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Northern Natural Gas Co. v. Approximately 9117.53 acres in Pratt, Kingman, and Reno Counties

United States District Court, D. Kansas

March 29, 2019

Northern Natural Gas Co., Plaintiff,
Approximately 9117.53 acres in Pratt, Kingman, and Reno Counties, Kansas, 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. Table 3 Just Compensation Owed Per Tract Tract Just Compensation ($)



         This condemnation action is before the court on competing dispositive motions by plaintiff Northern Natural Gas (Dkt. 1079) and the defendants (Dkt. 1081). After submitting the matter for consideration by Special Commissioners, the court first awarded compensation for Northern's condemnation of oil and gas rights in 2015 (Dkt. 1000, 1014). This award was modified on appeal by the Tenth Circuit, substantially diminishing the award owing to defendants. (Dkt. 1046).

         Following the appeal, this court conducted a January 8, 2018 hearing to determine the issues remaining in light of the Tenth Circuit's order. The court rejected the defendants' argument that the matter should be deferred pending the resolution of ongoing state litigation. (Dkt. 1060, at 2). After further argument, the court then issued a new Order (Dkt. 1076) which comprehensively summarized the status of the litigation.

         In the Order, the court again concluded (id. at 4-5) that it was bound by the conclusions of the Tenth Circuit, and was not free to defer additional rulings in the possibility that new decisions by the Kansas state courts may alter the legal landscape. The court further concluded that the calculation of just compensation must exclude the value of Northern's storage gas is the 2010 Extension Area on the date of taking, and that “the amount of the award attributable to that storage gas can be determined with reasonable accuracy from the existing record and from the factual finding of the Commission without a retrial of the case.” Id. at 9.

         The court identified the following issues remaining in the action: (1) the amount of just compensation (reducing the value of the award by the amount of storage gas); the amount, if any, which Northern might set off against that award; and (3) any other potential adjustments to the award, including the amount of interest. Id. at 10. The court directed the parties to file dispositive motions on those remaining issues, and they have done so. The court has reviewed those submissions and the extensive record, and finds that the record supports an award of compensation as provided herein.

         Summary judgment is proper where the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the court must examine all evidence in a light most favorable to the opposing party. McKenzie v. Mercy Hospital, 854 F.2d 365, 367 (10th Cir. 1988). The party moving for summary judgment must demonstrate its entitlement to summary judgment beyond a reasonable doubt. Ellis v. El Paso Natural Gas Co., 754 F.2d 884, 885 (10th Cir. 1985). The moving party need not disprove plaintiff's claim; it need only establish that the factual allegations have no legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir. 1987).

         In resisting a motion for summary judgment, the opposing party may not rely upon mere allegations or denials contained in its pleadings or briefs. Rather, the nonmoving party must come forward with specific facts showing the presence of a genuine issue of material fact for trial and significant probative evidence supporting the allegation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Once the moving party has carried its burden under Rule 56(c), the party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts. "In the language of the Rule, the nonmoving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed.R.Civ.P. 56(e)) (emphasis in Matsushita). One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and the rule should be interpreted in a way that allows it to accomplish this purpose. Celotex Corp. v. Catrett, 477 U.S. 317 (1986).

         Having reviewed the extensive record, the court finds that a sufficient basis for determining just compensation exists. The Commission's Report makes findings as to the amount of recoverable gas (both native gas and storage gas) present in the 2010 Extension Area on the Date of Taking, the amount of recoverable gas in the 3, 040 Acres subject to Northern leases on the Date of Taking, and a methodology for calculating just compensation. The Report (Dkt. 888) identifies the underlying data used in its calculations.

         Included in the evidence submitted to the Commission was the testimony of Dr. Paul Boehm. The Commission found Dr. Boehm's evidence persuasive, particularly with reference to the amount of native gas in the extension area. (Dkt. 888, at 33 n. 18). This court and the Tenth Circuit have also relied on Dr. Boehm's conclusions. See N. Nat. Gas Co. v. L.D. Drilling, No. 08-1405 (Dkt. 420, at 14-16) (noting that “Defendants have cited no gas composition evidence to contradict Dr. Boehm's opinions”); N. Nat. Gas Co. v. L.D. Drilling, , 697 F.3d 1259, 1267 (10th Cir. 2012) (Dr. Boehm's report provided “strong and clear evidence that ... wells even in the northern portion of the expansion area [are] producing primarily storage gas, even though some of those wells are more than 6 miles from the underground fault”).

         The plaintiff also attaches to its motion an affidavit by its expert Randal Brush, who advances several conclusions based upon his own expertise, publicly availableinformation, evidence submitted to the Commission, and the Commission's Report to determine the economic value of oil and native gas for the 2010 Extension Area. (Dkt. 1080 Exh. 1, at ¶¶ 7, 13-14). Brush's methodology takes the same approach as that used by the Commission in the August 26, 2014 Report to the court, which indicated that the Extension Area outside the Northern leases contained some 2.89 Bcf of recoverable gas. (Dkt. 888). The court has carefully reviewed the underlying materials, and finds that Brush's calculations present reliable and persuasive portrait of the oil and native gas, and that his conclusions are further evidence to support the condemnation judgment.

         From the total volumes as determined by the Commission and by the court, Brush subtracted the gas underlying the Northern lease and the escaped storage gas located under the 2010 Extension Area on the Date of Taking. Using the same methodology employed by the Commission, Brush calculated the value of the economically recoverable native gas and oil under the tracts with wells in the 2010 Extension Area.

         Having determined the amount of recoverable native gas for producing wells in the relevant area, Brush determined the amount of cash flow, with allowances for taxes, operating costs and appropriate discounts, to arrive at a value of economically recoverable oil and gas for each producing well. These calculations establish that only the following wells contained native gas in economically recoverable amounts:

         Table 1



Value ($)

Meireis 1-23
12, 720
Young 1 & 1-26
30, 840
Zink B
11, 610
Schwertfeger 1-23
123, 630
Branscom 1
29, 650
McGuire 1-31
76, 630

         The Producers raise several objections to these conclusions. Primarily, they argue that, because the court had previously ruled (Dkt. 810) that compensation would be awarded for both storage and native gas, they “were not afforded the opportunity” to present evidence before the Commission as to the amount of native gas n the Extension area. (Dkt. 1086, at 4). The Producers also complain that the issue of native gas as documented by ...

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