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Mountaineer Minerals, LLC v. Antero Resources Corp.

United States District Court, N.D. West Virginia

November 5, 2019

MOUNTAINEER MINERALS, LLC, a West Virginia limited liability company, Plaintiff,
v.
ANTERO RESOURCES CORPORATION, a Delaware corporation formerly known as Antero Resources Appalachian Corporation, Defendant.

          MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT ANTERO RESOURCES' SUPPLEMENTAL MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF MOUNTAINEER MINERALS' SUPPLEMENTAL MOTION FOR SUMMARY JUDGMENT

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE.

         I. Background

         In this civil action, three oil and gas companies, Antero Resources Corporation (“Antero Resources”), Mountaineer Minerals, LLC (“Mountaineer Minerals”), and Perkins Oil and Gas (“Perkins”), assert some interest in the rightful ownership of oil and gas leasehold rights (the “Marcellus Rights”) governed by a 100-year-old lease (the “Collins Lease”).[1] Perkins currently owns and operates oil and gas wells that extract oil and gas from beneath the Collins Lease property. Defendant Antero Resources and plaintiff Mountaineer Minerals both seek ownership of the Marcellus Rights. Defendant Antero Resources purports to have purchased the Marcellus Rights from Crude Oil and Gas Company (“Crude”). Prior to any of the parties having an interest, the Collins Lease mineral rights were divided into what has been described in this civil action as shallow rights and deep rights.

         This Court will briefly outline the division of shallow rights and deep rights under the Collins Lease. However, this Court notes various imperfections in the chain of title. First, each assignment of the rights under the Collins Lease was recorded in Ritchie County, West Virginia. The only one that was not recorded in Ritchie County was Crude's 1985 assignment to Monongahela Leasing (“Monongahela”). That was improperly recorded in Doddridge County, West Virginia. Second, two assignments do not reference the Collins Lease by name: (1) the 1985 assignment from Crude to Monongahela; and (2) the 1986 assignment from Monongahela to Farr.

         In 1984, P.D. Farr (“Farr”) was the owner of both the shallow rights and deep rights under the Collins Lease. However, that same year, Farr assigned his deep rights under the Collins Lease to Crude. The following year, Crude assigned its deep rights to Monongahela. Then, in 1986, Monongahela assigned its deep rights back to Farr. In 1991, Farr assigned his shallow rights to Key Oil, which assigned those shallow rights back to Farr about one month later. Therefore, at the time of the Subject Assignment in 1996, Farr owned both the shallow rights and deep rights under the Collins Lease. On August 30, 1996, Farr assigned, in a document titled “General Assignment and Bill of Sale” (hereinafter, the “Subject Assignment”), two wells (API well numbers 47-85-03583 and 47-85-02520) (the “Assigned Wells”) and the associated leasehold rights to operate those wells to Perkins. ECF No. 90-1 at 1; ECF No. 82 at 6. The parties dispute whether the Subject Assignment assigned both the shallow rights and deep rights, and whether the Subject Assignment pertained only to the wells or included all leasehold rights under the Collins Lease. In 2010, defendant Antero Resources became interested in purchasing the Marcellus Rights as to those wells and it began negotiating with Perkins to purchase such rights. During defendant Antero Resources' negotiations with Perkins, defendant Antero Resources obtained an ownership report in November 2012 which was based on an examination of only Ritchie County records. Therefore, that report did not include the 1985 assignment from Crude to Monongahela which was recorded in Doddridge County, as stated above. Approximately two years later, Crude sold certain rights to defendant Antero Resources. Moreover, in 2015, Perkins assigned its rights to plaintiff Mountaineer Minerals.

         This Court entered a memorandum opinion and order that granted plaintiff Mountaineer Minerals' motion for summary judgment and denied defendant Antero Resources' motion for summary judgment. ECF No. 76. This Court, at that time, concluded that defendant Antero Resources had notice of Perkins' ownership interest in the Marcellus Rights but failed to use reasonable diligence to determine whether Perkins owned such rights. Id. at 10, 15. This Court concluded that defendant Antero Resources was not a bona fide purchaser and did not purchase its interest in the Collins Lease in good faith. Id. at 16. Therefore, this Court declared that Perkins' ownership interest was not void and plaintiff Mountaineer Minerals was the rightful owner of the Marcellus Rights. Id. at 21.

         The United States Court of Appeals for the Fourth Circuit vacated and remanded the judgment of this Court in order to resolve a genuine issue of material fact - which rights in the Subject Assignment did Farr assign to Ritchie. According to the Fourth Circuit, the main issue is whether Ritchie, and thereby Perkins, and thereby plaintiff Mountaineer Minerals, obtained the Marcellus Rights under the terms of the Subject Assignment. ECF No. 82 at 10. Prior to remand, it was unclear based on the record whether Ritchie obtained the Marcellus Rights. If Ritchie obtained the Marcellus Rights then plaintiff Mountaineer Minerals would be the rightful owner of such rights.

         Following the remand from the Fourth Circuit, this Court set a briefing schedule and oral argument on September 12, 2019 to address the issue remaining following remand - namely, which rights Farr assigned to Ritchie in 1996, as those rights pertain to API Number 47-85-03583. ECF No. 87. Defendant Antero Resources indicated at oral argument in this Court following the remand, without objection by plaintiff Mountaineer Minerals, that the Fourth Circuit “was satisfied that the depth of the other well [(API Number 47-85-02520)] was shallow under anyone's definition of shallow.” ECF No. 97 at 6.

         Currently pending before this Court are the following briefs together with responses and replies: (1) a supplemental brief by Antero Resources in support of summary judgment (ECF No. 90); and (2) a supplemental brief by Mountaineer Minerals in support of summary judgment (ECF No. 91). The Court will summarize the contentions of the parties in turn.

         Plaintiff Mountaineer Minerals contends that the Marcellus Rights were assigned to Ritchie. ECF No. 91 at 12. In support, plaintiff Mountaineer Minerals states that in 1986, Monongahela assigned to Farr the Marcellus Rights and that in 1991, Farr owned all shallow rights as well. ECF No. 92 at 5. According to plaintiff Mountaineer Minerals, pursuant to the legal doctrine of merger, there is no longer a division of leasehold depths at the bottom of the fifth sand formation, but all leasehold rights and depths merged together and were owned by Farr in 1991. Id. Therefore, plaintiff Mountaineer Minerals concludes that, at the time of the Subject Assignment, Farr owned any and all leasehold rights and he assigned those rights to Ritchie without exceptions or reservations. Id. Plaintiff Mountaineer Minerals further maintains that a strict interpretation of the language in the Subject Assignment and lack of words of limitation leads to the conclusion that the Marcellus Rights, and not just the wells, were assigned to Ritchie, and thereby to the plaintiff. ECF No. 91 at 12-16. Plaintiff Mountaineer Minerals then contends that even if this Court were to find the Subject Assignment's terms to be ambiguous, Ritchie would still receive the leasehold acreage and not just the wells based on the principle that all ambiguities are to be construed strictly against the assignor and in favor of the assignee. Id. at 17. In support, plaintiff Mountaineer Minerals states that it hired Tom O'Neill to provide a third-party title opinion (hereinafter “Title of Perkins”) on the Collins leasehold ownership, and he found that Perkins was the owner only insofar as that oil and gas leasehold extends below the bottom of the fifth sand formation. ECF No. 91 at 18-19. Moreover, plaintiff Mountaineer Minerals refers to defendant Antero Resources' November 30, 2012 Revised Limited Ownership Report and the October 29, 2012 Limited Ownership Report, stating that those reports serve as further evidence that Perkins acquired any and all leasehold rights and not just the wells. Id. at 19-20.

         Defendant Antero Resources asserts that the Subject Assignment did not include the Marcellus Rights because neither assigned well reached the depth of the Marcellus Shale Formation. ECF No. 90 at 6. Defendant Antero Resources cites the following in support of that conclusion: (1) the terms of the Subject Assignment; (2) various ownership reports, (3) previous statements made by plaintiff Mountaineer Minerals, and (4) various public documents. Id. at 7-12. Defendant Antero Resources stresses the importance of the Fourth Circuit's finding that Farr assigned to Ritchie his interest in only two wells. ECF No. 95 at 8-9; see ECF No. 82 at 6 (“In 1996, Farr assigned to [Ritchie] all [Farr's] right, title, and interest in and to two specific oil and/or gas wells.”) (internal quotation marks omitted). Therefore, defendant Antero Resources claims that while the Collins Lease applied to all depths and formations, the Collins Lease does not shed light on the depths and formations covered by later assignments. Id. at 10. Moreover, defendant Antero Resources states that Farr was capable of conveying the Assigned Wells, along with the leasehold interests necessary to operate them, from his larger interest in the Collins Lease. Id. at 10-11. Therefore, defendant Antero Resources concludes that words of limitation were not necessary. Id. at 11. Further, defendant Antero Resources indicates that the Title of Perkins which was prepared by Tom O'Neill & Associates, is unsworn, not previously admitted, has not been authenticated, and that Mr. O'Neill was never disclosed as an expert; therefore, it should not be considered. ECF No. 93 at 19-20. Even if the Court considers the Title of Perkins, defendant Antero Resources notes that the Title of Perkins does not specifically address the Marcellus Shale Formation or delineate depths. Id.

         II. Applicable Law

         Under Rule 56(c) of the Federal Rules of Civil Procedure, A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:

(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . . ...

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