Columbia Gas Transmission Corp. v. An Exclusive Gas Storage Easement in the Clinton Subterranean Geological Formation in 19.16 Acres

705 F. Supp. 1242, 105 Oil & Gas Rep. 268, 1988 U.S. Dist. LEXIS 15969, 1988 WL 147010
CourtDistrict Court, N.D. Ohio
DecidedAugust 9, 1988
DocketNo. C85-661A
StatusPublished
Cited by1 cases

This text of 705 F. Supp. 1242 (Columbia Gas Transmission Corp. v. An Exclusive Gas Storage Easement in the Clinton Subterranean Geological Formation in 19.16 Acres) is published on Counsel Stack Legal Research, covering District Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Columbia Gas Transmission Corp. v. An Exclusive Gas Storage Easement in the Clinton Subterranean Geological Formation in 19.16 Acres, 705 F. Supp. 1242, 105 Oil & Gas Rep. 268, 1988 U.S. Dist. LEXIS 15969, 1988 WL 147010 (N.D. Ohio 1988).

Opinion

ORDER

DOWD, District Judge.

I. INTRODUCTION.

On March 7,1985, the plaintiff, Columbia Gas Transmission Corp., filed the above-captioned condemnation action pursuant to the provisions of the Natural Gas Act, 15 U.S.C. § 717f(h). Columbia sought to appropriate the exclusive right to use the underground natural gas storage easement in the Clinton formation beneath the Johnson property. Following the Court’s holding that Columbia had the right to condemn the subject easement, the case proceeded to a jury trial to determine the value of the condemned easement for purposes of rendering just compensation to the defendants.

The jury found $18,500 to be just compensation for the taking of the easement beneath the Johnson property. By agreement of the parties, the trial was bifurcated so that the Court instead of the jury would have the responsibility to determine all additional elements of just compensation relating to the defendant producers’ drill[1244]*1244ing site preparation costs as well as reclamation costs which under Ohio law will now have to be incurred because the well cannot now be completed or produced.

Before the Court is the motion of the defendants Smail and Wiles (“Producers”) to recover costs for improvements (docket # 64). The defendants request the Court to award $19,017.591 as just compensation for the taking by Columbia of the Producers’ drilling site located on the Johnson property. The Producers further request the Court to declare that all plugging and reclamation costs are the responsibility of Columbia, in which case the defendants agree that Columbia should be entitled to salvage rights.2

In response to the motion, Columbia has agreed that the Producers are entitled to recover $235 representing $95 incurred on November 11, 1983 for a drilling permit and $140 incurred on November 30, 1983 for a location survey. Columbia opposes any award of further expenses to the Producers.

For the following reasons, the Court awards to the Producers the sum of $14,-689.57 and denies the remainder of the motion for costs and improvements. Further, the Court holds that the plaintiff, Columbia Gas, is responsible for reclamation costs and is also entitled to salvage rights.

II.OVERVIEW.

The primary issue here is good faith. Columbia agrees that the defendant Producers may recover improvement costs for the drilling site, as well as reclamation costs, so long as the expenses were incurred in good faith. What the Court must determine is which, if any, of the expenses incurred by the Producers (beyond the $235 concededly owing) were incurred in good faith. Then the Court must address the secondary issue, i.e., of those expenses incurred in good faith, which expenses are recoverable as just compensation for the taking of the drilling site.

III.POSITIONS OF THE PARTIES AS TO THE GOOD FAITH ISSUE.

Columbia takes the position that, except for the $235 incurred at the very outset for a drilling permit and location survey, all the Producers’ expenses were incurred in bad faith because the Producers were on notice that the proposed well site was within the “map area,” i.e., the area designated by the FERC certificate as the Columbia storage field.

The Producers do not dispute, and in fact have stipulated, that as early as December 1, 1983, Columbia notified the Producers that Columbia objected to their obtaining a drilling permit because Columbia asserted that the proposed well location was inside the boundaries of Columbia’s storage field. The position taken by the Producers, however, is that Columbia’s right to condemn was uncertain at best at that time and in fact remained uncertain until some time after the defendants incurred all the expenses connected with the preparation of the drilling site, including the obligation to incur reclamation costs when the well could not produce or stops producing.

IV.THE COURT’S THRESHOLD THOUGHTS.

In the Court’s view, the Court not only has the responsibility to determine the good faith/bad faith issue as it relates to this particular case. The Court must also attempt to fashion some sort of principled method for resolving the good faith/bad faith question in the context of future condemnation actions. The Court finds that to [1245]*1245derive such a principled method requires the Court to establish a rule that can be applied with at least some measure of objectivity. Thus, although each party here has to some extent questioned the “motive” of the other party in pursuing a certain course of action,3 it seems to the Court that the important question is not so much motive but reasonableness. A standard based upon motive, which will always be a subjective question, will not provide anything much in the way of a principled method for determining just compensation. However, if the Court phrases the issue as, “Would a reasonable person, knowing the facts and circumstances existing at the relevant time, have proceeded to incur the expenses which he later seeks as just compensation in a condemnation action?” then the Court will, hopefully at least, have provided at least some guidance for addressing the issue in future cases.

In considering the good faith/bad faith question, the Court must attempt to accommodate two equally important, albeit competing, policy interests. On the one hand is the public interest in ensuring the integrity of gas storage fields. On the other hand is the equally important interest of a private property owner in making legitimate and productive use of his property. In the Court’s view, it is the Court’s responsibility to fashion some rule of reason that will allow the utmost exercise of each interest without unduly impinging upon the other interest.

To illustrate the Court’s concern, it might be helpful to pose two hypothetical situations at opposite extremes. Suppose, for example, that in this case it had been absolutely clear that the Johnson property lay two miles outside the protective area boundaries of Columbia’s storage field, but that Columbia had nonetheless threatened a condemnation action on the grounds of Columbia’s belief that the law would eventually develop to a point where Columbia could condemn property within a five mile radius of the storage field boundary. In such a case, it would seem unjust to hold that the producer should be presumed to proceed at his peril in preparing to make productive use of his oil and gas lease and drilling permit. To curtail the Producers’ rights under those circumstances would be, in the Court’s view, to place extreme and dangerous power into the hands of an entity with condemnation powers.

By way of contrast, suppose that today, against the background of the case law developed thus far, the Johnson property lay not merely within the protective area but within the active area of Columbia’s storage field. Suppose further that against that background Columbia forewarned the producer against drilling. Under those circumstances it would appear that a reasonable person would know that Columbia had a reasonably certain right to condemn the subject property and that a producer should therefore be held to proceed at his own risk if he chooses to incur expenses to prepare the drilling site.

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705 F. Supp. 1242, 105 Oil & Gas Rep. 268, 1988 U.S. Dist. LEXIS 15969, 1988 WL 147010, Counsel Stack Legal Research, https://law.counselstack.com/opinion/columbia-gas-transmission-corp-v-an-exclusive-gas-storage-easement-in-the-ohnd-1988.