Supreme Court's decision in McCormick,
We provide a brief description of the differences between vertical and directional drilling to better contextualize the dispute. As its name suggests, a vertical well is drilled vertically, i.e., straight down from the drill pad and into the surface beneath the drilling rig. 5 Aplt. App. 1022. By contrast, a directional well begins as a vertical well, but then makes a modest deviation (at angles of 15 to 23 degrees) after the first 1,000 to 1,500 feet.
Compare Convenient, Black's Law Dictionary (1st ed. 1891) (defining "convenient" as "proper; just; suitable;"), and Convenient, Webster's New Modern English Dictionary 204 (1922) (defining "convenient" as "suitable; appropriate; affording accommodation; handy"), with Convenient, Oxford English Dictionary, http://www.oed.com/view/Entry/40695 (last visited Dec. 7, 2018) (noting that the current sense of "convenient" is "[p]ersonally suitable or well-adapted to one's easy action or performance of functions; ... the saving of trouble").
Recall that Gerrity used this same "due regard" phrase in explaining that the mineral rights holder must accommodate surface owners.
For instance, it provides lengthy, enumerated lists of the types of uses that the mineral owner may make of the land. See McIntire,
The absence of the mineral owner from the dispute in Gerrity does not entirely explain why the court never discussed the deed's terms. Although the lessee - not the mineral owner - was a party to the dispute, Gerrity,
Our earlier discussion of the varying definitions of "convenient" roughly contemporary with the deed does not weaken this conclusion because mineral "[r]eservations are construed more strictly than [ ] grant[s], and any ambiguities in a reservation are construed against the grantor." Notch Mountain Corp.,
We note, however, that the district court and Anadarko contemplated that the plaintiffs were required to satisfy this element at trial. See A-W Land Co. I,
Reference
- Full Case Name
- Marvin BAY Mildred Bay, Co-Trustees of the Bay Family Trust, - and Vernon Jesser Mary Jesser Kent J. McDaniel Deanna R. McDaniel v. ANADARKO E&P ONSHORE LLC Anadarko Land Corporation
- Cited By
- 2 cases
- Status
- Published