Interstate Explorations, LLC v. Morgen Farm & Ranch, Inc.

Interstate Explorations, LLC v. Morgen Farm & Ranch, Inc., 2016 MT 20 (Jan. 26, 2016) (Rice, J.) (5-0, aff’d)

Issue: Whether the district court erred in denying Interstate’s motion to dismiss Morgen’s counterclaims for lack of subject matter jurisdiction because Morgen did not exhaust its statutory remedies.

Short Answer: No.


Facts: Morgen owns the surface rights of property to which it leased the oil and gas rights to Montana Oil Properties, Inc., which assigned its lease interest to Interstate. Interstate drilled and completed a well on the Morgen property.

In July 2014, Interstate sued Morgen for failing to execute an easement for MDU to enter the property and hook up an electrical line for the well. Morgen answered and asserted counterclaims of damages caused by hydrocarbon spills.

Procedural Posture & Holding: Interstate moved to dismiss Morgen’c counterclaims for lack of subject matter jurisdiction, and the district court denied the motion. Interstate appeals, and the Supreme Court affirms.

Reasoning: Under the plain language of the Surface Damage Act, the Board of Oil and Gas Conservation has no direct enforcement or rule-making authority under Chapter 10 regarding the dispute resolution process. The Act is an attempt to facilitate communication between surface owners and oil and gas operators to help resolve damage disputes. Although a statutory process has been enacted, it is not an agency or administrative proceeding that must be exhausted before litigation may be commenced. Even if it were, the Act specifically states that the process is not an exclusive one.