The U.S. Court of Appeals for the 10th Circuit reversed a lower court's ruling in favor of Anadarko Petroleum Corp., prolonging a legal dispute over drilling practices on privately owned land in Colorado.
The case, Bay v. Anadarko, was a class-action suit claiming that Noble Energy Inc., which had leased the mineral rights from Anadarko on the acreage in Weld County, had committed trespass by insisting on using vertical drilling as opposed to horizontal drilling, thereby taking up more space on the Bay family ranch. The case was initially decided in favor of underground rights owner Anadarko on the grounds that it needed as much space as "convenient and necessary" to produce the oil and gas from the Wattenberg field.
The Bay family has held their land in Weld County since 1907, when it was deeded to them by Union Pacific Railroad Corp., but the railroad held on to the underground mineral rights. Anadarko bought the mineral rights in 2000 and then leased them out; Noble became the lessee in 2006.
Even though vertical drilling was still prevalent in the region at that time, the Bay family asked Noble to drill horizontal wells to reduce the surface impacts on their property. Noble responded by requesting that the Bays pay them $100,000 per horizontal well, which the family refused. They then filed suit, arguing that "this surface use constituted a trespass."
The district court, however, considered the 1907 deed to give Anadarko and its lessees the right to use as much surface land as "convenient and necessary" to access the oil and gas below. It also allowed the producer to act in whatever method "it deems most suitable in a given situation" as long as it is not "commercially unreasonable."
After both sides presented their cases, Anadarko requested a judgment saying the Bays had "consented to any trespass," and Anadarko could not be held liable for Noble's actions. The lower court agreed, finding in favor of the company.
The appeals court, however, questioned whether a deed can expand surface or mineral rights beyond Colorado "common law," since the state statutes do not include deeds as a legal mechanism that would allow for expanded activity. The court also questioned whether the definition of "convenient" has changed over the past 111 years as it would now call for tighter controls over the producer's aboveground activities.
"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," the appellate court said in its Dec. 26, 2018, decision. While the court said it could not determine whether Anadarko could be liable for Noble's actions, saying it would leave that decision for the district court, it did reverse the previous decision and remanded the case to the lesser court.
Anadarko spokesman John Christiansen said the company would not comment on pending litigation.