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BTU Western Resources, Inc. v. Berenergy Corp.

Supreme Court of Wyoming

May 28, 2019

BTU WESTERN RESOURCES, INC.; SCHOOL CREEK COAL RESOURCES, LLC; and PEABODY POWDER RIVER MINING, LLC, Appellants (Defendants),
v.
BERENERGY CORPORATION, Appellee (Plaintiff). BERENERGY CORPORATION, Appellant (Plaintiff),
v.
BTU WESTERN RESOURCES, INC.; SCHOOL CREEK COAL RESOURCES, LLC; and PEABODY POWDER RIVER MINING, LLC, Appellees (Defendants).

          Appeal from the District Court of Campbell County The Honorable Thomas W. Rumpke, Judge

          Representing BTU Western Resources, Inc.; School Creek Coal Resources, LLC; and Peabody Powder River Mining, LLC: Patrick R. Day, Thomas L. Sansonetti, Matt J. Micheli, and Jeffrey S. Pope, Holland & Hart LLP, Cheyenne, Wyoming. Argument by Mr. Day.

          Representing Berenergy Corporation: Darin B. Scheer and Keith Burron, Crowley Fleck PLLP, Cheyenne, Wyoming; Peter C. Forbes, Carver Schwarz McNab Kamper & Forbes, LLC, Denver, Colorado. Argument by Mr. Forbes.

          Before DAVIS, C.J., and FOX, KAUTZ, GRAY, and BURKE (RET.), JJ.

          GRAY, JUSTICE.

         [¶1] This dispute, over priority of rights between mineral developers in Wyoming's Powder River Basin, is before the Court a second time. Berenergy owns rights to both federal and private oil and gas. Peabody holds federal coal leases, and these minerals overlap. Berenergy Corp. v. BTU Western Resources, Inc., 2018 WY 2, ¶¶ 38-42, 408 P.3d 396, 404 (Wyo. 2018) (Berenergy I). In Berenergy I, we determined the United States Department of Interior, Bureau of Land Management (BLM) was a necessary party to the proceedings dealing with competing federal leases. We remanded Berenergy I to the district court to determine whether the BLM could be joined as a party and, if it could not, instructed the case be dismissed. Id. ¶ 43, 408 P.3d at 405.

         [¶2] A petition for rehearing was filed alleging the private oil and gas lease (Thornburg lease) was not appealed or decided in Berenergy I. The Thornburg lease-like Berenergy's federal oil and gas leases-overlaps Peabody's federal coal lease. We declined to amend our opinion, finding that issues related to the Thornburg lease were not appealed. In doing so, we did not limit the district court's authority to consider the Thornburg lease issues on remand if it found it appropriate to do so.

         [¶3] On remand, the district court held that it did not have subject matter jurisdiction "as to the lands underlying the Thornburg lease absent the presence of the BLM . . . [and was] limited to construing the leases affecting the lands underlying the Thornburg lease." The district court applied the "law of the case" in deciding that a form of the accommodation doctrine governs to resolve the parties' dispute on the overlapping minerals. It declined to rule on what accommodation would be required because of its finding on jurisdiction. Both parties appeal. We reverse, in part, and affirm, in part.

         ISSUES

         [¶4] We address the following issues:

I. Is the BLM's participation necessary to resolve the Thornburg lease dispute?
II. Does law of the case doctrine require the district court to apply its original judgment of accommodation?

         FACTS

         [¶5] Most of the facts underlying this case are set forth in Berenergy I, ¶¶ 5-12, 408 P.3d at 397-99 and, except for those pertinent to this appeal, are not reiterated here.

         [¶6] Berenergy and Peabody develop minerals in Wyoming's Powder River Basin. Berenergy produces oil from both federal and private oil and gas leases. The private lease known as the Thornburg lease is the subject of this appeal. Peabody mines coal pursuant to its separate federal leases. It plans to extract coal by strip mining areas subject to Berenergy's oil and gas leases, including the Thornburg lease. Peabody's process requires removing top soil, blasting, and excavating the subsurface. Peabody cannot blast within 500 feet of an engineered structure, including an oil well. The parties cannot simultaneously conduct their operations. See Berenergy I, ¶ 12, 408 P.3d at 398.

         Original Proceedings in District Court

         [¶7] Berenergy filed its lawsuit seeking a declaration of the parties' relative rights to develop the minerals subject to their leases. The district court granted in part and denied in part the parties' cross-motions for summary judgment concerning questions of which legal principles should govern their conflict. The district court held the dispute would be resolved under the accommodation doctrine and that its ruling on the relative rights of the parties under their conflicting federal mineral leases would apply equally to the Thornburg lease. A bench trial followed. After trial, the district court ruled on a number of issues. Those decisions relevant to this appeal are: (1) Berenergy must, at appropriate times, cease production and cap its wells below the projected coal seam allowing Peabody to mine through these areas; (2) Peabody must compensate Berenergy for losses in production on a per well basis; and (3) Peabody must escrow monies to cover Berenergy's costs for waterflood production of its oil leases using an off-site well.[1]

         Berenergy I

         [¶8] In Berenergy I, we considered cross-appeals of the district court's ruling regarding the federal leases. Berenergy I, ¶ 14, 408 P.3d at 399. We concluded that we could not reach the substance of those appeals because the BLM was a necessary party to be joined under Rule 19 of the Wyoming Rules of Civil Procedure. Id. ¶¶ 37-43, 408 P.3d at 403-05. We remanded the case "for an evaluation of whether a federal agency may participate in this suit" and directed the district court to dismiss the case if the BLM could not be joined. Id. ¶ 43, 408 P.3d at 405.

         Petition for Rehearing Berenergy I

         [¶9] Peabody petitioned for rehearing of Berenergy I arguing that Berenergy had not appealed the district court's decision regarding the private Thornburg lease and, as a result, that portion of the case should not be subject to the dismissal requirements of Berenergy I. In response, Berenergy asserted that the Thornburg lease was appealed and the entire case-including the Thornburg issue-should be dismissed. In our order on rehearing, we held that "the issues related to the Thornburg lease were not presented to the Court" on appeal and said: "Given the circumstances, this Court finds it inappropriate to amend [Berenergy I] to address issues related to the Thornburg lease. In so ruling, this Court does not limit the district court's authority to consider the Thornburg lease issues, if the district court finds such consideration appropriate."

         District Court's Decision on Remand

         [¶10] On remand, the district court held, "This Court further concludes that it lacks subject matter jurisdiction to grant the relief previously granted to Peabody as to the lands underlying the Thornburg lease absent the presence of the BLM. Instead, the Court is limited to construing the leases . . . ." The district court then found that the law of the case applied, meaning its earlier decision (that the accommodation doctrine controlled the order and operation of development with respect to the Thornburg lease) had not been appealed and the decision remained in effect. The district court did not decide what a suitable accommodation would be, concluding instead that the decision on what constitutes a suitable accommodation rested with the BLM.

         Current Appeal

         [¶11] Peabody contends that the district court: (1) can fully resolve the Thornburg lease dispute without the BLM's participation; and (2) the district court should not have reopened the final judgment on the Thornburg lease dispute. In the alternative, Peabody contends, if the Thornburg lease dispute is reopened, the district court should enforce Peabody's right to mine through the Thornburg lease pursuant to the Coal Lands Act, 30 U.S.C. §§ 83-85, as opposed to the accommodation doctrine. Berenergy argues that the district court correctly held: (1) that our decision in Berenergy I deprived it of subject matter jurisdiction to ...


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