Northern Natural Gas Company v. Tract No. 1062710 et al

Filing 464

MEMORANDUM AND ORDER granting in part 202 Motion for Preliminary Injunction; granting in part and denying in part 403 Motion for TRO; adopting 414 Report and Recommendations; adopting in part 415 Report and Recommendations. SEE ORDER FOR DETAILS. Signed by District Judge Monti L. Belot on 3/13/2012. (alm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NORTHERN NATURAL GAS COMPANY,
Plaintiff,
v.
Approximately 9117.53 acres in Pratt,
Kingman, and Reno Counties, Kansas,
and as further described herein;
Tract No. 1062710 containing 80.00
acres more or less, located in Kingman
County, Kansas, and as further
described herein; et al.,
Defendants.

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CIVIL ACTION
No.

10-1232-MLB

MEMORANDUM AND ORDER
On November 16, 2011, Magistrate Judge Donald Bostwick issued a
Report and Recommendation regarding Northern’s Motion for a Temporary
Restraining

Order.

That

same

day

he

also

filed

a

Report

and

Recommendation addressing Northern’s Motion for Preliminary Injunction
and for Supplementary Confirmation of Condemnation Authority.

(See

Docs. 414 & 415, addressing Docs. 403 & 202). The parties filed
various objections to the Reports. Docs. 426, 427, 428.

Following

Judge Brown’s death, the case was transferred to the undersigned
judge.

Accordingly, the matter is now before the court on the

parties’ objections to Judge Bostwick’s reports and recommendations.
Judge Bostwick’s first Report recommended that the court grant
Northern’s motion to temporarily restrain L.D. Drilling, Inc. from recompleting the Brown A1 well. The second Report recommended that the
court confirm Northern’s supplemental condemnation authority request
and grant its motion for preliminary injunction to allow it immediate

access to, and possession of, the property to be condemned (including
the Brown A1 well and seven other wells Northern seeks to condemn),
subject to several conditions. Those recommended conditions include
the posting of a bond in the amount of $6.7 million and the deposit
of just over $3.8 million in funds into the court’s registry, with the
latter funds subject to being drawn down by defendants affected by
Northern’s immediate access.1 If an amount drawn down should exceed
the ultimate award of just compensation at the end of the case, the
affected defendant would be liable for return of the excess plus
interest. With regard to the eight wells that Northern seeks to
convert to observation wells, Judge Bostwick recommended an additional
requirement that any draw-down of funds be accompanied by the consent
of

any

landowners,

royalty

owners,

working

interest

owners

or

lienholders who have an interest in the tract upon which the well is
located.
I. SUMMARY OF OBJECTIONS
a. Northern. Northern objects to the recommendation for a $3.2
million deposit to secure access to defendants’ eight wells, arguing
that a bond would be sufficient security and asserting that neither
case law nor Rule 65 requires a deposit. Alternatively, Northern
argues it should be allowed to post a $1.2 million bond as security

1

The total cash deposit recommended by Judge Bostwick was
$3,811,700.
The following represent the component parts of that
total: $3.2 million would relate to the eight wells to be converted
to observation wells [$400,000 per well] ; $538,000 would be security
for Northern’s use of the Viola formation throughout the Expansion
Area; $16,800 would be for the rights and interests to install three
new injection wells and an observation well; and $56,900 would be for
the property, rights and interest to install flow line, electrical
lines, and communication lines.
-2-

for access to Nash’s wells, instead of a cash deposit, due to concerns
about Nash Oil & Gas, Inc.’s ability to repay any excess draw-down.
Northern also requests clarification as to whether the conditions
require defendants to apply any withdrawn funds toward the actual cost
of drilling a new well, and whether and to what it extent the
conditions require defendants to provide evidence of the landowners’
consent to a withdrawal.
b. L.D. Drilling, Inc., Nash Oil & Gas, Inc., et al.2

These

defendants first object to Judge Bostwick’s recommendation that the
court has the power to grant a preliminary injunction allowing
Northern immediate access to the property. They point out that the
Natural Gas Act contains no “quick take” provision for immediate
taking of property, in contrast to other condemnation statutes where
Congress specifically provided such authority. Defendants assert the
court should follow the reasoning of Northern Border Pipeline Co. v.
86.72 Acres of Land, 144 F.3d 469 (7th Cir. 1998) and Transwestern
Pipeline Co., LLC v. 17.19 Acres of Property Located in Maricopa
County, 550 F.3d 770 (9th Cir. 2008) which hold that, in the absence
of an order of condemnation, a federal district court has no authority
to grant a preliminary injunction for immediate access because the
condemnor has no substantive right to immediate possession of the
property.

Defendants reject the reasoning of East Tennessee Natural

Gas Co. v. Sage, 361 F.3d 808 (4th Cir. 2004), which holds that a
district court has the inherent equitable power to grant this type of

2

These defendants include L.D. Drilling and Nash Oil and Gas and
their respective holders of working interests and overriding royalty
interests. See Doc. 428 at 1.
-3-

injunctive relief.
As a fall-back position, defendants assert that even if the court
concludes it has such authority, Northern has failed to show that it
will suffer irreparable harm without an injunction. Defendants point
out that no gas production has occurred in the Expansion Area for
nearly a year, notwithstanding Northern’s claim that third-party
production is the cause of storage gas migration.
Defendants

additionally

raise

authority to condemn the well bores.

an

objection

to

Northern’s

They argue that even if the

wells are covered by Northern’s Blanket Certificate of authority, the
NGA limits condemnation to properties that are “necessary” to the
proper operation of the facility.

They say the well bores are not

necessary because Northern can obtain or drill other well bores to
achieve its purposes.
As to the $3.2 million deposit of funds pertaining to the eight
wells sought by Northern, defendants contend that the funds are based
on the cost of drilling replacement wells and that defendants alone
– and not the landowners – own the eight wells and will bear any well
replacement costs. For that reason, they argue they should not be
required to obtain the consent of landowners or royalty owners before
drawing down deposits that are intended to cover the costs of wells.
Defendants also object to Judge Bostwick’s recommendation that
L.D. Drilling be temporarily restrained from recompleting the Brown
A1 well pending a ruling by the court on Northern’s motion for
immediate access. They argue Judge Bostwick impermissibly relied on
an ex parte affidavit to find a likelihood of harm to the Brown A1
well, and that he erred in concluding that damage to the well bore
-4-

will constitute irreparable harm to Northern because the well bores
are not “necessary” to operate Northern’s facility.
II. STANDARDS OF REVIEW
The foregoing motions were referred to Judge Bostwick pursuant
to 28 U.S.C. § 636(b)(1)(B). On such a referral, the court makes a de
novo determination of those portions of the report, findings or
recommendations as to which objection is made. The court may accept,
reject, or modify the findings or recommendations, and it may receive
further evidence or recommit the matter to the Magistrate. Id.
The standards for issuing a temporary restraining order or a
preliminary injunction are well established. When seeking a TRO or a
preliminary injunction, the moving party must demonstrate: (1) a
likelihood of success on the merits; (2) a likelihood that the movant
will suffer irreparable harm in the absence of preliminary relief; (3)
that the balance of equities tips in the movant's favor; and (4) that
the injunction is in the public interest. See Little v. Jones, 607
F.3d 1245, 1251 (10th Cir. 2010). In addition, the movant must
establish “a relationship between the injury claimed in the party's
motion and the conduct asserted in the complaint.” Id. (citing Devose
v. Herrington, 42 F.3d 470, 471 (8th Cir. 1994)). Certain types of
injunctions are disfavored, including mandatory injunctions to compel
the nonmoving party to take action and injunctions that disrupt the
status quo. See Little, 607 F.3d at 1251; Beltronics USA, Inc. v.
Midwest Inventory Distribution, LLC, 562 F.3d 1067, 1070 (10th Cir.
2009). Northern’s request for immediate access to and possession of
defendants’ wells and other property falls within the disfavored
category. Before a court may grant such relief, the movant must make
-5-

a

heightened

showing

of

the

four

factors.

O

Centro

Espirita

Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 975-6 (10th
Cir. 2004) (en banc). The court must more closely scrutinize the
request to assure that the exigencies of the case support the granting
of relief that is extraordinary even in the normal course. Id. at 975.
III. DISCUSSION
A. Motion to Confirm Supplemental Authority to Condemn. In March
2011, the court confirmed Northern’s authority to condemn the property
listed in the initial complaint, including the right, title and
exclusive possession of the Viola and Simpson formations in the
Expansion Area approved by FERC (Doc. 183).

Northern later amended

the complaint to include property interests to be taken to implement
a proposed water injection program (see Docs. 202, 183.)3

The latter

interests include the right to install, acquire and operate various
wells,

including

specified

existing

wells

to

be

converted

to

observation wells; installing electrical and telecommunication lines;
the right to inject water into the Viola formation; and the right of
ingress and egress across the Expansion Area to facilities that are
part of Northern’s containment plan.
Defendants contend some or all of these property rights are not
“necessary” within the meaning of 15 U.S.C. § 717f(h), and that
Northern does not have authority to condemn them because Northern can
use newly-drilled wells or well bores other than the ones specified
(Doc. 428 at 12-13). The court agrees with Judge Bostwick, however,

3

The Amended Complaint also added tracts 123611 and 3152711 as
part of the property to be taken. These tracts were not included in
the initial complaint.
-6-

that this amounts to an impermissible collateral attack on the FERC
Certificate

and

FERC’s

approval

of

the

water

injection

program

submitted by Northern. Cf. Brief of L.D. Drilling, Inc. (Doc. 305 at
13) (“We have reviewed Northern’s submission to FERC and Northern did
NOT provide any evidence or analysis regarding the issues previously
identified. For example, Northern stated that the locations of these
wells are suitable, but Northern did not discuss whether drilling
wells nearby would also be suitable.”). It is undisputed that FERC
directed Northern to submit a containment plan that would effectively
slow and reverse storage gas migration out of the Cunningham storage
field, that Northern’s filings under that order included a plan for
conversion of specified third-party wells into observation wells, and
that FERC issued a delegated order confirming that Northern’s proposed
actions are in compliance with the June 2, 2010 FERC Order. In that
determination, FERC declared that “Northern’s proposed construction
activities ... can be undertaken pursuant to section 157.203(a) of
Northern’s blanket certificate authority.”4 No appeal was taken from
FERC’s orders relating to the containment plan and, as Judge Bostwick
noted, collateral attacks on FERC orders cannot be entertained in the
district court. See Doc. 415 at 22; Williams Natural Gas Co. v. City
of Oklahoma City, 890 F.2d 255, 264 (10th Cir. 1989) (the eminent

4

A Blanket Certificate was issued in September of 1982
authorizing Northern to conduct routine activities as permitted by 18
C.F.R. § 157.203(b). Additional certificates were issued in 2008 and
2010 authorizing expansion of the storage field by 1,760 acres and
creation of a buffer zone of 12,320 acres. Northern filed a
containment plan in a quarterly report in April of 2011, and on April
29, 2011, FERC issued a Delegated Order under 18 C.F.R. 375.308(y)(1)
finding Northern’s proposed actions to be in compliance with FERC’s
June 2, 2010 order.
-7-

domain authority granted district courts under the NGA does not
provide challengers with an additional forum to attack the substance
and validity of a FERC order). The court agrees with Judge Bostwick’s
analysis and finds that Northern’s request to confirm its supplemental
confirmation authority should be granted.
B.

Motion for Immediate Access.

Northern seeks a preliminary

injunction granting it immediate possession of, and access to, the
property interests to be taken in order to implement its containment
plan for the Cunningham Storage Field.

The threshold question is

whether the court has the power to even consider Northern’s request
for a preliminary injunction under the facts of this case.
There are two conflicting lines of case law regarding a district
court’s authority to grant a preliminary injunction for immediate
access to property that is the subject of a condemnation proceeding.
Judge Bostwick gave a concise summary of these decisions in his Report
and the court has reviewed the decisions as well. Although there is
no Tenth Circuit authority on the question, the court concludes the
better view is that the district court has the equitable power to
grant an injunction in an appropriate case.
In East Tennessee Natural Gas Co. v. Sage, 361 F.3d 808 (4th Cir.
2004),5

a

injunction

district
for

court

immediate

granted
possession

a

gas
of

company

properties

a

preliminary

needed

for

a

pipeline project. In upholding this injunction, the Fourth Circuit
recognized that the NGA, like most condemnation statutes, contains no

5

Rehearing and rehearing en banc denied, 369 F.3d 357 (4th Cir.,
May 14, 2004), and cert. denied sub nom. Goforth v. East Tennessee
Natural Gas Co., 543 U.S. 978 (Nov. 8, 2004).
-8-

so-called “quick-take” provision,6 but simply provides that the holder
of a certificate may acquire property “by the exercise of eminent
domain in the district court.” Id. (citing 15 U.S.C. § 717f(h)). Sage
pointed out that despite the absence of such express authority,
nothing in the NGA precludes a preliminary injunction for immediate
possession. Similarly, neither Rule 71.1 nor its predecessor (Rule
71A) contains any language prohibiting a condemnor from pursuing any
available procedure to obtain immediate possession, including an
application for preliminary injunction under Rule 65. Sage, 361 F.3d
at 823. On the contrary, the rules of civil procedure generally apply
to condemnation proceedings except as otherwise provided in Rule 71.1.
See Fed.R.Civ.P. 71.1(a). Sage noted that the committee which drafted
Rule 71A decided against including procedures for immediate possession
because

“the

procedure

...

being

followed

[to

allow

immediate

possession] seems to be giving no trouble, and to draft a rule to fit
all the statutes on the subject might create confusion.” Sage, 361
F.3d at 823 (quoting Fed.R.Civ.P. 71A advisory committee supplementary
report, 11 F.R.D. 222, 228 (Mar. 1951)). Sage accordingly rejected an
argument that a district court lacks authority to enter an injunction
for immediate possession: “Congress has never given any indication
6

The Fourth Circuit noted there are two basic types of
condemnation: a “straight condemnation,” where just compensation is
determined and final judgment entered before the condemnor takes
possession, and a “quick take” method, where the condemnor takes
possession at the outset of the proceeding. Sage pointed out that
under the latter method, which it said was typically available only
to the United States under the Declaration of Taking Act, the
Government must deposit the estimated value of the property with the
court, and the persons entitled to compensation have that sum
available, whereupon title to the property vests in the United States
even though just compensation is not finally determined until later
in the proceeding. Sage, 361 F.3d at 822.
-9-

that it disapproves of this procedure. Indeed, because Congress has
not acted to restrict the availability of Rule 65(a)’s equitable
(injunctive) remedy in an NGA condemnation, we conclude that the rule
applies.” Sage, 361 F.3d at 824. See also id. (citing Mitchell v.
Robert De Mario Jewelry, Inc., 361 U.S. 288, 291 (1960) (“Equitable
jurisdiction is not to be denied or limited in the absence of a clear
and valid legislative command.”)). In the Fourth Circuit’s view, then,
a district court has inherent equitable power to grant immediate entry
to the condemnor to prevent irreparable harm. Sage, 361 F.3d at 826.
Nevertheless, Sage observed that equitable powers may not be used
to create new substantive rights.

But when a substantive right

exists, an equitable remedy may be fashioned to give effect to the
right. Sage, 361 F.3d at 823. Once a condemnor’s right to take the
property

has

been

confirmed

by

a

court,

the

condemnor

has

a

substantive right to obtain the property, and it is proper to consider
the condemnor’s

request for equitable relief in the form of a

preliminary injunction for immediate possession. To obtain such
relief, the condemnor must still meet the strict requirements for a
preliminary injunction, including a showing that it will suffer
irreparable harm without the injunction. Id. at 825.
Sage

recognized

that

the

Constitution

does

not

bar

taking

immediate possession before just compensation is paid. Rather, the
Constitution mandates that “the owner is entitled to reasonable,
certain, and adequate provision for obtaining compensation before his
occupancy is disturbed.” Id. at 824 (citing Cherokee Nation v. S. Kan.
Ry. Co., 135 U.S. 641, 659 (1890)). Because title to the property does
not pass until the end of the case (unlike a true “quick-take”
-10-

procedure), the condemnor becomes a trespasser if it fails to pay the
final

compensation

award

in

a

reasonable

time.

Id.

at

825-26.

Likewise, if the condemnor abandons the project before final judgment,
it will be liable to the landowner for the occupation and for any
resulting damages. Id. at 826.

Sage noted that landowners were

protected by the availability of condemnation procedures under thenRule 71A, by the condemnor’s deposit of an amount of cash equal to the
appraised value of the interests condemned, and by the solvency of the
condemnor and its ability to make up any difference between the
deposit and the ultimate determination of just compensation. Sage, 361
F.3d at 824.
Defendants reject Sage and instead rely on Northern Border
Pipeline Co. and Transwestern Pipeline Co., supra. They complain that
Judge Bostwick did not “analyze the comparative merit” of Sage and
Northern Border but rather based his recommendation by counting the
number of decisions which follow Sage’s reasoning as opposed to
Northern Border (Doc. 428 at 3-7). Clearly this is an unwarranted and
unfair characterization of Judge Bostwick’s thorough Report.
Defendants’

reliance

on

Northern

Border

is

unimpressive.

Northern Border is sketchy about the facts before the district court.
But as explained in both Sage (361 F.3d at 827) and Transwestern
Pipeline (550 F.3d at 777) the critical defect in Northern Border’s
application for a preliminary order of possession was its failure to
first obtain an order confirming its right to condemn the property.
Defendants acknowledge that Northern has such an order (Doc. 183) but
counter that Transwestern explains that “. . . a confirmation order
cannot

provide

a

substantive

right
-11-

that

the

underlying

FERC

certificate does not, because the order simply confirms the existence
of authority that is granted by the certificate. . . .” (citing the
district court’s opinion, 544 F. Supp. 2d at 948).

If the district

court’s opinion says that, this court has missed it.

It’s more

instructive to consider what the Ninth Circuit said on appeal:
Here, Transwestern's substantive right to condemn the
affected parcels accrues only through the issuance of an
order of condemnation by the district court. To obtain such
an order, Transwestern must, at minimum, meet the
requirements of § 717f(h), which include showing: “(1) that
it holds a FERC certificate authorizing the relevant
project, (2) that the land to be taken is necessary to the
project; and (3) that the company and the landowners have
failed to agree on a price for the taking.... In addition
to showing an inability to agree on a price with the
landowner, [Transwestern] must also establish that it
engaged in good faith negotiations with the landowner.”
Nat’l Fuel Gas Supply Corp. v. 138 Acres of Land, 84
F.Supp.2d 405, 416 (W.D.N.Y. 2000) (citations omitted).7
Most courts presented with the issue agree that a
plaintiff gas company must secure an order of condemnation
before taking possession. In Northern Border, the Seventh
Circuit held that the gas company could not obtain a
preliminary injunction without first showing a “substantive
claim to immediate possession.” Northern Border Pipeline
Co. v. 86.72 Acres of Land, 144 F.3d 469, 472 (7th Cir.
1998). In East Tennessee Natural Gas Co. v. Sage, 361 F.3d
808, 825 (4th Cir. 2004), the Fourth Circuit found that the
district court's grant of immediate possession was
appropriate only where an order of condemnation had first
issued. In construing the holding of Northern Border, the
Sage court agreed that without first accruing its
substantive right of possession through an order of
condemnation, the gas company could not invoke the court's
equitable powers. Id. at 828. Sage also cited Northern
Border Pipeline Co. v. 64.111 Acres of Land, 125 F.Supp.2d
7

The Memorandum and Order of March 15, 2011 (Doc. 183)
discusses the matter of good faith negotiation. Judge Brown concluded
that the NGA does not condition Northern’s authority to proceed with
condemnation upon “good faith negotiation.”
This is not to say,
however, that negotiations are not an acceptable part of the
condemnation process. Indeed, Northern has negotiated with at least
some of the landowners.
As Judge Brown correctly and sensibly
observed, if compensation cannot be negotiated, it will be determined
as part of the action.
-12-

299, 301 (N.D.Ill. 2000) and Guardian Pipeline, L.L.C. v.
950.80 Acres of Land, 210 F.Supp.2d 976, 979 (N.D.Ill.
2002), cases interpreting the Seventh Circuit's Northern
Border decision and which granted possession to gas
companies only following judgments of condemnation.
Transwestern relies upon Northwest Pipeline, because
there the district court relied heavily on the court's
equitable powers to grant a preliminary injunction under
the NGA. Northwest Pipeline Corp. v. The 20' x 1,430'
Pipeline Right of Way, 197 F.Supp.2d 1241, 1246 (E.D.Wash.
2002). Transwestern argues that the Northwest Pipeline
decision cannot be reconciled with the district court's
decision in this case. But its reliance is misplaced. The
court in Northwest Pipeline granted the gas company
possession only after first deciding the gas company's
summary judgment motion, issuing an order of condemnation,
and requiring the gas company to deposit the estimated fair
market value of the condemnation. Id. Using the court's
equitable powers after issuing an order of condemnation and
ensuring the preliminary injunction standard is met was
proper. The Northwest Pipeline decision is also consistent
with the district court's actions here, as Transwestern did
not file any summary judgment motion before seeking
immediate possession.
Given the limited statutory authority afforded by the
NGA, an order of condemnation must be issued before the
substantive right of taking accrues. This approach strikes
the correct balance of requiring the gas company to satisfy
all elements of the statute, but does not require it to
wait for the full determination of just compensation for
each parcel before the district court uses its equitable
powers to grant possession. Rather, once the order is
issued, the district court can require Transwestern to
deposit the full estimated amount of the taking and engage
in the standard preliminary injunction analysis, as it did
in Northwest Pipeline.
Transwestern Pipeline, 550 F.3d at 776-7 (footnote omitted).
Northern Border was decided in 1998. More contemporary authority
endorses the Sage approach, including a prior decision in this
district. See Sage, 361 F.3d at 827 (listing cases); Humphries v.
Williams Natural Gas Co., 48 F.Supp.2d 1276, 1280 (D. Kan. 1999)
(noting “the fact that it is apparently well settled ‘that the
district court does have the equitable power to grant immediate entry

-13-

and

possession

where

such

relief

is

essential

to

the

pipeline

construction schedule.’”). See also J. Behnke and H. Dondis, The Sage
Approach to Immediate Entry by Private Entities Exercising Federal
Eminent Domain Authority under the Natural Gas Act and the Federal
Power Act, 27 Energy L.J. 499 (2006) (“the Sage approach to immediate
entry currently represents the most developed stage of judicial
thought and action concerning immediate entry and federal eminent
domain law.”); Perryville Gas Storage LLC v. 40 Acres of Land, 2011
WL 4943318(W.D. La., Oct, 17, 2011) (“Federal courts across the
country have recognized that a district court has the equitable
authority to grant immediate entry and possession to a natural gas
company in a condemnation action brought under the Natural Gas Act.”).
After considering defendants’ arguments, the court agrees with
Judge Bostwick’s recommendation that the court should follow the
reasoning of Sage. The court finds that it has the authority to
consider Northern’s motion for a preliminary injunction for immediate
access.

Should the motion be granted, the court will not be creating

a substantive right but rather will be granting preliminary relief
that may – and likely will – be available to Northern at the end of
the case under the NGA. The rules of civil procedure provide a
mechanism for obtaining preliminary relief, and Northern’s confirmed
right to condemn the property provides Northern with an interest in
the property that the court, upon proper showing, has the authority
to protect from irreparable harm.

Without such authority, the owner

of any single property subject to condemnation could effectively
thwart the condemnation process by using the property in a way that
destroys its usefulness to the condemnor, and the public interest
-14-

underlying the condemnation could be irreparably harmed.
Having

concluded

that

the

court

has

authority

to

grant

a

preliminary injunction for immediate access, upon the proper showing,
the court turns to whether an injunction is warranted in this case.
As Judge Bostwick noted, Northern’s request would alter the status quo
and is a disfavored mandatory injunction subject to a higher level of
scrutiny. Doc. 415 at 29.
1. Likelihood of Success on the Merits. Judge Bostwick concluded
that in an action under the NGA, the court’s entry of an order
confirming the condemnor’s right to condemn the property shows that
the condemning party is likely to prevail on the merits. Doc. 415 at
31. Defendants do not challenge that particular conclusion and the
court agrees that Northern is likely to prevail on its claim for
condemnation of the named property given its authority under the NGA
and the FERC Certificate, as recognized by the court’s prior order and
See Sage, 361 F.3d at 829-30.

by the discussion above.

2. Irreparable Harm to the Moving Party. FERC rejected Northern’s
initial proposal for a “wait and see” approach to whether water
injection

is

necessary

Expansion Area.

to

stop

storage

gas

migration

into

the

FERC found the integrity of the storage field is

“substantially at risk” and insisted that Northern develop a more
robust plan to reverse the storage gas migration, adding that the plan
should go into effect within six months of FERC’s June 2, 2010 order.
In response, Northern submitted a containment plan calling for (among
other

things)

installation

of

facilities

for

a

water

injection

program, including the acquisition and conversion of existing well
bores

of

defendants

for

conversion
-15-

to

observation

wells.

FERC

determined that Northern’s proposal is in compliance with the June 2
order. As Judge Bostwick noted – and as the record shows – “FERC
clearly urged Northern to act on the containment plan as quickly as
possible

since

it

had

concluded

that

the

storage

field

is

substantially at risk without implementation of a water injection
plan.” Doc. 415 at 33.
Northern’s containment plan will take several years to fully
implement. See Doc. 203-5, Brush Affidavit p. 6; Doc. 203-6 at 10. The
estimated total time to achieve complete stabilization of the field
is between 41 to 69 months from July 2010. It’s now March 2012.

The

plan calls for potential injection of large volumes of water – up to
6,000,000 barrels – which itself will likely require a significant
period

of

time.

Implementation

of

the

plan’s

latter

steps

are

obviously dependent upon Northern gaining access and completing the
initial stages – a “critical path approach,” as Judge Bostwick noted.
As a result, “[a]ny delay in allowing Northern access to the Expansion
Area will automatically further delay the completion of the entire
water injection system.” Doc. 415 at 33. Compounding the problem is
the risk that if defendants retain the well bores now sought by
Northern and use fracking techniques to explore other zones, the well
bores may be damaged and rendered unusable for Northern’s purposes,
despite the fact that Northern has been granted authority to condemn
the wells for a legitimate public purpose.
FERC said the viability of the Cunningham Storage Field is at
risk because of storage gas migration to the Expansion Area, and that
Northern’s containment plan – including water injection – is necessary

-16-

to remedy that situation and preserve the integrity of the field.8 The
evidence submitted by Northern in this proceeding supports that
conclusion. Under the circumstances the court agrees that Northern has
shown a threat of irreparable harm if the preliminary injunction is
not granted.9 Like Sage, this project, which has yet to begin, will
suffer even more delay without a preliminary injunction and Northern
may be unable to reestablish stability of the Cunningham Storage
Field. Northern is already unable to come anywhere close to meeting
FERC’s time line for installation of a water injection program, and
the viability of the storage field will be threatened. Unlike the
cases relied upon by defendants, there is a real threat of irreparable
harm present that renders inadequate the ordinary legal remedy of
allowing the condemnor to gain possession only after just compensation
is fully determined and paid. Cf. National Fuel Gas Supply Corp. v.
138 Acres of Land, 84 F.Supp.2d 405, 416 (W.D.N.Y. 2000) (counsel for
condemnor conceded that neither condemnor nor its customers would face
irreparable injury without an injunction).
3. The balance of equities.

Defendants argue they would be

harmed by the injunction because Northern could later decide to
abandon the condemnation. Defendants cite Kirby Forest Industries,
8

Defendants say Northern previously represented that stopping
third-party production in the Expansion Area alone would stop the gas
migration, and that because production has now ceased Northern faces
no threat of irreparable harm. But the evidence does not show that the
migration has been eliminated, and the containment plan approved by
FERC clearly contemplates that water injection may be necessary to reestablish stability of the storage field.
9

Defendants say that “Northern’s own brief
will not suffer irreparable harm if it is denied a
428 at 8). Defendants fail to cite the applicable
“own brief” and the court is unaware of any such
-17-

admitted, Northern
quick take.” (Doc.
pages of Northern’s
fatal admission.

Inc. v. United States, 467 U.S. 1 (1983) which involved what the
Supreme Court called a “straight condemnation procedure prescribed in
40 U.S.C. § 257" which, after entry of judgment following a trial
before a court or special commission determining the just compensation
due, gives the government the option to buy the property.

Defendants

cite the court’s statement that “If the Government decides not to
exercise its option, it can move for dismissal of the condemnation
action.”

(Doc. 428 at 12).

Defendants overlook Rule 71.1(i)(1)(A)

which provides:
By the Plaintiff. If no compensation hearing on a piece of
property has begun, and if the plaintiff has not acquired
title or a lesser interest or taken possession, the
plaintiff may, without a court order, dismiss the action as
to that property by filing a notice of dismissal briefly
describing the property.
(Emphasis supplied).
Here, the result of a preliminary injunction will permit Northern to
take “possession,” therefore precluding Northern from unilaterally and
without court authorization “back[ing] out of [a] taking if the amount
of just compensation is eventually set too high.”

(Doc. 428 at 12).

Defendants cite no evidence that Northern will “back out” or even
might

“back

out.”

Arguments

based

on

speculation

are

never

persuasive.
Defendants next contend they will suffer a loss of production
opportunities prior to completion of the condemnation proceeding. But
as Judge Bostwick (and Sage) pointed out, defendants, as landowners,
are protected because they retain title to the property and can
proceed

against

Northern

for

trespass

if

Northern

abandons

the

condemnation – including damages for Northern’s occupation of the

-18-

property. Security against any harm from lost production can be
addressed through the amount of deposit or bond required for the
injunction (see Doc. 415 at 38). Defendants’ suggestion that the
particular wells at issue are so uniquely situated that substitute
wells cannot allow them to adequately explore other zones likewise
appears highly speculative (see Doc. 305 at 3) (“Drilling a new well
might miss the hydrocarbons found at the pinpoint locations of the
current wells.”).

At any rate, defendants will be entitled in the

course of condemnation to just compensation for any property rights
taken by Northern. These potential harms to defendants, which appear
compensable, are substantially outweighed by the danger of irreparable
harm to Northern from being unable to restore the integrity of the
storage field in a timely fashion.
4. Whether the Injunction is in the Public Interest. As the court
has noted before, both federal and state law recognize that the public
interest is furthered by establishing and maintaining natural gas
storage fields. That public interest is the basis for granting natural
gas companies the authority to condemn and take private property for
use in a gas storage facility. The public interest in maintaining
storage fields will be furthered by a preliminary injunction allowing
Northern to obtain immediate access to and possession of the defendant
property and to proceed with implementation of the containment plan,
including conversion of defendants’ wells to observation wells. FERC’s
finding that the viability of the storage field is at risk is
supported by evidence presented in this proceeding, and it provides
strong support for the extraordinary remedy of allowing Northern to
access and take possession of wells and property to which defendants
-19-

retain title, provided it is for the purpose of implementing the
containment plan approved by FERC and which FERC has directed Northern
to promptly engage. Sage, 361 F.3d at 826 (“As the Supreme Court has
said, courts of equity may go to greater lengths to give ‘relief in
furtherance of the public interest than they are accustomed to go when
only private interests are involved.’” (quoting Va. Ry. Co. v. Sys.
Fed’n. No. 40, 300 U.S. 515, 552 (1937))); Rockies Exp. Pipeline, LLC.
v.

4.895

Acres

of

Land,

2008

WL

4758688

(S.D.

Ohio,

Oct,

27,

2008)(“issuance of an injunction ... would in fact serve the public
interest in that it would aid in ensuring that the FERC-approved
pipeline deadline is not delayed beyond the already adjusted target
date.”).
After weighing the facts relevant to Northern’s motion and giving
full consideration to defendants’ positions, the court agrees with
Judge Bostwick’s view that Northern has made a sufficient showing to
warrant the issuance of the disfavored preliminary injunction it
seeks. The court also agrees that the injunction should be conditioned
upon Northern providing the deposits and bonds discussed hereafter to
provide adequate security to protect the interests of defendants. The
court concludes that granting immediate access and possession of the
property to Northern will not violate defendants’ rights under the
Takings Clause of the Fifth Amendment. “[T]he Takings Clause does not
prohibit the taking of private property for public use, but rather
requires compensation when a taking occurs. [cite omitted] Such
compensation does not have to be contemporaneous with the taking, so
long as there is an adequate provision for obtaining compensation that
exists at the time of the taking.” Alto Eldorado Parternership v.
-20-

County of Santa Fe, 634 F.3d 1170, 1174 (10th Cir. 2011) (citing
Williamson County Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S.
172, 194 (1985)).

In this instance, the condemnation procedures

provided by Rule 71.1, the security in the form of cash deposits
subject to withdrawal and/or the posting of bonds by Northern, as well
as the fact of Northern’s good credit rating, all provide defendants
with a reasonable, certain and adequate provision for obtaining just
compensation.
Security.

The court may issue a preliminary injunction only if

the movant gives security in an amount that the court considers proper
to pay the costs and damages sustained by any party found to have been
wrongfully enjoined or restrained. See Fed.R.Civ.P. 65(c).

After

reviewing the recommendations of Judge Bostwick concerning the posting
of security, as well as the parties’ objections and comments, the
court concludes that the following represent the reasonable bonds and
deposits that should be required as security for issuance of the
preliminary injunction.
1. Eight wells to be converted to observation wells.

Northern

proposed that its estimated salvage value of these wells – $20,000
each, or a total of $160,000

– be deposited with the court, with

defendants able to draw upon the deposits. Northern acknowledged that
defendants’ cost to drill replacement wells, if they chose to do so,
would be in the neighborhood of $400,000 for each well, so Northern
proposed to put up a bond for the $380,000 difference, representing
a total bond of $3,040,000 for the eight wells, in addition to the
cash deposit. Defendants, on the other hand, argued for a deposit of
$400,000 for each well plus an additional 25% to cover interest and
-21-

lost

production

from

other

zones.

Judge

Bostwick

ultimately

recommended that the court require a deposit of $400,000 for each well
(a total of $3.2 million for the eight wells), which could be drawn
down by the appropriate defendants.
Defendants have a right to explore zones other than the Simpson
and Viola. They can do so with their current well bores at a cost
substantially below the cost of drilling a new well, but Northern’s
immediate possession of these wells will obviously preclude that
activity.

Moreover, practical considerations may preclude further

exploration by defendants until just compensation is received. See
Doc. 415 at 43. Under these circumstances, the court finds – with one
exception noted below – that Northern should be required to deposit
$400,000 per well, with the deposit subject to withdrawal by the
appropriate

defendant.

The

deposit

can

be

drawn

down

by

the

appropriate defendant(s) in full or in part, but if the ultimate award
of just compensation is less than the amount withdrawn, the defendant
which drew down such funds will be liable for any excess, plus
interest.
Northern raises a specific objection concerning the three Nash
wells (the Trinkle 1, Holland 1-26, and J.C. 1) that are subject to
the motion for immediate access. It argues that Nash Oil & Gas is
financially unsound and Northern should therefore be allowed to
provide a bond as security for these wells instead of a cash deposit.
Otherwise, Northern argues, it will be unlikely to recoup any money
drawn by Nash in excess of the Commission’s ultimate award of just
compensation (Doc. 426 at 4-5). Nash does not really dispute that it
has incurred financial difficulty, but blames Northern’s litigation
-22-

tactics and says there will likely be more than enough money awarded
to the producer defendants from the gas reserves in the Expansion Area
Viola to protect Northern from loss (Doc. 441 at 3-4).
After considering the matter, the court agrees with Northern that
in view of Nash’s financial difficulties, security for the three Nash
wells should be primarily in the form of a bond rather than a deposit.
While it is possible, as Nash argues, that it could receive an award
for gas reserves in the Expansion Area that would protect Northern
from any potential loss on its deposit, that argument is based on
speculation about the outcome of the Kansas Supreme Court case and
about the amount of reserves for which Nash may receive compensation.
Given the parties’ financial circumstances, the court concludes
that the following represents reasonable security for Northern’s
immediate possession of the three Nash wells: Northern shall be
required to make a deposit of $20,000 for each of the three wells and
to post a bond in the amount of $380,000 for each well.

This

represents a total deposit of $60,000 for the three Nash wells plus
a bond for $1,140,000.

The deposit portion will be subject to

withdrawal by Nash under the same terms and conditions as the deposits
pertaining to all of the other defendants’ wells.
Northern also asks for clarification whether Judge Bostwick
recommended that the ability of producer defendants to draw on the
deposits be conditioned upon a showing that the draw is for the
purpose of drilling a replacement well in the Expansion Area. Doc. 426
at

5-6.

Judge

Bostwick

included

no

such

condition

in

his

recommendation and the court will impose no such requirement. The
deposits may be used by the owners for any purpose they see fit. The
-23-

court will adopt Judge Bostwick’s recommendation that any request to
draw down deposits for the eight wells be accompanied by the consent
of

any

landowners,

royalty

owners,

working

interest

owners

and

lienholders who have an interest in the tract where the well is
located.

Although

defendant

producers

argue

this

condition

is

unwarranted, the court concludes it is appropriate and necessary to
protect the interests of all parties who may be affected by the
condemnation and to avoid subsequent disputes arising from withdrawal
of the deposits.
Northern additionally seeks “clarification as to the Court’s
intentions regarding the intended relationship between the costs to
drill these new ‘replacement’ wells and the calculation of any just
compensation to which the producer Defendants may be entitled.” Doc.
426 at 6. Northern’s apparent concern is whether the court is
endorsing “the substitute facilities doctrine,” which Northern says
is not a permissible method of determining just compensation under
Kansas law. Id. at 6-7. Judge Bostwick made no recommendations
concerning the standards for just compensation, nor did he make any
findings about the amount of compensation likely to be due defendants
for the taking of their wells. These issues simply are not ripe and
the court will issue no advisory opinions. Judge Bostwick properly
limited his recommendations as to the amount of security he considered
sufficient to compensate defendants should it be found that they are
wrongfully restrained or enjoined. He considered all of the available
evidence, including the fact that defendants have a right to explore
other zones in the Expansion Area, that defendants’ initial attempt
to explore other zones met with at least some success, and that
-24-

Northern’s possession of the wells in question may effectively inhibit
defendants’ ability to explore further.

Judge Bostwick acknowledged

defendants’ argument that Northern might abandon the project before
completion of the condemnation proceedings, which would result in an
award of damages to defendants. His recommended solution, using the
cost of a replacement well as a measure of the security necessary to
protect defendants from harm is not erroneous, but sensible. The court
has likewise considered all of these factors and concludes that the
appropriate amount of security for the extraordinary and drastic
remedy sought by Northern are the amounts set forth by Judge Bostwick,
as modified by the court’s ruling above.
2. Gas Volumes in the Expansion Area/ Other Components of a Bond
or Deposit. Judge Bostwick noted the wide variance between plaintiff
and defendants’ estimates of the value of the Viola gas underlying the
Expansion Area ($4.4 million versus $35.5 million). He also noted the
parties’ legal dispute concerning ownership of the gas. He took these
uncertainties into account in finding that the posting of a bond for
the value of the gas would be more appropriate than a cash deposit.
None of the parties have objected to that conclusion – or to the
recommendation for a $6.7 million bond – and the court concludes that
Judge

Bostwick’s

recommendations

are

appropriate

and

should

be

adopted. The court likewise adopts Judge Bostwick’s recommendations
that Northern be required to deposit the following amounts, which will
be subject to withdrawal, as security for Northern taking immediate
possession of these additional items of property: (a) use of the Viola
formation throughout the Expansion Area – $538,000; (b) rights and
interests to install, construct and maintain 3 new injection wells and
-25-

1 new observation well – $16,800; and (c) property, rights and
interests

to

install

flow

lines,

electrical

lines,

and

telecommunication lines – $56,900.
C. Northern Motion to Restrain L.D. Drilling from Recompletion
of the Brown A1 Well.

After L.D. Drilling filed notice of its intent

to recomplete the Brown A1 well (also referred to in the briefs as the
Brown 1A) in the Mississippi formation, Northern moved to restrain
L.D. from reentering and reworking the well pending a ruling on
Northern’s motion for immediate possession. Judge Bostwick recommended
that the motion for a TRO be granted. L.D. Drilling and other
defendants with an interest in the Brown A1 now challenge Judge
Bostwick’s finding that there is a significant likelihood of damage
to the well bore if the recompletion is allowed. They contend Judge
Bostwick impermissibly accepted an ex parte affidavit of Northern’s
expert in making this finding. Even if damage to the well bore could
occur, defendants argue this would not constitute irreparable harm to
Northern

and

would

not

justify

an

injunction.

Defendants

also

reiterate their contention that Northern is not authorized to condemn
the well bore under the NGA because it is not “necessary” for use in
the storage facility. Finally, as discussed above, defendants contend
Northern should not be allowed to take immediate possession of this
or any of their wells.
The motion for a TRO regarding the Brown A1 well may become moot
if Northern posts the security discussed above and obtains possession
of the well. For now, however, the controversy remains at issue and
the court will rule on the objection. Judge Bostwick afforded the
parties an evidentiary hearing on this motion and the court is
-26-

unpersuaded by defendants’ argument that it was improper for him to
rely on Mr. Cook’s affidavit. Northern submitted materials (including
the

affidavit)

in

connection

with

its

motion,

and

defendants

apparently made no contemporaneous objection to Judge Bostwick’s
consideration of, or reliance on, these materials. The court also
notes that Mr. Davis and Mr. Shoemaker both testified at the hearing
that they examined the materials relied upon by Northern and they each
addressed opinions expressed by Cook in his affidavit. Davis disputed
Cook’s view that the well bore would likely be damaged for Northern’s
purposes if the well were fracked above the Viola formation. Davis
conceded, however, that the procedure could warp the casing and that
he had never fracked a well using anywhere near the 200,000 pounds of
sand contemplated for the Brown A1.
The court concludes from the evidence presented that recompletion
of the Brown A1 in the manner described by defendants will, in all
likelihood, damage the well bore and render it unsuitable for use as
an observation well by Northern. As Judge Bostwick observed, this
fracture treatment is four times larger than any overseen by Davis
previously and “there is no indication that this size of fracture is
safe where the well bore needs to be maintained and preserved” for use
in an observation well (Doc. 414 at 5-6). The court further concludes
that Northern will suffer irreparable harm from being unable to use
the well bore to comply with FERC’s orders and to implement the
containment plan approved by FERC. By contrast, defendant will suffer
little if any harm from the delay caused by the TRO. Moreover, the
order preventing any reworking of the well will preserve the status
quo. Finally, the TRO furthers the public interest by preserving an
-27-

item of property that has been lawfully named in a condemnation action
as necessary to help stabilize a natural gas storage field. The court
concludes that a bond in the amount of $10,000, as recommended by
Judge Bostwick, represents reasonable security for the foregoing
order.
IV. CONCLUSION
A. Northern’s Motion for Temporary Restraining Order (Doc. 403)
is GRANTED in part and DENIED in part. The motion is granted with
respect to defendant L.D. Drilling Inc. and the Brown A1 well; it is
denied with respect to any other defendants and any other wells, as
no threat of imminent harm to any wells other than the Brown A1 has
been shown. Defendant L.D. Drilling, Inc. is hereby ordered to refrain
from re-entering and recompleting the Brown A1 well. The foregoing
order shall remain in effect until Northern has had a reasonable
opportunity to post security pertaining to its Motion for Immediate
Access and to take possession of the Brown A1 well. Northern shall
post a bond pursuant to Fed.R.Civ.P. 65(c) in the amount of $10,000,
without any requirement for any sureties, as security for any costs
or damages incurred by L.D. Drilling, Inc. should it be determined
that it has been wrongfully restrained under the foregoing order.
Defendant L.D. Drilling’s objections to Judge Bostwick’s Report and
Recommendation (Doc. 414) concerning the above motion are denied; the
court adopts the Recommendation in its entirety.
B.

Northern’s

Supplemental

Motion

to

Confirm

Condemnation

Authority and to Grant Preliminary Access to Implement Water Injection
Program (Doc. 202) is GRANTED to the following extent. The court
determines

and

confirms

that

Northern
-28-

has

been

granted

lawful

authority by the Natural Gas Act and the Federal Energy Regulatory
Commission to acquire by condemnation all of the property described
in its Amended Complaint (Doc. 188), including:

the “Interests to Be

Taken Located on the Property to Be Taken” and the “Interests to Be
Taken to Implement Water Injection Program Located on the Property to
Be Taken to Implement Water Injection Program.” See Doc. 188 at ¶¶6263 & Exhs. I, J.
The court finds that Northern has made the strong showing
required for issuance of a disfavored preliminary injunction, and that
it is entitled to immediate possession of the Interests to Be Taken
and the Interests to Be Taken to Implement Water Injection Program,
and to immediate access to the Property to Be Taken and the Property
to Be Taken to Implement Water Injection Program. This order is
conditioned upon Northern first providing the following reasonable
security to protect defendants’ continuing interests in the subject
property:
A. Posting of a bond with appropriate sureties
1. Gas in Expansion Area

$6,700,000

2. Nash wells (3)

$1,140,000

B. Deposit into Court’s Registry:
1. Wells (8) to be converted to observation

$2,060,00010

2. Use of the Viola formation throughout
the Expansion Area

$

538,000

3. Rights and interests to install, construct
and maintain the three new injection wells
and one new observation well
$

16,800

10

As noted previously, this figure includes a deposit of $60,000
for the Nash wells (3), and $2,000,000 for the remaining five wells.
-29-

4. Property, rights and interests to install
flow lines, electrical lines and
telecommunication lines
$
Total Deposit

56,900

$2,671,700

The required deposits may be drawn down by the appropriate
defendants in full or in part.

Any request to draw down funds shall

be accompanied by consent of any landowners, royalty owners, working
interest owners and lienholders who have an interest in the tract upon
which the well is located. Any defendant seeking to draw down funds
may file a motion with the court asking for an order authorizing the
disbursement. The motion shall be accompanied by proof of any consent
required by this order. Any response or objection to the motion shall
be filed within 10 days.
If the ultimate award of just compensation is less than the
amounts drawn down, each defendant which drew down funds shall be
liable

for

the

return

of

the

excess

together

with

appropriate

interest. This order of preliminary injunction shall remain in effect
until just compensation is determined and paid and final judgment is
entered in the case, or until the court orders otherwise.
As a further condition to the issuance of this injunction, the
court orders that Northern, at least 15 days prior to entering or
taking possession of any property affected by this order, give written
notice to the affected landowner describing the nature and duration
of the activity Northern intends to conduct upon said property.
A motion for reconsideration of this order pursuant to this
court's Rule 7.3 is not encouraged.

The standards governing motions

to reconsider are well established.

A motion to reconsider is

appropriate where the court has obviously misapprehended a party's
-30-

position or the facts or applicable law, or where the party produces
new evidence that could not have been obtained through the exercise
of reasonable diligence.

Revisiting the issues already addressed is

not the purpose of a motion to reconsider and advancing new arguments
or supporting facts which were otherwise available for presentation
when the original motion was briefed or argued is inappropriate.
Comeau v. Rupp, 810 F. Supp. 1172 (D. Kan. 1992).

Any such motion

shall

any

not

exceed

five

pages.

The

response

to

motion

for

reconsideration shall not exceed five pages. No reply shall be filed.
IT IS SO ORDERED.
Dated this

13th

day of March 2012, at Wichita, Kansas.

s/Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE

-31-