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Synergy Resources Corp. v. Briller, Inc.

United States District Court, D. Colorado

May 5, 2016

SYNERGY RESOURCES CORPORATION, a Colorado corporation, Plaintiff/Counterclaim Defendant,
v.
BRILLER, INC., Nebraska corporation, R.W.L. ENTERPRISES, and ROBERT W. LOVELESS, Defendants/Counterclaim Plaintiffs, and EDWARD HOLLOWAY, an individual, and CRAIG D. RASMUSON, an individual, Counterclaim Defendants,

ORDER ON CROSS MOTION FOR SUMMARY JUDGMENT

R. Brooke Jackson, Judge.

Defendant’s cross-motion for what amounts to partial summary judgment, ECF No. 63, is granted for the reasons discussed in this order.

BACKGROUND

The Court set forth the background facts and history in its order of March 10, 2016 concerning two motions to dismiss, ECF No. 74, and will repeat only so much of the story as is necessary to resolve the pending motion.

Defendant Briller, Inc. is the lessee of two oil and gas leases on land in Weld County, Colorado, referred to as the 1982 and 1985 leases. The 1982 lease had a primary term of three years. It provided, however, that it would continue beyond the primary term as long as oil or gas continued to be produced but would terminate if production ceased unless lessee resumed operations for re-working or drilling a well within sixty (60) days from such cessation.” ECF No. 27-1 at ¶¶2, 12. The 1985 lease had a primary term of 10 years. Like the 1982 lease it provided that the lease would continue beyond the primary term as long as oil or gas continued to be produced but would terminate if production ceased unless the lessee commenced additional drilling or re-working operations within 90 days. ECF No. 27-2 at ¶1.

Based on its review of Briller’s records in the public file at the Colorado Oil & Gas Commission the plaintiff, Synergy Resources Corporation, became convinced that both leases appeared to have terminated under their respective cessation of production clauses. It notified Briller of its position, attempted unsuccessfully to obtain confirming records from Briller, and apparently made some unsuccessful attempts to negotiate a deal with Briller. Ultimately, Synergy obtained leases from the individuals and entities that it believed were the owners of the relevant mineral rights and proceeded with exploration and development activities, including the drilling of eight horizontal wells that crossed through the lands that had been subject to the Briller leases.

Briller was not pleased. It asserts that its leases had not expired, and that Synergy was trespassing on its leaseholds. In this suit, removed from the Weld County District Court, Synergy seeks a declaratory judgment as to whether the 1982 and 1985 Briller leases expired by their terms (and a second claim seeking damages caused by defendants’ alleged interference with Synergy’s contracts with the mineral owners from whom Synergy obtained leases). Verified Complaint, ECF No. 11. Defendants counterclaimed for a declaration that the leases had not expired, and defendant Briller added counterclaims against Synergy and two of its principals, Edward Holloway and Craig D. Rasmuson, for damages and injunctive relief based on theories of trespass, bad faith trespass and conversion. ECF No. 10. Later, after Synergy filed an Amended Complaint, Briller expanded its counterclaims to add a claim for civil theft. ECF No. 37 at 66.

During the initial scheduling conference on October 30, 2015 the parties agreed that the first step would be to resolve whether the two Briller leases had expired due to cessation of production. Briller was about to produce its production records, but Synergy was skeptical about the bona fides of those records. The parties agreed, however, that the answer could probably be found in the records of a third party, DCP Midstream, which purchased the production from the Greeley Tech Center #41-5 Well. The records were later obtained, but the dispute was not resolved.

Defendants filed a motion in which they argued that Synergy is not a real party in interest, and that more than 40 mineral owners from whom Synergy obtained leases must be joined as additional parties to this case. ECF No. 36. The Court denied it. ECF No. 74. Counterclaim defendants Holloway and Rasmussen filed a motion to dismiss the claims against them personally. ECF No. 47. The Court granted it. ECF No. 74. That left pending defendants’ motion for summary judgment, ECF No. 63, which has been fully briefed. Both parties have made the briefing more complicated than it needed to be. The simple question posed, and that the Court now answers, is whether either or both Briller leases expired.

ANALYSIS

A. The 1982 Lease.

Reversing its initial position, defendants now contend that the 1982 lease did expire by its terms. ECF No. 63 at 10. Synergy agrees. ECF No. 68 at 8. I need not discuss it further.

B. The 1985 Lease.

The original 10-year term has long since expired. However, it is undisputed that production continued thereafter. It is also undisputed that production ceased from April 22, 2004 to July 20, 2004, a period of 90 days. Defendants argue that the period of cessation totaled “no more than 90 days.” ECF No. 63 at 8. That argument goes nowhere, because for resumption of production to rescue the lease from the cessation clause, production must resume “within 90 days.” ECF No. 27-2 at ¶1. It ...


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