EBEL, Circuit Judge.
In these consolidated interlocutory appeals, Defendants-Appellants, natural gas producers with wells in south central Kansas, challenge a preliminary injunction enjoining them from further gas production from those wells. The district court entered the preliminary injunction after concluding there was a substantial likelihood that Plaintiff-Appellee Northern Natural Gas Co. ("Northern") will prevail on its state-law claim alleging that Defendants' natural gas production from these wells is an actionable nuisance because it is disrupting Northern's nearby underground
Before addressing the issues presented by these appeals, we mention briefly the manner in which natural gas production and storage is regulated. Both state and federal governments regulate the natural gas industry. See Nw. Cent. Pipeline Corp. v. State Corp. Comm'n, 489 U.S. 493, 506, 109 S.Ct. 1262, 103 L.Ed.2d 509 (1989). Congress, through the Natural Gas Act of 1938 ("NGA"), 15 U.S.C. §§ 717-717z, vests the Federal Energy Regulatory Commission ("FERC") with exclusive jurisdiction over sales of natural gas in interstate commerce for resale and transportation of natural gas, as well as over natural gas companies engaged in those activities. See 15 U.S.C. § 717(b); see also Fuel Safe Washington v. FERC, 389 F.3d 1313, 1317 (10th Cir.2004). See generally Cascade Natural Gas Corp. v. FERC, 955 F.2d 1412, 1421 (10th Cir.1992) ("It is settled that if the NGA grants jurisdiction to [FERC] over a matter, ... its jurisdiction is exclusive."). Relevant here, FERC's exclusive jurisdiction over interstate transportation of natural gas also includes jurisdiction over the storage of natural gas. See Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 295 n. 1, 108 S.Ct. 1145, 99 L.Ed.2d 316 (1988) (agreeing that "[u]nderground gas storage facilities are a necessary and integral part of the operation of piping gas from the area of production to the area of consumption") (internal quotation marks omitted).
"Prior to constructing or operating any natural gas pipeline and related facilities, a company subject to FERC's jurisdiction must obtain from FERC `a certificate of public convenience and necessity,' 15 U.S.C. § 717f(c)(1)(A), indicating ... the proposed service `is or will be required by the present or future public convenience or necessity.' 15 U.S.C. § 717f(e)." Fuel Safe, 389 F.3d at 1317; see also Schneidewind, 485 U.S. at 302, 108 S.Ct. 1145. Once a natural gas company obtains a certificate of public convenience and necessity, the NGA gives the company eminent domain authority to condemn property it needs to provide the necessary service. See 15 U.S.C. § 717f(h).
The NGA expressly leaves to states the regulation of retail sales, as well as purely intrastate wholesales and transportation of natural gas. See id. § 717(b), (c); see also Gen. Motors Corp. v. Tracy, 519 U.S. 278, 292-93, 117 S.Ct. 811, 136 L.Ed.2d 761 (1997); Fuel Safe, 389 F.3d at 1317. In addition, the NGA reserves to states "the power to regulate the physical production and gathering of natural gas in the interests of conservation or of any other consideration of legitimate local concern." Interstate Natural Gas Co. v. Fed. Power Comm'n, 331 U.S. 682, 690, 67 S.Ct. 1482, 91 L.Ed. 1742 (1947); see also Panhandle E. Pipeline Co. v. Oklahoma, 83 F.3d 1219, 1225-26 (10th Cir.1996). For NGA purposes, production and gathering of natural gas "are terms narrowly confined to the physical acts of drawing the gas from the earth and preparing it for the first stages of distribution." N. Natural Gas Co. v. State Corp. Comm'n, 372 U.S. 84, 90, 83 S.Ct. 646, 9 L.Ed.2d 601 (1963); see also Panhandle E. Pipeline, 83 F.3d at 1225-26. Kansas regulates natural gas production through the Kansas Corporation Commission ("KCC"). See Zinke & Trumbo, Ltd. v. State Corp. Comm'n, 242 Kan. 470, 749 P.2d 21, 24 (1988).
Turning to the facts at issue in these appeals, the district court, following an evidentiary hearing, made the following
After obtaining these certificates of public convenience and necessity, Northern, in 1979, began injecting natural gas into the Field for storage. After a several-year "fill-up" period during which Northern re-pressurized the Field, the Field remained "essentially stable" from 1985 through 1995. (Aplt.App. at 1926.) Cunningham Field is the largest of fifteen underground natural gas storage fields in Kansas, and one of the largest twenty-five such fields in the United States.
Northern thought that Cunningham Field would be a good underground natural gas storage facility because Northern believed there were several faults surrounding the Field that would seal the stored gas inside the Field. But as it turned out, the fault at the northern end of the field did not fully seal in the natural gas. Instead, an aquifer, acting with the fault, had originally formed the northern boundary of the Field.
(Id. at 1930.) Beginning in approximately 1994, however, other natural gas producers began extracting gas and large amounts of water just north of the Field, causing "pressure sinks" that destabilized the Field and resulted in the migration of Northern's storage gas northward beyond the Field's boundary. (Id.)
In 2005, FERC permitted Northern to drill two withdrawal wells near the Field's northern boundary, in an effort to recapture the stored natural gas that was migrating northward, and further permitted Northern to drill two observation wells at the Field's northern boundary in order to determine whether Northern's recapture efforts were successful. The withdrawal wells, however, were unable to stop the northward migration of Northern's storage gas.
In 2007, Northern requested that FERC permit Northern to expand the Field's northern "buffer zone" by 4,800 acres. (Id. at 1927.) FERC agreed to expand the buffer zone, but only by 1,760 acres because Northern had failed to prove its storage gas had migrated further than that. FERC did not authorize Northern to inject or store any natural gas in this buffer zone.
Northern initiated this lawsuit in December 2008, suing three natural gas producers, L.D. Drilling, Inc. ("L.D. Drilling"), Nash Oil & Gas, Inc. ("Nash"), and Val Energy, Inc. ("Val Energy"), which together have approximately twenty-five wells, located four to seven miles north of
Based on these theories, Northern asserted claims under Kansas law seeking title to the natural gas being produced by Defendants and declaratory and injunctive relief, as well as damages, based upon claims for conversion, unjust enrichment, nuisance and civil conspiracy. In response, Defendants asserted a number of counterclaims against Northern. The only claim at issue in these interlocutory appeals, however, is Northern's nuisance claim.
While this federal litigation was pending, Northern applied to FERC for permission to expand Cunningham Field's buffer zone to include the area where most of Defendants' challenged wells are located. Defendants intervened in that agency action and objected to this expansion of the Field's buffer zone. Nevertheless, in June 2010, FERC issued Northern a certificate of public convenience and necessity permitting Northern to add more than 12,000 additional acres (the "expansion area") to the Field's northern buffer zone, in the Viola and Simpson geological formations. FERC granted this new certificate after Northern presented evidence showing that its natural gas stored in Cunningham Field was migrating northward out of the Field. FERC found in particular that "Northern had shown that there is a two-mile wide primary gas migration pathway from the storage field into the expansion area." (Id. at 1929.) In issuing the certificate of public convenience and necessity, FERC considered but rejected arguments made by objectors that the Field "should be abandoned because the lack of migration barriers in the expansion area made the field unsuitable for storage." (Id. at 1930.) Instead, FERC agreed generally to a four-step plan Northern proposed to contain the stored gas and stop its northward migration. That plan required Northern to do the following: 1) to "shut in all third party production north of the northern fault"; 2) to monitor pressures to see if stopping third-party production to the north returned pressures along the Field's northern boundary to pre-1995 levels; 3) if this pressure did not return to pre-1995 levels, to inject water at the north end of the Field in order to raise pressure there; and 4) possibly "bring[] shut-in wells into production or install[] offset wells to counter any third-party production adjacent to the expansion area." (Id.) In approving at least the first three steps of this proposed four-step plan, FERC ordered Northern to develop a more specific migration control plan within six months of FERC's issuing Northern the certificate of public convenience and necessity. Defendants did not appeal FERC's ruling and that administrative decision is now final.
After obtaining from FERC the certificate of public convenience and necessity for the expansion area, Northern initiated a second lawsuit in federal court in the District of Kansas, seeking to exercise the eminent domain authority granted Northern
Following FERC's issuance to Northern of a certificate for the expansion area, Northern, in this litigation, sought a preliminary injunction enjoining Defendants from producing natural gas or water from their challenged wells located in the expansion area. The district court granted that injunction. In these consolidated interlocutory appeals, L.D. Drilling and Nash challenge the preliminary injunction.
We review the district court's decision to grant a preliminary injunction for an abuse of discretion. See Awad v. Ziriax, 670 F.3d 1111, 1125 (10th Cir.2012). "An abuse of discretion occurs only when the trial court bases its decision on an erroneous conclusion of law or where there is no rational basis in the evidence for the ruling." Id. (internal quotation marks omitted).
"In order to secure a preliminary injunction, the moving party," here Northern, "must establish the following elements: (1) a substantial likelihood of success on the merits; (2) irreparable injury will result if the injunction does not issue; (3) the threatened injury to the movant outweighs any damage the injunction may cause the opposing party; and (4) issuance of the injunction would not be adverse to the public interest." Kan. Judicial Watch v. Stout, 653 F.3d 1230, 1233 n. 2 (10th Cir.2011). Although "[g]enerally, where the three latter harm factors weigh in favor of the movant, the probability of success factor is relaxed," that is not the case here, where the requested injunction is one that alters the status quo and therefore is disfavored. Flood v. ClearOne Commc'ns, Inc., 618 F.3d 1110, 1117 n. 1 (10th Cir.2010). Instead, Northern had to make a "strong showing" of both the likelihood of success on the merits of its nuisance claim and that the balance of the harms favored issuing the requested injunction. Id. (internal quotation marks omitted). The district court applied this more stringent standard in granting Northern the preliminary injunction at issue here.
On appeal, Defendants challenge only the district court's determination that there is a substantial likelihood Northern will prevail on its nuisance claim. We consider only that issue here. Our review is further circumscribed by the fact that the question of who has title to the gas that has already migrated out of the Field is not determinative of Northern's nuisance theory. Northern's theory, instead, is that Defendants' continued production from their wells located in the expansion area would draw out the gas Northern is currently storing in the Field. Therefore, in determining here whether the district court abused its discretion in concluding that there was a substantial likelihood that Northern would prevail on its nuisance claim, we do not address the question of
Under Kansas law, "[a] private nuisance is a tort related to an unlawful interference with a person's use or enjoyment of his land." Smith v. Kan. Gas Serv. Co., 285 Kan. 33, 169 P.3d 1052, 1061 (2007) (internal quotation marks omitted). As just mentioned, Northern's theory underlying its nuisance claim is that Defendants' continued production of natural gas and water through their wells located in the expansion area is lowering the pressure in that area, causing more and more of the natural gas Northern is storing in Cunningham Field to migrate at a faster pace northward out of the Field and into the expansion area. Specifically, Northern alleged the following: Defendants' production through their expansion area wells was interfering with Northern's use and enjoyment of Cunningham Field as an underground storage facility for natural gas by creating "`pressure sinks' that have drawn, and continue to draw, Northern's storage gas from the Cunningham Storage Field through a two-mile wide geologic pathway." (Aplt.App. at 246 ¶ 135.) This pathway has now become saturated with gas, which "causes the volume of storage gas migrating along such pathways to increase." (Id. at 247 ¶ 136.) This increased migration interferes with Northern's "natural gas storage operations authorized by [FERC] and the KCC, and impede[s] Northern's ability to maintain the storage integrity of the Cunningham Storage Field." (Id.)
The parties agree that, to succeed on this nuisance claim, Northern must establish the following four elements:
Pagel v. Burlington N. Santa Fe Ry. Co., 316 F.Supp.2d 984, 989 (D.Kan.2004) (citing Williams v. Amoco Prod. Co., 241 Kan. 102, 734 P.2d 1113, 1124-25 (1987), which applied Prosser and Keeton on Torts, § 87, pp. 622-23 (5th ed.1984)).
Regarding Defendants' interference with Northern's use of the Field for storing natural gas, the district court found the following:
(Aplt.App. at 1950.) Thus, the district court found that Defendants' production from their expansion area wells was interfering with Northern's use of the Field as a storage facility, and the court went on to find that this interference was substantial. On appeal, Defendants do not dispute these findings. And there is evidence in the record to support them.
To succeed on its nuisance claim, Northern must also establish that Defendants acted with the intent to interfere with Northern's use of the Field to store natural gas. See Pagel, 316 F.Supp.2d at 989. Regarding such intent, the district court found the following:
(Aplt.App. at 1952 (emphasis added).)
The district court did not abuse its discretion in reaching this determination. Northern presented evidence to the district court that Defendants' production of natural gas and water from their expansion area wells was siphoning off gas Northern was storing in the Field. Northern had previously presented that evidence to FERC, in order to obtain the certificate of public convenience and necessity for the expansion area. And Defendants participated in those FERC proceedings. Thus, by at least the time FERC issued Northern
On appeal, Defendants argue that the district court's determination — that Defendants intentionally interfered with Northern's use of its Field to store natural gas by continuing to produce natural gas from their expansion area wells, knowing that production would draw more of Northern's stored natural gas out of the storage field and into the expansion area — was insufficient to establish that Defendants acted with the "bad intent" to harm Northern needed to support Northern's nuisance claim. (Aplt. Br. at 34.) But, for purposes of a nuisance claim, Kansas case law does not require proof that a defendant acted with malice or bad intent.
St. David's Episcopal Church v. Westboro Baptist Church, Inc., 22 Kan.App.2d 537, 921 P.2d 821, 828 (1996) (quoting Prosser and Keeton on Torts § 87, pp. 624-25 (5th ed.1984)); see also Sandifer Motors, Inc. v. City of Roeland Park, 6 Kan.App.2d 308, 628 P.2d 239, 246 (1981). Thus, it is enough under Kansas law for Northern to show that Defendants "act[ed] with the purpose of causing the nuisance, or kn[e]w that it [wa]s resulting or substantially certain to result from his or her conduct." United Proteins, Inc. v. Farmland Indus., Inc., 259 Kan. 725, 915 P.2d 80, 85 (1996) (citing Restatement (Second) of Torts § 825(a) and (b) (1965)).
Lastly, to prevail on its nuisance theory, Northern also has to establish that Defendants' interference with Northern's use and enjoyment of Cunningham Field "was of such a nature, duration or amount as to constitute unreasonable interference with [Northern's] use and enjoyment of the land." Williams, 734 P.2d at 1124-25 (emphasis added; quoting Prosser and Keeton on Torts, § 87, pp. 622-23 (5th ed.1984)). "This does not mean that the defendant's conduct must be unreasonable. It only means that the interference must be unreasonable." Id. at 1125 (quoting Prosser and Keeton on Torts, § 87).
In deciding whether interference is unreasonable, Kansas law requires a court to consider the particular facts of a given case and weigh a number of factors:
Vickridge First & Second Addition Homeowners Ass'n, Inc. v. Catholic Diocese, 212 Kan. 348,
A court must also consider the social value of the competing interests:
St. David's Episcopal Church, 921 P.2d at 828 (internal quotation marks, alteration omitted).
In this case, in determining that there was a substantial likelihood that Northern could establish that Defendants' intentional interference with Northern's use of the Field to store natural gas was unreasonable, the district court considered all of the circumstances at issue in this case and carefully weighed the relevant factors as well as the parties' competing interests. See Sandifer Motors, 628 P.2d at 243-44 (weighing relevant factors). In particular, the district court acknowledged Defendants' "right to produce natural gas to which they or their lessors hold title in the expansion area" and the facts that "Northern's erroneous assessment of the underground fault appears to have contributed at least in part to the situation it now claims to be a nuisance" and that "Northern could also bear potential liability for what amounts to [its] unauthorized use of the Viola formation" to store natural gas "in the expansion area." (Aplt.App. at 1952-53.) The Court also weighed several other factors, including the fact that, although Defendants have an interest in drilling and producing native natural gas from their challenged wells, "there is strong evidence that all of the wells at issue would, if allowed to continue operating during this litigation, produce primarily storage gas." (Id. at 1953.) Lastly, the court factored in the public interest served by using Cunningham Field as an underground natural gas storage facility.
Weighing all of these competing interests and relevant factors, as Kansas law directs, the district court concluded that there was a substantial likelihood that Northern will be able to prove Defendants' continued production of storage gas from their expansion area wells amounts to an unreasonable interference with Northern's use and enjoyment of its storage facility. We cannot say that that determination was an abuse of discretion.
First, the fact that the KCC previously permitted Defendants to drill wells in the expansion area does not immunize Defendants from Northern's nuisance claim. Under Kansas law, "the fact that a business is carried on lawfully and in accordance with ordinary methods does not relieve one from liability if the use is unreasonable and as such constitutes a nuisance." Williams, 734 P.2d at 1122 (citing Helms v. E. Kan. Oil Co., 102 Kan. 164, 169 P. 208 (1917)); see also Rosedale Drive-In Theater, Inc. v. Burlington N. R.R., No. 90-2412-V, 1992 WL 135020, at *4 (D.Kan. May 29, 1992) (unreported) (noting that, even though it may have been lawful to build the bridge abutment at issue, that abutment "may still be the subject of an actionable nuisance").
Williams, 734 P.2d at 1122 (quoting Helms, 169 P. at 208).
Second, Defendants overstate what the Kansas state court concluded in the parallel state litigation. In that state case, Northern sued the purchasers of the natural gas Defendants were producing, alleging that those purchasers were converting Northern's natural gas that had migrated northward out of Cunningham Field. In that state case, the purchasers impleaded Defendants, asserting that if the purchasers were liable for converting Northern's
To summarize, the parties agree that, to prevail on its nuisance claim, Northern must establish four things: 1) Defendants acted with the intent to interfere with Northern's use and enjoyment of the storage field; 2) there was some interference with the use and enjoyment of the Field of the kind Defendants intended; 3) that interference was substantial; and 4) the interference was of a such a nature, duration or amount as to constitute unreasonable interference with the use and enjoyment of the Field. See Pagel, 316 F.Supp.2d at 989. The district court did not abuse its discretion in determining that there was a substantial likelihood that Northern could prove all four of those elements of its nuisance claim.
For the foregoing reasons, we AFFIRM the preliminary injunction.