Continental Resources recently scored a unanimous victory before the North Dakota Supreme Court.
The case involves an appeal filed by plaintiffs, Rhonda Pennington, Steven Nelson, Donald Nelson and Charlene Bjornson against the Oklahoma City-based energy company.
In 2011, the plaintiffs executed oil and gas leases for property in McKenzie County, North Dakota. Each lease term was three years with a lessee option to extend for an additional year. The leases were assigned to Continental and it exercised the option to extend the leases. The leases contained a “regulation and delay” paragraph which states, “When drilling, reworking, production or other operations are prevented or delayed…by inability to obtain necessary permits…this lease shall not terminate because of such prevention or delay and, at Lessee’s option, the period of such prevention or delay shall be added to the term hereof.”
In May 2012, Continental applied for a drilling permit on a 2,560-acre unit, which included property covered by the leases.
In October 2015, Continental recorded an affidavit of regulation and delay, stating it had not yet obtained federal regulatory approval to begin drilling operations on the lease. Continental sought to terminate the 2,560-acre unit and create a 1,920-acre unit that excluded the land requiring federal approval.
In November 2015, the North Dakota Industrial Commission approved the smaller spacing unit.
In January 2016, the Commission pooled all of the oil and gas interests in the smaller unit for development. Continental began drilling operations and obtained production in 2017.
In August 2017, the plaintiffs sued Continental, alleging the leases expired on October 25, 2015 and Continental’s delay in obtaining regulatory approval did not extend the leases. The district court ruled in Continental’s favor, concluding the “regulation and delay” paragraph extended the leases until regulatory approval was obtained to begin drilling operations.
The plaintiffs filed their appeal, arguing that the district court erred in concluding the leases had not expired.
In its decision rendered on June 10, 2021, the North Dakota Supreme Court ruled that under the law of the case doctrine, a party cannot relitigate issues in a second appeal which were resolved in the first appeal or which would have been resolved had they been properly presented in the first appeal. The mandate rule requires the district court to follow an appellate court’s pronouncements on legal issues in subsequent proceedings in the case and to carry the appellate court’s mandate into effect according to its terms.
To view the decision, click here.