Douglas v. Denbury Onshore, LLC
| Docket Number: | 2010-CA-00369-COA Linked Case(s): 2010-CA-00369-COA ; 2010-CT-00369-SCT |
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| Court of Appeals: |
Opinion Link Opinion Date: 06-14-2011 Opinion Author: Ishee, J. Holding: Affirmed. |
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| Additional Case Information: |
Topic: Real property - Oil and gas lease - Use of abandoned well - Board’s authority - Section 53-3-119 - Section 53-3-103 - Jurisdiction Judge(s) Concurring: Lee, C.J., Irving and Griffis, P.JJ., Myers, Barnes, Roberts and Maxwell, JJ. Non Participating Judge(s): Russell, J. Concurs in Result Only: Carlton, J. Procedural History: Summary Judgment Nature of the Case: CIVIL - REAL PROPERTY |
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| Trial Court: |
Date of Trial Judgment: 02-22-2010 Appealed from: Lincoln County Chancery Court Judge: Ed Patten Disposition: Granted Denbury's Summary-Judgment Motion, Denied the Douglases' Partial Summary-Judgment Motion, and Dismissed Case Number: 2009-0178 |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Connie Mack Douglas and Charlene T. Douglas |
BILL WALLER SR. |
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| Appellee: | Denbury Onshore, LLC | WILLIAM F. BLAIR, TROY FARRELL ODOM | ||
Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Real property - Oil and gas lease - Use of abandoned well - Board’s authority - Section 53-3-119 - Section 53-3-103 - Jurisdiction |
| Summary of the Facts: | In 1937, M.R. Douglas and his wife, Connie Douglas, executed an oil, gas and mineral lease (the Douglas Lease) to R.P. Brewer Jr., covering land located in Lincoln County. At the time, they owned the land in fee simple. The Douglas Lease granted Chevron the right to explore for oil, gas, and other minerals on the described property. The Douglas Lease contained a ten-year primary term and continued thereafter as long as production or operations were in effect. Later that year, M.R. Douglas et ux., executed a Mineral Deed unto J.C. Vaughn Jr., conveying an undivided one-half mineral interest in the SW 1/4 of the SW 1/4 of Section 11, Township 6 North, Range 8 East, Lincoln County, Mississippi, less and except fifteen acres off of the West side and other lands. In 1940, M.R. Douglas et ux., executed a Mineral Deed unto Hugh V. Murray, conveying an undivided mineral interest in certain land. In 1945, Chevron obtained a permit to drill the M.R. Douglas Unit No. 2 No. 1 Well from the Mississippi Oil and Gas Board. In 1947, Chevron began drilling the Well. Chevron soon completed its work, and the Well became a producing oil well in the Mallalieu Field. In 1954, M.R. Douglas et ux., executed a Warranty Deed unto Jewel Douglas and his wife, Hollice Douglas, as tenants in common, conveying the surface estate of the Land. Jewel and Hollice are Connie Mack Douglas’s parents. In 1954, M.R. Douglas et ux., executed a Warranty Deed unto his daughter, Mrs. Will Ann Douglas Smith, conveying certain described personal and real property, together with all improvements located thereon, with references to the Well. In 1977 and 1982, Jewel and Hollice conveyed their interest in the Land to Connie Mack Douglas and Charlene Douglas in two separate conveyances. The deed conveying the surface rights of the Well was subject to prior mineral reservations. As a result, the Douglases own the surface estate of the Land, but no mineral interest. However, the Douglases own minerals in other tracts in Section 11, and they have been paid working interest income by Denbury Onshore, LLC in the approximate sum of $300,000 for production of the Well from the Compulsory Fieldwide Unit. The Well produced for a number of years, but on April 9, 1968, Chevron plugged the Well. When it plugged the Well, Chevron abandoned the conductor pipe, the surface casing, and the bottom 8,734 feet of production casing of the Well. The Well lay dormant for almost forty years until late 2005, when Denbury began reentry operations. Beginning in 2001, Denbury obtained oil and gas leases from the mineral owners in the Land and other nearby lands, which became the East Mallalieu Field Unit. Some mineral owners did not sign oil and gas leases, but opted to participate in the operation as working interest owners. In 2003, Denbury filed a petition with the Board and issued a public notice to form a Compulsory Fieldwide Unit for the East Mallalieu Field Unit. The Douglases own certain mineral interests within other lands contained in the Unit. The Douglases received notice of the Board’s hearing to consider the petition and a copy of the proposed Plan of Unitization, but they failed to attend the hearing or file a contest or protest. On August 20, 2003, the Board considered Denbury’s petition and entered its order approving the Plan. The Douglases did not appeal that order. Sometime in September 2003, Denbury filed a second petition seeking an order from the Board implementing the Unit. Proper notice was issued for this second Board hearing. Again, the Douglases failed to appear to contest or protest any provision of the Plan or implementation of the Plan. On October 29, 2003, the Board granted Denbury’s petition implementing the Unit. The Douglases did not appeal the Board’s order. The Douglases, as unleased mineral interest owners in the Unit, are working interest owners under the Plan and are subject to the terms and conditions of the Plan. Beginning in April 2005, Denbury contacted the Douglases seeking permission to locate the Well since it was completely underground and covered in dirt. On April 26, 2005, Denbury submitted a proposed mineral lease and surface-use agreement to the Douglases; however, they declined to lease or execute the surface use agreement. On November 23, 2005, Denbury obtained a permit from the Board to re-enter the Well and complete it as an oil producer. The Douglases did not contest the issuance of the permit. The Well was completed as a producer shortly before January 31, 2006. Later, on April 19, 2007, the Board granted Denbury an amended permit to convert the Well to a CO2 injection well. In 2009, the Douglases filed their complaint against Denbury Resources Inc., and John Does 1-100, claiming ownership of the Well and the equipment cemented therein. The Douglases later submitted an amended complaint substituting Denbury Onshore, LLC, as the proper party in interest. In their complaints, the Douglases alleged Denbury illegally entered the Well without the Douglases’ permission. They further alleged that Denbury wrongfully took property used from the Well’s site, and it improperly accessed the road and pipeline to the Well. The Douglases sought damages for the use of the Well, along with claims of nuisance and personal injury suffered as a result of Denbury’s operations. The Douglases filed a motion for summary judgment. Denbury also filed motions for summary judgment. The chancery court denied the Douglases’ motion for summary judgment and granted both of Denbury’s motions for summary judgment regarding the Well’s use and surface damages. Finally, the chancery court dismissed without prejudice the Douglases’ cause of action for nuisance. The Douglases appeal. |
| Summary of Opinion Analysis: | Issue 1: Use of the abandoned well The Douglases argue that the chancery court erred by ruling that the surface owner of the land on and around the abandoned Well had no interest in the ownership or right to use this “improvement.” They argue that the Well became a fixture of the real property once Chevron abandoned it over thirty years ago. As such, the Well could no longer be considered as an access point to the mineral rights; at best, it was part of Chevron’s personal property, and Chevron never allowed Denbury to use that personal property. In the alternative, the Douglases maintain that even if the mineral rights apply to the Well, Denbury never acquired a lease for all parts of the unitized fields, only portions of the field. When land is severed to create a surface and mineral estate, the two estates are separate and distinct. The owner of a mineral estate has a corporeal possessory interest in the minerals. The mineral estate is dominant over the surface estate. As such, a mineral owner or a lessee of the mineral estate, in the absence of additional rights expressly conveyed or reserved, may use as much of the surface as is reasonably necessary to exercise its right to recover minerals, without liability for surface damage. Likewise, the mineral owner or mineral lessee has the absolute right to select the location for drilling a well. Here, the Well is part of the mineral estate. The wellbore and casing are clearly part of the subsurface; no part of the abandoned Well is above ground, and the Well can only be used for development of the mineral estate. Denbury was granted the right to access the Well per the Plan, which combined all of the land’s leases into a common lease. As a lessee to the mineral rights and Unit operator, Denbury had the right to enter the Douglases’ property and use the Well to gain access to the mineral estate. Nothing in the record indicates that Denbury was unreasonable in its operations and use of the Douglases’ land. Issue 2: Board’s authority The Douglases argue that the chancery court erred by affirming the Board’s grant to Denbury of ownership and use of the abandoned wellbore, because the Board lacked the authority to do so. The Douglases are procedurally barred from raising this issue on appeal since they filed their appeal well beyond the statutory limit found in section 53-3-119. In addition, Denbury properly followed each step required by section 53-3-103 to have the Plan approved. Issue 3: Jurisdiction The Douglases argue that the chancery court erred by dismissing their claims of nuisance and personal injury against Denbury, and by stating that those claims should be brought in circuit court rather than chancery court. They argue that the chancery court should have extended pendent jurisdiction over the claims. A court may properly exercise pendent jurisdiction if the claim arises out of the same transaction or occurrence as the principal claim or out of a common nucleus of operative fact. If there is a doubt as to whether a complaint is legal or equitable in nature, the better practice is to try the case in circuit court. The Douglases’ complaint shows that the remedy they seek in the form of actual and punitive damages is legal rather than equitable in nature. Thus, the chancery court properly dismissed the nuisance claim without prejudice. |
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