Northern Oil and Gas, Inc. v. Continental Resources, Inc.

Filing 95

ORDER granting 82 Northern's Motion for Summary Judgment; denying 84 Continental's Motion for Declaration of Law. Signed by Magistrate Judge Timothy J. Cavan on 9/27/2017. (JDR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
NORTHERN OIL AND GAS, INC.,
and NORTHWEST FARM CREDIT
SERVICES, FLCA,

CV 14-90-BLG-TJC
ORDER

Plaintiffs,
vs.
CONTINENTAL RESOURCES, INC.,
Defendant.
This case originated from a dispute concerning competing oil and gas leases
covering a tract of land in Richland County, Montana. Plaintiffs Northern Oil and
Gas, Inc. (“Northern”) and Northwest Farm Credit Services, FLCA (“NWFCS”)
originally brought this action against Defendant Continental Resources, Inc.
(“Continental”), seeking, inter alia, a declaration that Continental’s lease had
expired and that Northern’s lease was valid. Northern and NWFCS invoked this
Court’s diversity jurisdiction under 28 U.S.C. § 1332. With the parties’ written
consent, this case was assigned to the undersigned for all purposes. (Doc 23.)
Presently pending before the Court are cross-motions for summary judgment
filed by Northern (Doc. 82) and Continental (Doc. 84). Both parties are seeking a
determination of the extent to which Northern is required to participate in the costs
associated with drilling an oil well in Richland County. The Court heard oral

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argument on these motions on September 14, 2017. For the reasons discussed
below, the Court grants Northern’s motion and denies Continental’s motion.
I.

Pertinent Facts
On September 29, 2008, NWFCS, as lessor, granted an Oil and Gas Mining

Lease covering the west half of Section 10, Township 24 North, Range 52 East,
M.P.M., Richland County, Montana (the “Leased Premises”), in favor of Diamond
Resources, Inc., as lessee (the “Continental Lease”). The Continental Lease was
for a five-year primary term, which expired on September 29, 2013. On November
9, 2012, Diamond Resources, Inc., assigned the Continental Lease to Continental,
effective September 29, 2008.
On May 8, 2013, Continental filed an application with the Montana Board of
Oil and Gas Conservation (“Montana Board”), requesting an order permitting the
drilling of a well, known as the Sterling 1-3H Well (or the “Well”), within a
temporary spacing unit consisting of Sections 3 and 10, Township 24 North, Range
52 East. The temporary spacing unit included the Leased Premises. On June 6,
2013 the Montana Board granted Continental’s Application and permitted the
drilling of the Sterling 1-3H Well.
As explained by Continental in its brief, an operator drilling in a pooled area
is required under Mont. Code Ann § 82-11-202 to send all leasehold interest
owners a notice of intent to drill, an estimated cost of drilling, and an offer to allow

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the owners to participate in the well by sharing in the well costs. (Doc. 89 at 4.)
An interest owner who elects to participate will share in its proportionate amount
of drilling and production expenses, and also receive its share of income
attributable to their interest, if any. Id. An owner who refuses to participate in the
well – or in industry parlance, declines to “consent” – does not pay expenses, and
does not receive revenue from the well until drilling and production expenses have
been recovered from revenues and a penalty has been recovered by the consenting
owners. Id. at 4-5.
At the time the drilling permit was granted in June 2013, Northern
indisputably held a leasehold interest in the E/2 of Section 10, Township 24 North,
Range 52 East. That lease covered a total of thirty-two net mineral acres, equating
to a gross unit working interest of 3.643319% (the “3.6% Lease”). In accordance
with the statutory procedure under § 82-11-202, Continental sent Northern a well
proposal and authorization for expenditure (“AFE”) on August 15, 2013, seeking
Northern’s commitment to participate in the drilling of the Sterling 1-3H Well. By
letter dated September 13, 2013, Northern communicated its desire to participate.
(See Doc. 86-1.) On September 18, 2013, Continental commenced drilling
operations on the Sterling 1-3H Well in the E/2 of Section 3, Township 24 North,
Range 52 East.

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Approximately six weeks after drilling operations started, NWFCS granted
Northern a new lease covering the W/2 of Section 10, Township 24 North, Range
52 East (henceforth, the “Northern Lease”) on October 28, 2013. This lease
covered the same tract previously covered under the Continental Lease.
Continental disputed the validity of the Northern Lease. Continental
maintained that it began drilling operations on Sterling 1-3H Well prior to the end
of the lease’s primary term, which, according to Continental’s interpretation of the
lease, served to extend the term of the lease beyond the primary term. Northern
asserted, however, that while Continental may have commenced drilling in an
adjoining parcel within the temporary spacing unit, it did not began drilling
operations on the leased premises before the expiration of the primary term. Thus,
Northern maintained, the Continental lease expired on September 29, 2013.
Nevertheless, what is particularly relevant to the parties’ present motions is that,
after the Northern lease was granted, Continental never sent Northern or NWFCS a
well proposal or AFE requesting consent to participate in the operation of the
Sterling 1-3H Well with respect to the Northern lease.
On March 26, 2014, Continental filed an Application with the Montana
Board requesting an Order declaring all of Sections 3 & 10-24N-52E as a
permanent spacing unit for production. (See Doc. 86-2.) On May 1, 2014, the
Montana Board entered an Order, granting Continental’s Application and

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designating all of Sections 3 & 10-24N-52E a permanent spacing unit for
production of oil from the Sterling 1-3H Well. Also on May 1, 2014, the Montana
Board issued an Order that “all interests in the permanent spacing unit comprised
of all of Sections 3 & 10, T24N-R52E are hereby pooled on the basis of surface
acreage for production of Bakken/Three Forks Formation oil and associated gas.”
Northern also participated in the proceedings before the Montana Board. In
its findings, the Board specifically recognized that Continental and Northern had
“an ongoing dispute as to the effective leasehold coverage” of their competing
leases. (See Doc. 86-5 at 2.) The Board’s findings also reflect that the parties
acknowledged that the Board’s order made “no findings with respect to which
lease may provide effective leasehold coverage,” and the parties further
acknowledged that Continental was “not authorized to recoup non-consent
penalties…absent further order of the Board.” Id.
Northern filed the instant lawsuit on July 14, 2014. Northern sought to quiet
title to the disputed leasehold interest in its name, and also sought money damages
for lost oil and gas production revenues derived from the interest. (Doc. 1.) This
Court ultimately entered an Order on the parties’ cross-motions for summary
judgment on May 31, 2016 (Doc. 70), holding in pertinent part that the Continental
Lease expired by its terms on September 29, 2013, and holding the Northern Lease
to be valid.

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Having determined the validity of the parties’ leasehold interests, the sole
remaining issue in this action is whether Northern should be forced to participate in
the costs of drilling and operation for the Sterling 1-3H Well with respect to the
Northern Lease as a consenting owner, or whether Northern maintains the right to
make an election as to whether it does or does not consent to participate with
respect to that share.
II.

Parties’ Arguments
A.

Northern

Northern argues that it should not be required to consent to Continental’s
drilling operation with respect to its interest in the Northern Lease. (Doc. 83 at 2.)
Northern makes several arguments in support of its position.
First, Northern argues that the only contract between Northern and
Continental is Northern’s undisputed consent to participate with respect to the
3.6% Lease, and Continental cannot unilaterally expand the interests covered under
that contract to impose an additional consent upon Northern with respect to the
Northern Lease. (Id. at 6-7.)
Next, it argues that Continental had a statutory remedy available to it,
insofar as it simply could have sent an AFE or amended well proposal to Northern
to bind Northern to a consent position. Northern maintains that Continental’s

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failure to do so does not justify imposing an election on Northern at this time. (Id.
at 6-9.)
Finally, Northern argues that Continental is judicially estopped from taking
its present position due to the position it adopted before the Montana Board.
Specifically, Northern asserts that Continental assented to the inclusion of the
language prohibiting Continental from assessing a non-consent penalty against
Northern absent further action from the Montana Board. (Id. at 9-14.)
B.

Continental

Continental argues that Northern should be prohibited from taking a nonconsent position with respect to the Northern Lease. (Doc. 85 at 2.)
Continental’s primary argument is that it would be inequitable to permit
Northern to adopt a non-consent position at this time. Continental asserts that
Northern’s prior conduct evinced its intent to participate in the Well, but Northern
changed that position after the price of oil dropped and it learned that the
production of the Sterling 1-3H Well was less than anticipated. Continental
explains that oil production is an inherently risky enterprise, and allowing Northern
to wait until the Well’s production capabilities are known (referred to in the
industry as “riding the well down”) removes the risk associated with a timely
decision to consent. Accordingly, argues Continental, Northern should be
estopped from adopting a non-consent position merely because it knows now that

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such a position is more favorable. Instead, Northern should be forced to consent,
thereby accepting its share of the expenses in developing the Well.
Continental also disputes Northern’s characterization of Continental’s
argument as seeking to expand the existing contract covering the 3.6% Lease.
Continental argues that there simply is no contract contemplating the Northern
Lease, so the Court may exercise its powers in equity without contravening any
existing agreement.
Continental also argues, in the alternative, that the Court should remand this
issue to the Montana Board if it declines to impose a consent position upon
Northern.
III.

Legal Standard
“The court shall grant summary judgment if the movant shows that there is

no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). A party seeking summary judgment
always bears the initial responsibility of informing the court of the basis for its
motion, and identifying those portions of the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, which it
believes demonstrate the absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986).

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Material facts are those which may affect the outcome of the case. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is
genuine if there is sufficient evidence for a reasonable fact-finder to return a
verdict for the nonmoving party. Id. If the moving party meets its initial
responsibility, the burden then shifts to the opposing party to establish that a
genuine issue of fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986).
The Court must consider each motion on its own merits when parties file
cross-motions for summary judgment. Fair Housing Council of Riverside County,
Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). The fact that both
parties moved for summary judgment does not vitiate the Court’s responsibility to
determine whether disputed issues of material fact are present. Id.
As noted, the Court’s jurisdiction over this action is based on diversity of
citizenship. Thus, the Court must apply the substantive law of Montana, the forum
state. In re County of Orange, 784 F.3d 520, 523-24 (9th Cir. 2015) (“Under the
Erie doctrine, federal courts sitting in diversity apply state substantive law and
federal procedural law.”) (citation omitted); see also Medical Laboratory Mgmt.
Consultants v. American Broadcasting Companies, Inc., 306 F.3d 806, 812 (9th
Cir. 2002).

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In actions based on diversity jurisdiction, the federal court “is to
approximate state law as closely as possible in order to make sure that the
vindication of the state right is without discrimination because of the federal
forum.” Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir. 1980). Federal courts
“are bound by the pronouncements of the state’s highest court on applicable state
law.” Appling v. State Farm Mutual Auto. Ins. Co., 340 F.3d 769, 778 (9th Cir.
2003) (citation omitted). But when an issue of state law arises and “the state’s
highest court has not adjudicated the issue, a federal court must make a reasonable
determination of the result the highest state court would reach if it were deciding
the case.” Medical Laboratory Mgmt. Consultants, 306 F.3d at 812 (citations
omitted). In doing so, the federal court must “look to existing state law without
predicting potential changes in that law.” Ticknor v. Choice Hotels Int’l, Inc., 265
F.3d 931, 939 (9th Cir. 2001) (citation omitted).
IV.

Discussion
The parties agree that Northern’s capacity to make a consent/non-consent

election is the sole remaining issue in this case, and there are no material facts in
dispute. (See Docs. 86 and 90.) For the following reasons, the Court grants
Northern’s motion and denies Continental’s motion, ruling in effect that Northern
is not estopped from electing to take a non-consent position with respect to the
Northern Lease.

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A.

Statutory Considerations

The rights and responsibilities of owners and operators within a pooled
spacing unit are governed by Mont. Code Ann. § 82-11-202. Relevant to the
present issue, the statute outlines the procedures for obtaining an owner’s consent
to participate in the costs of development and operations within the unit, and the
consequences of an owner’s refusal to do so. Subsection (2)(a) of the statute
provides for the recovery of the costs for development and operations, and states
that “the owners who agree to share in the cost of drilling and operating the well
are…entitled to receive…all of the production of the well until they have
recovered all of the costs out of the production.” Further, under subsection 2(b) of
the statute, an owner who refuses to agree to pay the owner’s share of drilling and
completion costs is also subject to a non-consent penalty equal to 100% to 200% of
development and production costs. The provisions of subsections 2(a) and (b) are
also applicable where “an owner of an oil and gas interest in a temporary spacing
unit refuses to agree to pay the owner’s share of the costs of drilling and operating
a well within the unit and an application is filed for pooling of the interests in the
well in a permanent spacing unit.” Mont Code Ann. § 82-11-202(2)(e).
In order to assess the non-consent penalty, however, an owner must refuse to
participate. In addition, in situations where, as here, a well has been drilled prior to
hearing on the pooling application, the owner’s refusal to participate must come

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“after written demand.” Mont Code Ann. § 82-11-202(2)(b). There is no evidence
in this case that Northern ever refused to pay its share of costs of development or
operations, or that it was ever provided written demand to do so.
Nevertheless, it may be presumed that an owner refused to pay the owner’s
share of costs under Mont. Code Ann. § 82-11-202(3), which provides as follows:
(3)(a) An owner is presumed to have refused to pay the owner’s share of
costs if prior to the spud date of the well, the owner fails to pay or agree in
writing to promptly pay the share of the costs after notice by the well
operator either:
(i) acknowledged in writing by the owner as received; or
(ii) sent at least 30 days prior to the spud date of the well to the owner
by certified mail, addressed to the owner's address of record in the
office of the clerk and recorder of the county where the well is to be
drilled or to the owner's address on file with the board.
(b) The notice must set forth the location of the well, the projected depth and
target formations, the anticipated costs of drilling and completing the well,
and the anticipated spud date of the well.
By the statute’s plan terms, notice by the well operator setting forth the
items enumerated in subsection (3)(b) is a threshold condition before any owner
may be presumed non-consent. It is undisputed that Continental did not send a
notice to Northern or to NWFCS with respect to the leasehold interest covered by
the Northern Lease. Consequently, by the express terms of the statute, it cannot be
presumed that Northern did not consent.

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In this case, however, Northern did not acquire the lease until after
Continental had spudded the Sterling 1-3H Well, by which time Continental had
already notified the owners within the spacing unit. Mont. Code Ann. § 82-11202(3) is silent as to an operator’s responsibility to notify an owner that emerges
after a well has been spudded. Nevertheless, the fact that Continental did not
notify Northern or NWFCS in accordance with Mont. Code Ann. § 82-11-202(3)
even after it discovered Northern’s claimed interest in the Northern Lease is not in
dispute, and the Court declines to read into the statute a non-existent provision that
would impose a presumptive non-consent position upon Northern.
Pursuant to Mont. Code Ann. § 82-11-202(3), it cannot be presumed that
Northern refused to agree to participate absent written demand or notice. Since
Continental did not send such a demand or notice, Northern retains the right to
elect whether to consent with respect to the Northern Lease.
B.

Judicial Estoppel

Notwithstanding any deficiencies in its notice procedure, Continental argues
that Northern should be estopped from electing a non-consent position at this time
due to the inherent unfairness of allowing it to “ride the well down” and bide its
time until it can determine whether consenting in the operation will be profitable.
Continental relies on the doctrine of judicial estoppel, the purpose of which, it
argues, “is ‘to protect the integrity of the judicial process’ by ‘prohibiting parties

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from deliberately changing positions according to the exigencies of the moment.’”
(Doc. 91 at 4 (quoting New Hampshire v. Maine, 532 U.S. 742, 749-751 (2001).)
“[J]udicial estoppel ‘generally prevents a party from prevailing in one phase
of a case on an argument and then relying on a contradictory argument to prevail in
another phase.’” Milton H. Greene Archives, Inc. v. Marilyn Monroe LLC, 692
F.3d 983, 993 (9th Cir. 2012) (quoting New Hampshire, 532 U.S. at 749). It is an
equitable doctrine invoked “not only to prevent a party from gaining an advantage
by taking inconsistent positions, but also because of ‘general considerations of the
orderly administration of justice and regard for the dignity of judicial proceedings,’
and to ‘protect against a litigant playing fast and loose with the courts.’” Hamilton
v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001) (quoting Russell
v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)) (alteration omitted). “A party can be
estopped by statements successfully advanced in both judicial and administrative
proceedings.” Greene Archives, 692 F.3d at 993, n. 13.
Though the circumstances where judicial estoppel may apply “are probably
not reducible to any general formulation,” the Supreme Court has identified the
following three factors that courts should consider:
First, a party’s later position must be clearly inconsistent with its earlier
position. Second, courts regularly inquire whether the party has
succeeded in persuading a court to accept that party’s earlier position,
so that judicial acceptance of an inconsistent position in a later
proceeding would create the perception that either the first or the second
court was misled.... A third consideration is whether the party seeking
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to assert an inconsistent position would derive an unfair advantage or
impose an unfair detriment on the opposing party if not estopped.
Id. at 993-994 (citing New Hampshire, 532 U.S. at 750-751). The Court will
consider each of these factors in turn.
i.

Inconsistent Position

The first consideration is whether Northern’s present position – namely that
it retains the right to elect whether to consent in the Sterling 1-3H Well operation –
is clearly inconsistent with any prior position it has adopted. The Court finds no
such inconsistency.
First, the record does not contain any evidence that Northern has expressed
an intent to consent or not consent with respect to the Northern Lease, whether
within this litigation, before the Montana Board, or in any other context. In the
absence of any evidence showing that Northern ever expressly made a consent
election, the Court cannot find that any election decision made at this time would
be inconsistent with its prior position.
Nevertheless, Continental seeks to satisfy the first prong of the judicial
estoppel test by implication. Continental maintains that Northern’s actions cannot
be explained in any way other than that it intended to consent with respect to the
Northern Lease up until the time that its “free look down the well” revealed that
plan to be economically disadvantageous. Continental cites four instances of
Northern’s conduct that, in Continental’s opinion, demonstrate a clear intent to
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consent with respect to the Northern Lease, and which are inconsistent with
Northern’s present position that it has not yet made a consent election. These
instances include: (a) purchasing the Northern Lease after the Sterling 1-3H Well
had already been spudded and while Northern had already elected to consent with
respect to the 3.6% Lease; (b) objecting before the Montana Board to any nonconsent penalty; (c) filing this lawsuit and seeking money damages for lost
revenue; and (d) electing to participate in the Sterling 1-3H Well with its other
leasehold interest. (Doc. 89 at 6-12.)
While it is certainly questionable that the “inconsistent position” prong of
judicial estoppel can be satisfied by implication where a party has never actually
adopted or asserted a prior position, the Court nevertheless will address
Continental’s arguments on this point.
a.

Northern’s Purchase of the Northern Lease

Continental argues that “[t]he simple fact Northern purchased a lease in the
spacing unit for the Sterling 1-3H Well manifests its desire to participate in that
well.” (Id. at 8.) In support of this conclusion, Continental cites the facts that
Northern knew at the time of purchase that a well was already in the process of
being drilled; Northern had already consented to participate with respect to its
other lease in the spacing unit; and Northern paid a substantial bonus for the lease.
(Id.) Each of these factors certainly supports the conclusion that Northern desired

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a greater leasehold interest within the Sterling 1-3H Well spacing unit. But it does
not necessarily follow that Northern unequivocally intended to consent with
respect to that additional interest. The fact that a leaseholder in Northern’s
position can elect not to consent demonstrates that owning a leasehold interest and
consenting to a well operation are not synonymous. A non-consenting owner can
still share in revenue from a well after drilling costs and non-consent penalties
have been satisfied. The Court cannot say with any certainty that any of the factors
Continental cites establish any intent beyond acquiring a further leasehold interest
within the spacing unit, which interest Northern can then exercise as it sees fit.
b.

Northern’s Objection before the Montana Board

As explained above, Northern participated in proceedings before the
Montana Board, which resulted in a ruling from the Montana Board that
Continental could not assess a non-consent penalty against Northern with respect
to the Northern Lease absent further action by the Board. Continental calls this
“the clearest evidence that Northern desired to participate – before oil prices
plunged and Northern got a ‘free look down the well.’” (Id. at 9.) According to
Continental, this conduct demonstrates a desire to participate because non-consent
penalties are only available against parties that do not participate. (Doc. 85 at 6.)
The Court cannot reach Continental’s conclusion. Northern explained at
oral argument that the reason for its position before the Montana Board was to

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prevent Continental from assessing a non-consent penalty before Northern had the
opportunity to make an election. That justification is sufficiently plausible to
preclude the Court from reaching the conclusion that Continental urges, which is
that Northern’s position before the Montana Board is inconsistent with a later
desire to not consent. Northern’s position before the Montana Board was that
Continental should not be allowed to assert a non-consent penalty before Northern
made an election one way or another. That position is not inconsistent with
Northern’s present position.
c.

Filing This Lawsuit and Seeking Monetary Damages

Next, Continental argues that the simple fact of filing this lawsuit and
seeking monetary damages for lost revenues demonstrates a desire to participate.
The Court is not persuaded. First, again, possessing a valid lease and consenting to
a drilling operation are not synonymous. Northern can both (a) validly possess the
Northern Lease and also (b) decline to consent in the drilling of the Sterling 1-3H
Well. Northern’s act of filing this lawsuit in order to quiet title to its leasehold
interest has no bearing on how it ultimately decides to exercise its rights under the
lease. Additionally, with respect to the monetary damages, a non-consenting
leaseholder still may be entitled to revenues from a productive well. See Mont.
Code Ann. § 82-11-202(2)(a). Northern’s request for any damages to which it may
be entitled is not indicative of either a consent or non-consent position.

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d.

Electing to Participate as to the 3.6% Lease

Finally, Continental argues that Northern’s election to participate with
respect to its preexisting 3.6% Lease indicates an intent to participate as to the
Northern Lease as well. Once again, Continental is conflating the possession of a
lease and the decision to consent with respect to that lease. Northern has the right
to elect whether to consent with respect to any lease it owns within the spacing
unit, independent of the decision it makes regarding any other leases it may own.
According to Northern, its consent to participate in the additional acreage would
have resulted in a five-fold increase in its liability for drillings costs, from
$275,842.97 to $1,379,214.85. The fact that Northern was willing to commit to
approximately $275,000.00 in liability, does not establish that it would have been
willing to risk more than $1,375,000.00. The Court is not in a position to speculate
as to what decision Northern would have made had Continental not incorrectly
assumed that the Northern Lease was invalid.
For the foregoing reasons, and keeping in mind the fact that Northern
undisputedly did not make an express election, the Court finds that Continental has
failed to demonstrate that Northern’s present position is inconsistent with any
position it has previously taken. Judicial estoppel therefore does not apply.
//
//

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ii.

Success of the Earlier Position

Even if Northern had previously adopted the position that it intended to
consent in the Sterling 1-3H Well, Continental has not demonstrated that Northern
prevailed in that position before a court or administrative body. There is no history
of Northern advancing, much less prevailing upon, that position before this Court.
Therefore, the only remaining possibility is that it advanced the position and
prevailed thereon before the Montana Board. As discussed above (see §
IV(A)(i)(b), supra), Northern did not argue to the Montana Board that it intended
to consent in the Sterling 1-3H Well operation. Rather, the parties acknowledged
their dispute, and agreed that Continental could not impose a non-consent penalty
without further action from the Montana Board.
It should be noted that Continental still may be able to impose a non-consent
penalty upon Northern, subject to Northern electing not to consent and the parties
presenting the issue to the Montana Board. Regardless of what happens in the
future, there is no evidence in the record that Northern ever adopted a position
declaring an intention to consent to the Sterling 1-3H Well operation, and then
prevailed upon that position.
iii.

Unfair Advantage

Finally, assuming arguendo that Northern had both adopted an inconsistent
position and then prevailed upon that position, the Court still would have to find

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that allowing such conduct would generate an unfair advantage to Northern or
impose an unfair detriment upon Continental. Here again, the Court is not
persuaded.
It may be true that Continental will be forced to bear an increased financial
burden if Northern elects not to consent in the Sterling 1-3H Well operation.
Nevertheless, Continental had ample opportunity, beginning when it first
discovered that Northern had purchased the lease and at numerous points
thereafter, to send Northern an AFE, amended well proposal, or some other request
that would have required Northern to make an express consent election. Northern
was never spurred to make such an election because Continental never sent any
notice or request that it do so. There is nothing that would have prevented
Continental from sending a proposal or taking some other action that would bind
Northern once Continental knew that Northern claimed a leasehold interest.
Continental has not provided any authority to suggest that Northern was obligated
to make an election on its own, independent of any request therefor from
Continental.
Continental elected to stand pat on its position that its lease was valid, and
did not take any steps to bind Northern to an election in the event it was ultimately
determined otherwise. Continental’s failure to force Northern to make an election
before the results of the Well were known does not constitute a “miscarriage of

21

justice” that would justify the “extraordinary remedy” of judicial estoppel. Mull v.
Motion Picture Industry Health Plan, 2014 WL 12639071, *14 (C.D. Cal. May 30,
2014).
C.

Continental’s Cited Authority

Continental cites several cases in support of the position that courts routinely
invoke equitable principles to prevent parties from “riding the well down,” and
Continental argues that this Court should rule similarly. Cases on which
Continental especially relies include Ranola Oil Corp. v. Corp. Comm’n of Okla.,
752 P.2d 1116 (Okla. 1988), Harding & Shelton, Inc. v. Prospective Inv. &
Trading Co., 123 P.3d 56 (Okla. Civ. App. 2005), and Samedan Oil Corp. v.
Comm’n of Okla., 755 P.2d 56 (Okla. 1988).
Continental is correct that these cases generally stand for the proposition that
courts are reluctant to reward parties who ride the well down, and thereby remove
the uncertainty inherent to the oil exploration business. See, e.g., Harding &
Shelton, 123 P.3d at 63-65. However, all of these cases are inapposite here
because they each involve a party that previously made an election and
subsequently attempted to change that election. The instant case is readily
distinguishable because, as discussed previously, Northern has never made an
election with respect to the Northern Lease.
//

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D.

Remand to the Montana Board

Finally, in the event the Court declines to force a consent election upon
Northern, Continental requests that the Court remand the case to the Montana
Board to determine whether Northern should be permitted to make an election.
Continental does not dispute the Court’s jurisdiction to determine the issues
presented by the parties’ cross-motions, and the Court has before it sufficient
undisputed facts to decide the parties’ motions on their merits. The Court therefore
denies Continental’s request.
V.

Conclusion
Based on the foregoing, IT IS ORDERED that:
(1) Northern’s Motion for Summary Judgment (Doc. 82) is GRANTED; and
(2) Continental’s Motion for Declaration of Law (Doc. 84) is DENIED.
DATED this 27th day of September, 2017.

_______________________________
TIMOTHY J. CAVAN
United States Magistrate Judge

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