Duncan Energy Company v. United States Forest Service
50 F.3d 584 (8th Cir. 1995)

  • The Federal government acquired the surface rights (aka the surface estate) to some land in North Dakota and made it into a National Forest.
    • However, the Federal government did not acquire the mineral rights. Those ended up in the hands of a company called Meridian.
      • That's known as a split estate, where one person owns the mineral estate and another person owns the surface estate.
  • Meridian entered an agreement with Duncan to drill for oil. They entered a memorandum of understanding with the US Forest Service to develop a surface-use plan that would preserve the forest while still allowing the companies to get their oil.
  • Things went ok for a while, but then the Forest Service came to the conclusion that National Environmental Policy Act (NEPA) required them to write an Environmental Impact Statement (EIS) before drilling could start.
    • That caused problems for Duncan because if they didn't start drilling soon they would be in breach of their contract with Meridian.
  • Duncan claimed they had an absolute right to get their oil and started building a road through the forest. The Forest Service canceled the memorandum of understanding. Everybody started suing everybody.
    • Duncan and Meridian argued that they owned the mineral estate, and that based on North Dakota law, the Forest Service could not prohibit access or regulate their privately-owned estate.
    • The Forest Service argued that Duncan had improperly used the Federally-owned surface estate without authorization, and that Federal law gives the Forest Service the authority to approve surface-use plans.
  • The Trial Court found for Duncan. The Forest Service appealed.
  • The Appellate Court reversed.
    • The Appellate Court found that in general, the mineral estate is dominant, which means that the rights of the mineral estate holder take precedent over the rights of the surface estate holder.
      • However, Court found that the mineral developers rights are limited to using only as much of the surface as reasonably necessary to get the minerals.
    • The Court found that the Forest Service has the right to determine what would be reasonably necessary to get the minerals. The Court deferred to the Forest Service's judgment that an EIS was required to determine what would be reasonable for Duncan to do.