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Richland Partners, LLC v. Cowry Enterprises, Ltd.

United States District Court, D. Montana, Billings Division

February 27, 2015



SUSAN P. WATTERS, District Judge.

I. Introduction

Plaintiffs Richland Partners, LLC, John Payne and Roger Hall ("Richland Partners") brought claims for property damage/negligence, strict liability, trespass, and private nuisance based on Defendant Cowry Enterprises, Ltd.'s, ("Cowry") alleged contamination of Richland Partners' property in Eastern Montana. (Doc. 6). Richland Partners also brought claims for negligent mismanagement, constructive fraud and tortious interference for Cowry's alleged interference with Richland Partners' attempts to subdivide the property. ( Id. ) Cowry moves for summary judgment on all of Richland Partners' claims. (Doc. 16). Having considered the parties' submissions, the balance of the record, and the relevant law, and no party having requested oral argument, [1] the Court GRANTS Cowry's motion for summary judgment.

II. Background

In the early 1980s, a company named Aminoil drilled some oil wells in Eastern Montana. (Doc. 12 at 2). While drilling at least one of the wells, Aminoil reclaimed a reserve pit. (Doc. 22 at ¶ 3). A reserve pit is a storage area dug in the ground that acts as a small reserve for storing spare or waste mud, base oil, water or brine while drilling an oil well. (Doc. 12 at 2). It was apparently common for companies to use a reserve pit while drilling a well during the early 1980s. ( Id. ) Typically, at the end of the drilling operations, the reserve pit was drained and reclaimed by filling the pit and placing soil on top. ( Id. ) In 1981, the parties' predecessors in interest settled all claims with Aminoil for surface damage, including for oil contamination, and the subsequent landowner released such claims. (Doc. 22 at ¶ 5).

In approximately 1984, Phillips Petroleum Company purchased Aminoil and became owner/operator of the wells. ( Id. ) at ¶16) In 1988, Conoco purchased ownership and operation of the wells from Phillips. ( Id. ) at ¶17) In 1993, Cowry assumed ownership and operation of the wells from Conoco. ( Id. ) at ¶18).

In 2012, Roger Hall and John Payne formed Richland Partners, LLC, and purchased property ("the Property"), which included Aminoil's reserve pit, to develop an RV and commercial park. ( Id. ) at ¶12) The Property is adjacent to two active oil wells owned by Cowry. (Doc. 21 at 2) Richland Partners hired Territorial Landworks to conduct due diligence before purchasing the Property and to assist with the subdivision approval process. (Doc. 22 at ¶ 16). At some point after purchasing the Property, Richland Partners, through Territorial Landworks, discovered oil waste from Aminoil's reclaimed reserve pit on the Property. ( Id. ) at ¶¶ 4-5). The reclaimed reserve pit is adjacent to, but not located on, a location where Cowry operates an active well. (Doc. 21 at 2) Despite operating the well, Cowry did not drill any of the wells on the Property and never owned or controlled the area where the oil waste was found. ( Id. ) The parties agree that Cowry's operation did not cause or result in oil seeping on to or contaminating the Property. (Doc. 22 at ¶¶ 4-5).

After Richland Partners purchased the Property, Territorial Landworks instructed a realtor to contact Cowry to inquire about its intent to drill on Cowry's oil pads adjacent to the Property. ( Id. ) at ¶ 6). The realtor told Cowry that his potential client was looking at purchasing the land, but did not mention any plans to build a subdivision. ( Id. ) at ¶ 43). In response, Cowry corporate officer Dzifa Glymin told the realtor "the []wells were drilled back in the 80's. There are no lease/rental fees paid for the surface land, as the owner receives royalties on production. [and] as far as new drilling, there is none expected near or around [the wells] anytime soon." ( Id. ) at ¶ 18).

Thereafter, Richland Partners submitted an application to Richland County requesting approval of a major industrial and residential subdivision called Richland County RV and Industrial Park ("the Park"). ( Id. ) at ¶ 23). At the request of the Richland County Planner Officer, Territorial Landworks, Richland Partners' agent, "made a great deal of effort" to get Cowry to submit comments about the Park. ( Id. ) at ¶24). Richland Partners, through Territorial Landworks, also reached out to Cowry seeking Cowry's comments on the Park. ( Id. ) at ¶64). In response, Cowry President Derick Glymin contacted Territorial Landworks and conveyed that he was "pro-development" and did not oppose the project, but wanted to ensure the project was safe for any children coming near the wells. ( Id. ) at ¶¶ 65). Glymin also submitted comments orally and in writing to the Richland County Planning Board, expressing Cowry's concern about the potential hazard of people, particularly children, living so close to producing oil wells. ( Id. ) at ¶¶ 25-26, 46).

Some of Cowry's concern stemmed from the fact that its wells were drilled through rock formations containing sour gas zones, including hydrogen sulfide ("H2S"). ( Id. ) at ¶ 61) H2S is a highly toxic gas present in some rock fonnations. ( Id. ) at ¶¶ 48-49) When Cowry purchased the wells, the wells produced from a sour gas zone. ( Id. ) at ¶49) After purchasing them, Cowry re-worked the wells so that neither well produces from a sour zone, ( Id. ) at ¶ 50), but one well still produces from a formation with a zone of sour gas. ( Id. ) at ¶ 52) There is some risk that an H2s release could occur from either well. ( Id. ) at ¶ 54) In fact, Cowry has H2S monitors surrounding the well that produces from the formation with the sour gas. ( Id. ) at ¶ 53) Additionally, Cowry anticipates that the wells will most likely have to be re-drilled at some later date and a higher potential for an H2S release exists when drilling. ( Id. ) at ¶¶ 56-57).

As a result of these concerns, Cowry's operations manager Ted Burkle attended a county meeting and expressed concerns about building the Park next to Cowry's active oil wells. ( Id. ) at ¶60) Cowry also sent a letter to the Richland County Planner opining that numerous mitigation measures for the Park would be required because of the presence of H2S if it were approved, including implementing evacuation plans, minimum fence construction, ongoing maintenance, and additional security measures. ( Id. ) at ¶61).

As a direct result of the concerns Cowry raised about H2S, ( Id. ) at ¶75), the Richland County Commissioners imposed numerous conditions upon the Park, including a 300 foot clear zone around the wells where no building may occur and no one but H2S certified personnel may enter; and a qualified evacuation plan. (Id. at ¶ 72) With regard to oil pad activity, the Richland County Commissioners found "the most potentially significant hazard is the known release of poisonous H2S gas from the well and the potential for future releases." ( Id. ) at ¶74) Because of these conditions, Richland Partners' ability to develop the property it purchased has been limited and more expensive. ( Id. ) at ¶78).

III. Standard

Summary judgment is proper when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue is "genuine" only ifthere is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party and a dispute is "material" only if it could affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The party moving for summary judgment has the initial burden of showing the absence ofa genuine issue of material fact. Anderson, 477 U.S. at 256-57. Once the moving party has done so, the burden shifts to the opposing party to set forth specific facts showing there is a genuine issue for trial. In re Barboza, 545 F.3d 702, 707 (9th Cir.2008). The nonmoving party "may not rely on denials in the pleadings but must produce specific evidence, through affidavits or admissible discovery material, to show that the dispute exists." Id.

On summary judgment, the evidence must be viewed in the light most favorable to the non-moving party. Id. The court should not weigh the evidence and determine the truth of the matter, but determine whether there ...

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