Diamond McCattle Co. v. Range La. Operating, LLC

316 So.3d 603

DIAMOND MCCATTLE COMPANY, L.L.C. and BWW Holdings, L.L.C., Appellants

v.RANGE LOUISIANA OPERATING, LLC, Appellee

No. 53,896-CA

Court of Appeal of Louisiana, Second Circuit.

Judgment rendered April 14, 2021

THE PESNELL LAW FIRM, A P.L.C. By: Billy R. Pesnell, John W. Pesnell, ALAN PESNELL LAWYER, LLC By: W. Alan Pesnell, Shreveport, Counsel for Appellants

COOK, YANCY, KING & GALLOWAY, By: J. William Fleming, John T. Kalmbach, W. Drew Burnham, Counsel for Appellees, Range Louisiana Operating, LLC and James Browning, Shreveport,

Before PITMAN, STONE, and COX, JJ.

COX, J.

This suit arises out of the Second Judicial District Court, Jackson Parish, Louisiana. Plaintiffs, Diamond McCattle Company, LLC, and BWW Holdings, LLC brought suit against Range Louisiana Operating, LLC ("Range"), and James Browning¹ for subsurface trespass. Range filed a motion for summary judgment ("MSJ"), and Plaintiffs filed a partial MSJ. The trial court denied Plaintiffs’ partial MSJ, granted Range's MSJ, and dismissed Plaintiffs’ suit with prejudice. Plaintiffs now appeal.

FACTS

Plaintiffs are the owners of the following described tract of land (hereinafter referred to as the "Subject Property"):

A certain piece, parcel or lot of ground, together with all improvements thereon, rights, ways and privileges thereunto belonging or in any way appertaining; being, lying and situated in Section 12, Township 16 North, Range 1 West, Jackson Parish, Louisiana, and being more particularly described as follows, to wit:

The East one-half (E 1/2) of the Southwest Quarter (SW 1/4), Section 12, Township 16 North, Range 1 West, LESS AND EXCEPT: 4.87 acres in the Southwest corner of Northeast Quarter (NE 1/4) of Southwest Quarter (SW 1/4), Section 12, Township 16 North, Range I West, being 267.85 feet East and West by 792 feet North and South. Containing 75 acres more or less, situated in Jackson Parish, Louisiana.

On January 12, 2018, Plaintiffs filed a petition for judicial relief from subsurface trespass against Range. Plaintiffs alleged that Range acted intentionally and in bad faith by horizontally drilling the Tri Delta 13-12 H No. 1 well (the "Well") under the Subject Property. Plaintiffs asserted that they are entitled to recover damages and be recognized as the owner of the well bore hole to the extent it is located on the Subject Property.

The Well's surface location is in the West Half of Section 13, Township 16 North, Range 1 West, on property owned by Tri-Delta Timber Group, LLC, on which Range had the right to conduct operations. Range applied for and obtained a drilling permit dated October 2, 2017, authorizing the drilling of a lease well to test the non-unitized "L Gray Sand."

The Well was actually drilled to the Lower Cotton Valley Formation, Reservoir A, for the Vernon Field, Jackson Parish, Louisiana (referred to as the "LCV RA Formation"). The LCV RA Formation is defined as being at the depth of 12,100 feet to 14,920 feet. Range drilled a total vertical depth of 14,243 feet, which correlates with the LCV RA Formation. After drilling to a total vertical depth of 14,243 feet, Range turned the drill bit and drilled horizontally (from south to north) for a total measured depth of 19,131 feet.² At a measured depth of 17,679.31 feet, the horizontal lateral crossed the underground plane between Sections 12 and 13, such that 1,443 feet of the wellbore is in the West half of Section 12, on the Subject Property. The Well is within two pre-existing drilling and production units created by the Louisiana Commissioner of Conservation—the LCV RA SU148 and LCV RA SU55.

The Well was completed on January 10, 2018. Range filed an application with the Office of Conservation on February 28, 2018, to have the permit amended from a "lease" well to a "unit" well. The Office of Conservation issued an order designating the Well a unit well, effective March 27, 2018.

Defendants answered on January 14, 2019.³ They denied the allegations by Plaintiffs, but admitted to the following: they did not have a lease with Plaintiffs; they did permit, drill, perforate, fracture, and complete the Well in the LCV RA Formation; and, they had no obligation to provide Plaintiffs with pre-entry notice. Defendants stated that Plaintiffs have failed to state a claim on which relief can be granted. Defendants asserted that the Well was drilled to depths subject to the LCV RA SU55 and LCV RA SU148 units, which include the Subject Property, and qualifies as a unit well for these two production units. They state that because of this, Plaintiffs are categorized as unleased owners and only have a claim for their share of production payments.

Plaintiffs amended their petition and stated that Range filed an "As Drilled" plat with the Office of Conservation, which showed that the bottom hole and lower perforation point of the Well are on Plaintiffs’ property. Plaintiffs asserted that Range intentionally and knowingly drilled the Well on their property and Defendants acted in bad faith in drilling the Well. They also amended their petition to state that Range initially filed its well application as a "lease" well, but on February 28, 2018, it filed an application to amend its drilling permit to designate the well as a "unit" well. Plaintiffs requested to be recognized as owners of the profits derived from the Subject Property, as well as the "works constructed" by Range on the Subject Property.

Defendants filed their MSJ arguing that their operations were unit operations; therefoer, Plaintiffs have no cause or right of action. They asked the court to dismiss Plaintiffs’ claim with prejudice because there are no genuine issues of material fact and they are entitled to summary judgment as a matter of law. They asserted the following: The Commissioner of Conservation had previously included the Subject Property in the compulsory drilling and production unit for the LCV RA Formation; the Well was drilled to and completed in the LCV RA Formation; and, their operations in connection to the Well constituted unit operations for the existing LCV RA Formation drilling and production unit.

In support of their MSJ, Defendants submitted the affidavit of Philip N. Asprodites, attorney and former Louisiana Commissioner of Conservation. He stated it is a "common, normal, accepted practice" for the Office of Conservation to permit a well to a deeper, non-unitized formation, although the operator's main objective is to test a shallower, unitized formation. He also stated, "Consistent with the Office of Conservation accepted practices and procedures, all operations in connection with the [Well] are deemed to be unit operations for the LCV RA SU 148 and LCV RA SU 55 drilling and production."

Defendants also attached the affidavit of Jeffrey Klam, former land manager for Range. His responsibilities included overseeing the Well. He stated that Range originally sought a permit to test the "non-unitized L-Gray," and from the commencement of operations, it was Range's intention that the Well would be drilled to the LCV RA Formation. He stated that Range then filed the appropriate paperwork with the Office of Conservation and the Commissioner found that the Well was drilled to the LCV RA Formation and designated it a unit well for the LCV RA SU55 and LCV RA SU148 units.

Defendants included the affidavit of James Browning. Mr. Browning stated he was working as a drilling supervisor for the Well beginning in November 2017. He described his responsibilities as implementing and overseeing Range's drilling plans, which put him in direct contact with Range regarding its plans. He stated that from the first day of drilling, Range's target was the "Lower Red," which is entirely within the LCV RA Formation.

Plaintiffs opposed Defendants’ MSJ and filed a cross-motion for partial summary judgment. They claimed that Mr. Klam's affidavit is an unsworn declaration and Mr. Asprodites’ affidavit is not based on personal knowledge, and both are not proper for consideration on MSJ. They argued that "Range falsely represented to the Commissioner of Conservation in its Application for a Drilling Permit that it had the consent or permission of all surface owners upon which ‘drilling operations’ for the [Well] would be conducted." Plaintiffs stated that they have been the owners of the Subject Property at all times relevant and never gave consent or authorization for Range to conduct any drilling on their property.

Plaintiffs argued that Defendants’ MSJ is not supported by applicable law. They contrast their suit from that of Nunez v. Wainoco Oil & Gas Co. , 488 So. 2d 955 (La. 1986). They highlighted that the Nunez drilling permit stated it was for "any zone" down to a certain a depth. They asserted that the law of trespass is premised on the "fundamental sanctity of private property from arbitrary invasion." They cited case law which states trespass includes subsurface trespass. Plaintiffs also pointed out that Defendants drilled under the Subject Property, located the bottom hole under the Subject Property, and fracked the Well long before it was classified as a unit well. They also highlighted that Range began producing on January 22, 2018, after this suit was filed. Therefore, these were not unit operations and Range trespassed when it drilled on the Subject Property without consent. Plaintiffs claimed that they are entitled to be recognized as the owners of the Well's bottom hole and bore hole, to the extent they are located on the Subject Property. They also claimed they are entitled to an accounting from Range to determine their share of the profits both before and after the March 27, 2018 approval date.

Defendants opposed Plaintiffs’ cross-motion for partial summary judgment, and adopted in extenso their arguments made in their own MSJ. They argued that Nunez is controlling, and that the intent of the operator determines if it is a unit operation or lease operation. They asserted that because it is a unit operation, which was...