CHAPTER 9 SHOTGUNS, LOCKED GATES, AND INDIGNATION: LITIGATING TEMPORARY RESTRAINING ORDERS AND INJUNCTIVE RELIEF IN SURFACE USE DISPUTES

• Jurisdiction: United States

Oil and Gas Agreements: Surface Use in the 21st Century (May 2017)
CHAPTER 9
SHOTGUNS, LOCKED GATES, AND INDIGNATION: LITIGATING TEMPORARY RESTRAINING ORDERS AND INJUNCTIVE RELIEF IN SURFACE USE DISPUTES
Matthew J. Salzman ¹
Stinson Leonard Street LLP
Kansas City, MO
Aaron K. Friess ²
Stinson Leonard Street LLP
Bismarck, ND

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MATTHEW J. SALZMAN is a partner in the Kansas City, Missouri office of Stinson Leonard Street and is co-chair of the Oil & Gas Practice Group. He represents clients in oil and gas consulting and litigation in various matters such as lease formation, compliance, and termination; AMI and joint development agreements and disputes; JIB and operator/non-operator issues; surface use and right-of-way agreements and disputes; and surface damage, trespass, nuisance, and oilfield service disputes. Matt has represented clients in five antitrust oil and gas class actions, and over a dozen royalty interest owner class actions involving well over a billion dollars of underpaid royalty claims. He does appellate work and recently took the lead in getting the U.S. Supreme Court to grant certiorari in a royalty class action resulting in a favorable decision on a removal issue. Matt has assisted clients on oil and gas matters in several states, including Texas, Colorado, New Mexico, Arizona, Nevada, Kansas, Oklahoma, Missouri, North Dakota, Montana, and Arkansas.

Oil and gas law tends to take certain truths for granted, chief among them being the ability to sever the mineral estate from the surface estate. It is axiomatic that, although Party A owns the surface of Section 30, Party B may own all of the oil and gas underlying Section 30, or may own a given formation underlying Section 30, or may own an isolated stratum of a given formation underlying Section 30. It is similarly axiomatic that the mineral estate dominates over the surface estate, such that the mineral estate owner may enter the surface and use as much of the surface as is necessary to develop the underlying minerals. A duly-executed oil and gas lease covering all oil, gas, and other minerals in, on, and under Section 4, Township 150 North, Range 91 West of the 5^th Principal Meridian in McLean County, North Dakota affords the holder or his assignee the right to enter any portion of Section 4, use as much of the surface as necessary, conduct exploratory operations on the Bakken Shale underlying the section, and produce hydrocarbons from the formation. However, a critical component of the operation--the steps necessary to get a drill bit into the Bakken formation underlying Section 4--often receives short shrift. A keen observer would note that a large (and quite-productive) portion of the Bakken formation lies under Lake Sakakawea, the third-largest manmade lake in the United States. Furthermore, Section 4, Township 150 North, Range 91 West lies squarely in middle of Lake Sakakawea, beneath 180 feet of water and several miles from either shore.

Although the case of Section 4 presents an extreme scenario, surface access problems can arise anytime, particularly whenever a mineral lessor owns less than all of the surface rights.

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Simply put, "any time more than one owner has the right to use the property, there is opportunity for conflict."³ Even when a single owner holds the surface and mineral estates in fee, disputes may arise as to whether and to what extent a "Surface User" may access and use the "Surface Owner's" surface estate.⁴ The oilpatch accounts of Surface Owners running drillers or other Surface Users off with shotguns, locking gates, disking up access roads, and otherwise impeding oil and gas development could fill many leather-bound volumes. Conversely, Surface Owner accounts of oil companies or other Surface Users drilling wells, placing compressor stations, or conducting operations in ways that prevent them from using their land could fill many other volumes. Although each of these acrimonious situations typically has its own history, these surface use disputes often have reached the breaking point when outside counsel first get involved, and often that initial involvement includes promptly petitioning the court for some immediate assistance. Consequently, this Paper will address the conflicting rights in the context of parties seeking preliminary injunctive relief.

Typically, a Surface User will file suit seeking the necessary access based on some contractual or other right it has to perform the intended operations. Alternatively, a Surface Owner will bring an action, such as one for trespass or nuisance, against a Surface User seeking to prevent or modify the proposed or ongoing operations.⁵ In circumstances in which time is of the essence, the party filing the lawsuit likely will request a temporary restraining order ("TRO") and/or a preliminary injunction in order to obtain relief before a final decision on the merits of the claims.⁶ These remedies are "governed by the principles of equity."⁷ They are preliminary in nature, and generally are intended to preserve the relative positions of the parties until a later, final determination on the merits.⁸ The specific requirements for preliminary injunctive relief vary slightly from jurisdiction to jurisdiction, but there are generally are four fundamental factors that must be satisfied--namely, the party seeking the relief must establish: (1) a substantial likelihood that it will prevail on the merits of the case, (2) that it will suffer irreparable harm

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unless the injunction is issued, (3) that the potential harm it will suffer outweighs whatever injury the requested relief would cause the opposing party, and (4) that the injunction, if issued, would serve the public interest.⁹ The movant has the burden to establish the necessity of injunctive relief.¹⁰ Although there are exceptions, more often than not if a party seeking preliminary injunctive relief can establish both a likelihood of success on the merits and that it would suffer irreparable harm, courts grant the requested relief.

This Paper addresses each of the four fundamental factors below in some detail. The nature and outcome of these disputes are determined based on the particular facts and circumstances in each instance. Moreover, there are numerous types of surface use litigation, each that has the potential for a plethora of legal issues. This Paper does not provide an exhaustive analysis of all the potential litigious concerns; rather, it addresses several of the more common issues based on a purely anecdotal sampling of these types of cases.¹¹ Aside from the technical legal requirements, practically speaking resolution of these issues begins (and often ends) with a straightforward question: Does the Surface User have the right to do what it intends to do? If a Surface User has the right to access and use the property and its proposed operations are within the scope of those rights, then it generally will prevail as against a recalcitrant Surface Owner who wishes to prevent the proposed operations. On the other hand, if the Surface User does not have the right to access the property, its proposed use exceeds the scope of its rights in the property, its proposed use is unreasonable when compared to available alternatives, or its proposed use would cause harm that outweighs the benefits, then the Surface Owner may well be able to enjoin the Surface User's conduct.

I. Likelihood of Success on the Merits

The likelihood that the party bringing the action will ultimately succeed on the merits of the case is often the "most significant" consideration in connection with an application for temporary restraining order and/or a preliminary injunction.¹² Conceptually--and somewhat counter-intuitively--a party's right to preliminary injunctive relief before a final determination of the merits of its claims largely depends on the final outcome of its claims or, at least, the party's perceived ability to succeed on the merits of the case.¹³ Importantly, a party seeking a temporary

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restraining order or a preliminary injunction need not demonstrate that it will indisputably prevail on the merits. The preliminary nature of the relief sought means that important factual development has not occurred, and requiring proof of actual success on the merits would likely prove an impossible standard to meet.¹⁴ Instead, the plaintiff need only show a "substantial likelihood" that it will eventually prevail on the merits. However, the exact standard a plaintiff must meet to satisfy this factor varies from jurisdiction to jurisdiction (and sometimes even within the same jurisdiction).¹⁵ Whatever the standard, it is the plaintiff's burden to meet, whether plaintiff is the Surface Owner seeking to enjoin the planned operations or the Surface User seeking to enjoin the Surface Owner from preventing the planned operations.¹⁶

In the surface use litigation context, whether the plaintiff has a substantial likelihood of prevailing on the merits of the case typically turns on a few fundamental considerations, including whether the alleged Surface Owner is indeed the owner of the surface estate, whether the Surface User has a right to access and use the property, and whether the proposed use is within the scope of the Surface User's right to use the property (assuming, of course, such right exists). Often the analysis of the likelihood of success factor ends after these three considerations, but there can be further considerations, such as whether some other accommodation must be made by the Surface User despite its legal right to do what it proposed doing.

The fact that the Surface Owner is indeed the owner of the surface or otherwise has standing (such as a surface lessee) is often not in dispute, but the Surface Owner typically must establish or at least make a prima facie showing of its right, title, and interest in the surface estate. When Surface Owners initiate...