[CITE: Locust Street Co. v. Citation Oil & Gas and DNR, 13 CADDNAR 295 (2014)
[VOLUME 13, PAGE 295]
Cause #: 13-101G (and 13-104G)
Caption: Locust Street Co. v. Citation Oil & Gas Corp. and DNR
Administrative Law Judge: Jensen
Attorneys: Brasseale II, DiRienzo (Locust); Illingsworth, Latowski (Citation); Boyko (DNR)
Date: September 17, 2014
[See Editor’s note at end of this document regarding change in the decision’s original format.]
FINAL ORDER ON MOTIONS FOR SUMMARY JUDGMENT
54. The Permits issued by the Department of Natural Resources to Citation Oil & Gas Corp. are affirmed.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Background and Jurisdiction
1. On June 5, 2013, the Claimant, Locust Street Company, Inc. (“Locust Street”), filed its petition for administrative review with the Natural Resources Commission (“Commission”) alleging to be aggrieved or adversely affected by the Respondent, Department of Natural Resources’ (“Department”), issuance of two Oil Well Drilling and Operating Permits to the Respondent, Citation Oil and Gas Corporation (“Citation”).
2. Permit 54796 and Permit 54797 (hereinafter referred to collectively as “the Permits”) were issued by the Department on May 22, 2013 and are the subject of administrative review under administrative cause number 13-104G and 13-101G, respectively.
3. Locust Street asserts that it is the agent for and manager of certain Gray family entities that have held “complete title to certain real estate in Wabash County, Illinois located along the border of Illinois and Indiana, opposite Gibson County”, Indiana since “circa 1839.”
4. Citation holds a lease (the Amanta Maier Lease), dated July 12, 1937 and duly recorded on September 29, 1937, to drill for oil and gas on lands within a drilling unit located “east of the Wabash River and within Section 14, Township 3 South, Range 14 West, lying [in] Gibson County, Indiana.” Citation agrees that this property lies immediately across the Wabash River to the east of the property owned by the Gray family entities. Brief in Support of Motion for Summary Judgment, pg.2.
5. For consideration in this proceeding is Locust Street’s opposition to Citation’s assertion “that it owns or controls the rights to drill and produce oil in and under all lands within the drilling unit boundary and lease acreage…” With respect to Permit 54797 Locust Street elaborates as follows:
4. The drilling unit and lease acreage for this well are located near the present location of the Wabash River, which forms the boundary between Illinois and Indiana.
5. According to a recent presentation by the Indiana Society of Professional Land Surveyors entitled “State Line Retracement Issues with Special Emphasis on the PLSS and Riparian Closings on the Illinois/Indiana Boundary,” which was held on April 18, 2013, in Vincennes Indiana, mineral rights are traced to the original fee simple patents granted by the U.S. Department of the Interior, Bureau of Land Management, General Land Office (“GLO”).
6. Although the meanderings of the Wabash River since 1839 may have affected the Gray family entities’ ownership of surface rights adjacent to the Wabash River, the oil and gas rights remain as they were held under the original GLO patents, unless such rights were subsequently transferred or conveyed by the owner.
7. Upon information and belief, the drilling unit for the Amanta Maier Well #30E that is the subject of the Permit [Permit 54797] encroaches upon mineral interests owned by Gray family entities and managed by Locust Street.
Petition Requesting an Administrative Review of Oil Well Permit #54797 Issued to Citation Oil & Gas Corp., Gibson County, Indiana, pg. 2. Locust Street offers the same position in its petition for administrative review associated with Permit 54796.
6. The Department, through its Division of Oil and Gas, is responsible for permitting, regulation, enforcement and other functions associated with the production of oil and gas in accordance with Indiana Code §§ 14-37 and 312 Indiana Administrative Code 16. Indiana Code § 14-37-2-1.
7. The Commission is the ultimate authority for the Department with respect to the instant proceeding. Indiana Code § 4-21.5-1-15 and 312 IAC 3-1-2.
8. On November 21, 2013, Citation filed its motion for summary judgment to which Locust Street and the Department filed timely responses on December 31, 2013. Citation’s reply brief was filed on January 6, 2014 and oral argument was heard on January 23, 2014.
Summary Judgment Standard
9. Summary judgment in administrative proceedings is governed by Indiana Code § 4-21.5-3-23, which expressly reflects the applicability of Trial Rule 56 of the Indiana Rules of Trial Procedure.
10. Trial Rule 56 authorizes a party against whom a claim has been initiated, in this instance Citation and the Department, to seek summary judgment at any time following the commencement of the action.
11. “The purpose of summary judgment is to terminate litigation about which there can be no factual dispute and which may be determined as a matter of law.” Howard v. DNR and Smith, 13 CADDNAR 36, 38 (2012) citing Wells v. Hickman, 657 N.E.2d 172, 175 (Ind. App. 1995).
12. “The judgment sought shall be rendered forthwith if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Trial Rule 56(C), See also Rodgers v. Liston and DNR, 13 CADDNAR 222, 223 (2014).
13. Summary judgment may be granted upon the issues raised by Citation in favor of another party although the other party did not file a similar motion for summary judgment. Trial Rule 56(B), see also Wheeler, et al. v. Peabody, DNR and Town of Zionsville, 9 CADDNAR 193 (2004).
14. “A fact is ‘material’ for summary judgment purposes if it helps to prove or disprove an essential element of the plaintiff’s cause of action.” Rodgers v. Liston and DNR, supra, citing Graham v. Vasil Management Co., Inc. 618 N.E.2d 1349 (Ind. App. 1993).
15. “A factual issue is ‘genuine’ for purposes of summary judgment if the trier of fact is required to resolve an opposing party’s different versions of the underlying facts.” Rodgers v. Liston and DNR, supra, citing York v. Union Carbide Corp., 586 N.E.2d 861 (Ind. App. 1992).
16. “A party moving for summary judgment has the burden of proof with respect to summary judgment, regardless of whether the party would have the burden in an evidentiary hearing. Once the party moving for summary judgment establishes a lack of material fact, the party responding to the motion must disgorge sufficient facts to show the existence of a genuine triable issue.” Philbeck v. Collins & Altman, 13 CADDNAR 219 (2013), (internal citations omitted).
[VOLUME 13, PAGE 296]
Findings of Fact
17. While the exact boundaries of property owned by the Gray family entities and by Citations’ lessor throughout the years is not stipulated by the parties, the evidence provided by each Locust Street and Citation is substantially consistent with respect to the property rights of each party and the location of the wells to be drilled under the authority of the Permits.
18. The Gray family entities are the owners of property situated in Illinois on the western shore of the Wabash River opposite the property owned by Citation’s lessor located on the eastern shore of the Wabash River in Gibson County, Indiana.
19. The natural erosional forces associated with the Wabash River has, over time, caused a diminution of the surface property owned by the Gray family entities while the surface property owned by the lessor of Citation has experienced expansion through accretion. Compare Petition Requesting Administrative Review of Oil Well Permit # 54796, Exhibit A, Brief in Support of Motion for Summary Judgment Exhibits C & G.
20. The wells authorized by the Permits will be located within the surface property boundary of Citation’s lessor on the Indiana side of the Wabash River although the location of the proposed wells was historically within the surface property boundary of the Gray family entities on the Illinois side of the Wabash River. Brief in Support of Motion for Summary Judgment, Exhibit C.
Conclusions of Law
21. It has been long settled that:
“when grants of land border on running water, and the banks are changed by that gradual process known as ‘accretion,’ the riparian owner’s boundary line still remains the stream, although, during the years, by this accretion, the actual area of his possessions may vary. In New Orleans v. U.S., 10 Pet. 662, 717, this court said: ‘The question is well settled at common law, that the person whose land is bounded by a stream of water which changes its course gradually by alluvial formations shall still hold be the same boundary, including the accumulated soil. No other fuel can be applied on just principles. Every proprietor whose land is thus bounded is subject to loss by the same means which may add to his territory; and, as he is without remedy for his loss in this way, he cannot be held accountable for his gain.
Nebraska v. Iowa, 143 U.S. 359, 360-361, (1892). See also Mississippi v. Arkansas, 415 U.S. 289 (1974; Missouri v. Nebraska, 196 U.S. 23 (1904); Arkansas v. Tennessee, 246 U.S. 158 (1918); Longabaugh v. Johnson, 321 N.E.2d 865, (Ind. Ct. App. 1975); Town of Freedom v. Norris, 27 N.E.2d 869, (Ind. 1891).
22. An exception to the principal of accretion is recognized where:
if, instead of a gradual and progressive change of its bed, the river, by an accident merely natural, turns entirely out of its course, and runs into one of the two neighboring states, the bed which is abandoned becomes, thenceforward, their boundary, and remains the property of the former owner of the river.
Id. at 366-367.
23. The parties’ filings and evidentiary material highlight the gradual and historic alterations of the Wabash River from 1806 to 2013 in the geographical area of interest. Petition Requesting Administrative Review of Oil Well Permit # 54796, Exhibit A, Brief in Support of Motion for Summary Judgment Exhibits C, E, F & G. The evidentiary material is void of evidence indicative of an avulsion resulting in a sudden and immediate change in course of the Wabash River.
24. Clearly the common law doctrine of accretion and erosion controls in Indiana with respect to surface property so impacted. Longabaugh v. Johnson, 321 N.E.2d 865, (Ind. Ct. App. 1975); Town of Freedom v. Norris, 27 N.E.2d 869, (Ind. 1891). The Commission has also routinely recognized common law associated with riparian rights in concluding that accretion and erosion by natural causes may alter the location of shorelines. Sims, et al., supra & Lauder and Starke Co. Comm., supra.
25. Locust Street seemingly accepts that the affect of accretion and erosion clearly control with respect to the Gray family entities and Citations’ lessor’s ownership of the surface property. The issue at hand involves no dispute that Citation’s lessor in Indiana now owns title to a larger surface area as a result of accretion and the Gray family entities now owns a diminished surface property area in Illinois resulting from erosion.
26. However, while the impact of accretion upon surface property is not in dispute, the impact of accretion upon the ownership of the subsurface property interests is in dispute. Diligent search has failed to identify an occasion in which an Indiana court has considered the impact of accretion upon subsurface property interests.
27. It is not the intent of this decision to exactly establish the parties’ respective property boundaries, whether those be surface or sub-surface boundaries. It is the intent, however, to establish whether Citation is a proper “owner” having the requisite authority to drill into and produce oil and gas from the particular pool in question for the purpose of affirming or overturning the issuance of the Permits. See 312 IAC 16-1-39.
28. Additional factors must be considered with respect to this proceeding. First is the State of Indiana’s property interests associated with the geographic area at issue and second is the fact that Locust Street’s contention brings into issue considerations potentially impacting the boundary line between the State of Indiana and the State of Illinois.
29. The Wabash River “from its junction with the Ohio River for 441.9 river miles to the Wells- Adams County Line” is a navigable waterway. Information Bulletin #3 (Third Amendment) Roster of Indiana Waterways Declared Navigable or Nonnavigable, June 11, 2008, http://www.in.gov/legislative/iac/20080611-IR-312080426NRA.xml.pdf.
30. Title to the bed of a navigable waterway vests in the State of Indiana. State v. Kivett, 95 N.E.2d 145, (1950), Snyder v. Department of Natural Resources, 8 CADDNAR 41 (1998).
31. The doctrine of accretion, clearly accepted in Indiana, dictates that the ownership of the bed of the Wabash River is vested regardless of any change in physical location.
32. Therefore, just as this analysis requires a determination as to the property interests of Locust Street and Citation’s lessor in light of the meanderings of the Wabash River over time, the State of Indiana’s property interests must also be considered.
33. Furthermore, it is noted that the State of Indiana’s western boundary with Illinois is identified as:
… a line drawn along the middle of the Wabash from its mouth, to a point, where a due north line drawn from the town of Vincennes, would last touch the north western shore of the said river…
31 Acts Passed at the First Session of the Fourteenth Congress of the United States, 59-61; U.S. Statutes at Large, III, 289-291; Kettleborough (ed.), Constitution Making in Indiana, I, 73-77; Carter (ed.), Territorial Papers, VIII, 404-408.
34. The Department correctly notes that a determination of the boundary between the State of Indiana and the State of Illinois is a matter within the original and exclusive jurisdiction of the [United States Supreme] Court.” Ohio v. Kentucky, 410 U.S. 641 (1973). The content of the instant order shall be restricted in application to the matter at hand and in no respect be viewed as commentary with respect to any determination of the location of the Indiana – Illinois State boundary.
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35. The Supreme Court of Indiana has, on at least one occasion, considered the relationship between surface property and subterranean formations lying beneath that surface. In so doing the court stated:
It will be noted that appellee nor his predecessors in title had never effected a severance of the cave from the surface estate. Therefore the title of the appellee extends from the surface to the center…
Marengo Cave Co. v. Ross, 10 N.E.2d 917 (1937), (emphasis added).
36. It is recognized that a cave is a fixed structure permanently located beneath the surface property more akin to coal reserves than to oil and gas, which has the ability to migrate from one location to another. Notwithstanding this difference,
Oil and gas are a part of the property under which they lie and for that reason are the property of the surface owner of the land but they remain the property of the surface owner only for the time that they remain beneath that surface.
Williams v. DNR and Countrymark Energy, 13 CADDNAR 6, 11 (2012) relying upon Brown v. Spilman, 155 U.S. 665, 669-670, (1895) (emphasis added).
37. The Indiana Supreme Court’s ruling in Marengo Cave establishes that title to surface lands carries with it title to subsurface formations and based upon United State Supreme Court pronouncement, the Commission has agreed that oil and gas reserves located beneath the surface are owned by the surface landowner. Seemingly there is no distinction to be made with respect to the type of subsurface formation that exists; the surface owner is the owner of whatever lies beneath.
38. Marengo Cave contemplates the ability to sever the subsurface property from the surface property consistent with Indiana Code §§ 32-23-10’s establishment of the means by which subsurface mineral rights may be severed from the surface property to which they are attached.
39. To “sever” is “to separate (a part) from the whole” or to “divide into parts; disunite”. Dictionary.com Unabridged, Based on the Random House Dictionary, © Random House, Inc. 2014, http://dictionary.reference.com/browse/sever?s=t . This further supports the conclusion that surface property and its subsurface components are routinely viewed to be one interest that is subject to separation.
40. Courts in numerous jurisdictions have concluded that the doctrine of accretion not only controls with respect to the surface property but also governs title to the subsurface property interests. Swaim v. Stephens Production Company, 196 S.W.3d 5, (Supreme Court of Arkansas, 2004); See also Eli v. Briley, 959 S.W.2d 723 (Tex.App.-Austin 1998), Siegert v. Seneca Resources Corp., 28 S.W.3d 680 (Tex.App.-Corpus Christi 2000); Nilsen v. Tenneco Oil Co., 614 P.2d 36 (Okla. 1980); Jackson v. Burlington Northern, Inc., 667 P.2d 406 (1983).
41. The deliberations and conclusions from other jurisdictions are instructive.
42. Indiana’s application of the doctrine of accretion is consistent with a majority of jurisdictions and there is here no convincing rationale to support a divergence from the majority view that the doctrine of accretion is equally applicable to subsurface property interests.
43. The Indiana Supreme Court’s prior determination that title to the surface of real property carries with it title “to the center” is consistent with the application of the doctrine of accretion to subsurface property interests. Through such application title to the surface and title to the subsurface remain unified absent severance by the title owner.
44. Application of the doctrine of accretion to the facts presented establish by a preponderance of the evidence that the wells proposed to be drilled under the authority of the Permits are located within property to which Citation’s lessor holds title to both the surface and sub-surface.
45. Locust Street asserts that notwithstanding a determination that the doctrine of accretion applies equally to the sub-surface properties as to surface properties, “the actions of the respondents [Citation and the Department] for the past thirty years establish a different mineral boundary” through acquiescence. Claimant’s Response in Opposition to Citation Oil & Gas Corp.’s Motion for Summary Judgment, pg 8.
46. Locust Street finds support for its contention in the “Unit Agreement” entered into between the State of Indiana and Damson Oil Corporation, the predecessor in interest of Citation, whereby the State of Indiana agreed that “Tract Participations shall remain constant throughout the entire period during which this agreement remains in force and effect, notwithstanding any subsequent shifts or changes in the course of the Wabash River.” Claimant’s Response in Opposition to Citation Oil & Gas Corp.’s Motion for Summary Judgment, Exhibit 7, ¶ 5.1 (emphasis added).
47. A clear reading of paragraph 5.1 of the Unit Agreement confirms that the paragraph sets forth the means of allocating royalties between Citation and its lessor and the State of Indiana “in accordance with the Tract Participations” that are “determined by the ratio which the surface area of the particular tract bears to the entire surface area of the Unit Area involved.” Id. ¶ 4.1 & 5.1. Furthermore, the Unit Agreement expressly states that Citation’s and the State of Indiana’s title to property are unaffected by its terms.” Id. ¶ 2.2.
48. While in the right case acquiescence by a property owner to the assertion of dominion and control by another person over property may result in the legal recognition of a different property boundary, such is not the case here. The term stated in the Unit Agreement upon which Locust Street relies, bears no relevance to the dominion or control of actual property and reflects nothing with respect to the title of property. The term’s application is clearly limited to establishing a consistent and stable method of the dividing royalties.
49. Citation presented many alternative theories in support of its motion for summary judgment including, adverse possession, estoppel by laches and acquiescence. Because this matter is determined on other grounds as stated herein, it is unnecessary to address the remainder of Citations’ contentions.
50. In “Claimant’s Response in Opposition to Citation Oil & Gas Corp.’s Motion for Summary Judgment”, Locust Street raises a new issue, different than the issues presented in its petitions for administrative review[1]. The newly developed issue presented by Locust Street alleges that the “oil wells proposed by the Permits at issue in these cases …are not on the acreage set forth in the Amanta Maier Lease or Maier Lease Assignment.”
51. It has been previously determined that the wells authorized by the Permits are proposed to be located on property that through application of the doctrine of accretion is owned by Citation’s lessor. Whether the lease between Citation and its lessor encompasses these accreted lands upon which the wells are to be drilled is a matter for consideration between Citation and its lessor.
52. Locust Street, who has failed to prove its claim to be the rightful owner of the oil and gas to be produced by the wells authorized by the Permits and who is not a party to the lease upon which Citation claims an interest in the oil and gas is not a proper party to contest the lease agreement between Citation and its lessor.
53. In any event, the lease was the subject of previous litigation by which the court concluded that all accreted lands were included in the lease whether or not specifically described. Maier v. Continental Oil Co., 120 F.2d 237 (1941).
[EDITOR’S NOTE: The original format of the Administrative Law Judge’s Findings of Fact, Conclusions of Law, and Final Order has been modified to correspond with CADDNAR format. The Final Order, Paragraphs 54, has been relocated to the “Final Order” section at the beginning of this document.]