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
That's known as a split
estate, where one person owns the mineral
estate and another person owns the surface
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
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.