                                                                 FILED
                                                      United States Court of Appeals
                                                              Tenth Circuit

                                                              July 11, 2017
                                     PUBLISH              Elisabeth A. Shumaker
                                                              Clerk of Court
                 UNITED STATES COURT OF APPEALS

                              TENTH CIRCUIT



NORTHERN NATURAL GAS
COMPANY,

      Plaintiff Counter Defendant-
      Appellant/Cross-Appellee,

v.                                         Nos. 15-3272, 15-3278, 15-3279,
                                                 15-3285, and 15-3286
L.D. DRILLING DEFENDANTS,
VAL ENERGY DEFENDANTS,
HUDSON GROUP DEFENDANTS,
and HUFF LANDOWNER GROUP,

      Defendants Counterclaimants-
      Appellees/Cross-Appellants,

and

NASH OIL AND GAS
DEFENDANTS, PRATT WELL
SERVICE DEFENDANTS, and
MEIRIES LANDOWNER GROUP,

      Defendants-Appellees/
      Cross-Appellants.


        APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF KANSAS
                (D.C. NO. 6:10-CV-01232-JTM-DWB)


Richard A. Olmstead, Kutak Rock L.L.P., Wichita, Kansas (Mark D. Coldiron and
Corey A. Neller, Ryan Whaley Coldiron Jantzen Peters & Webber, P.L.L.C.,
Oklahoma City, Oklahoma, with him on the briefs), for Plaintiff Counter
Defendant-Appellant/Cross-Appellee.

Daniel J. Buller, Foulston Siefkin L.L.P., Wichita, Kansas, and Adam S. Davis,
Wagstaff & Cartmell L.L.P., Kansas City, Kansas (Jim H. Goering, James M.
Armstrong, and Timothy B. Mustaine, Foulston Siefkin L.L.P., Wichita, Kansas,
for L.D. Drilling, and Brian J. Madden, Wagstaff & Cartmell L.L.P., Kansas City,
Kansas, for Nash Oil and Gas, and Jeffrey L. Carmichael, Morris, Laing, Evans,
Brock & Kennedy, Chartered, Wichita, Kansas, for Val Energy, and Robert R.
Eisenhauer, Johnston Eisenhauer Eisenhauer and Lynch, L.L.C., Pratt, Kansas, for
Pratt Well Service, with them on the briefs), for Defendants Counterclaimants-
Appellees/Cross-Appellants L.D. Drilling and Val Energy, and Defendants-
Appellees/Cross-Appellants Nash Oil and Gas and Pratt Well Service.

Stephen E. Robison, Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, Kansas
(Gregory J. Stucky, David G. Seely, Daniel E. Lawrence, and Ryan K. Meyer,
Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, Kansas, and Gordon B. Stull
and John D. Beverlin, Stull, Beverlin, Nicolay & Haas, L.L.C., Pratt, Kansas, for
The Huff Landowner Group, and Robert R. Eisenhauer, Johnston, Eisenhauer,
Eisenhauer & Lynch, L.L.C., Pratt, Kansas, for The Meireis Landowner Group,
and Jack V. Black and Thomas V. Black, Black’s Law Office, P.A., Pratt, Kansas,
for The Hudson Landowner Group, with him on the briefs) for Defendants
Counterclaimants-Appellees/Cross-Appellants The Hudson Group and The Huff
Landowner Group, and Defendants-Appellees/Cross-Appellants The Meiries
Landowner Group.


Before TYMKOVICH, Chief Judge, LUCERO, and PHILLIPS, Circuit Judges.


TYMKOVICH, Circuit Judge.



      This case arises from condemnation proceedings brought under the Natural

Gas Act of 1938 (NGA), 15 U.S.C. § 717 et seq. Northern Natural Gas Company




                                       -2-
initiated proceedings against a number of parties 1 to condemn certain rights

relating to the storage of natural gas in and under more than 9,000 acres of land in

southeast Kansas, known as the Cunningham Storage Field. According to Federal

Rule of Civil Procedure 71.1, the district court appointed a three-person

commission to determine an appropriate condemnation award. The district court

adopted the commission’s findings and recommendations in full, and entered final

judgment requiring Northern to pay $7,310,427 in principal (the award

recommended by the commission), plus interest, for a condemnation award

totaling over $8.5 million.

      Both sides appealed, asserting various arguments in support of their

positions that the award either over- or under-compensated the Landowners and

Producers. We REVERSE in part and AFFIRM in part. As we explain, the

condemnation award should not have included either (1) the value of storage gas

in and under the Cunningham Field on the date of taking, or (2) the lost value of

producing such gas after the date of certification, because certification

extinguished any property interests the Landowners and Producers may have held

in the gas before that date. But we agree with the award’s inclusion of value for


      1
        We refer to one group of parties as the “Landowners,” which includes the
unrepresented interest owners and three identified groups of landowners—the
Hudson Landowner Group, Huff Landowner Group, and Meireis Landowner
Group. We refer to another group of parties as the “Producers,” which includes
four groups of oil and gas producers—the L.D. Drilling Group, Nash Group, Pratt
Well Service Group, and Val Energy Group.

                                         -3-
Extension Area tracts based on their potential use for gas storage and buffer

rights, the commission’s valuation for the eight Extension Area wells, and the

district court’s denial of attorneys’ fees.

                                  I. Background

      Northern owns and operates the Cunningham Field, an underground natural

gas storage facility that is part of the “Northern System.” 2 Before original

production depleted the field’s natural resources and Northern converted it to a

storage facility, the property produced approximately 80 billion cubic feet (BCF)

of native natural gas from an underground dolomitic limestone formation known

as the Viola Formation.

      In 1978, the Federal Energy Regulatory Commission (FERC) and Kansas

Corporation Commission (KCC) first certified the Cunningham Field for gas

storage. 3 At that time, the field included approximately 25,000 acres of land.


      2
         The Northern System is a vast network of interstate natural gas pipelines,
storage fields, compressor stations, and other appurtenances that connect power
plants, local distribution companies, and residential users across nearly 14,000
miles to produce a stable supply of natural gas.
      3
          Under both the federal NGA and the Kansas Underground Storage of
Natural Gas Act, a natural gas public utility seeking to convert property for
underground storage may obtain a “certificate” from the appropriate commission
(i.e., the FERC or KCC, respectively). Such certificates of public convenience
and necessity may issue upon the commission’s determination that the property
sought to be acquired is suitable for the underground storage of natural gas and
that its use for such purposes is in the public interest. See 15 U.S.C.
§ 717f(c)–(g); Kan. Stat. Ann. § 55-1204. Certificate authority conveys a power
                                                                        (continued...)

                                              -4-
Northern’s certified boundaries expanded over time with the addition of a 1,760-

acre tract north of the original boundaries on October 30, 2008 (the 2008

Extension Area) and a 12,320-acre area located approximately five or six miles

north of the original boundaries on June 2, 2010 (the 2010 Extension Area). 4 In

February 2009, before it obtained certificate authority over the entire 2010

Extension Area, Northern negotiated and obtained storage leases on

approximately 3,040 acres in the southern part of the 2010 Extension Area.

      This appeal concerns property rights related to the storage of natural gas in

and under approximately 9,200 acres of land in the vicinity of the Cunningham

Field, including some of the Extension Area. Valuation is determined from the

“date of taking” for purposes of valuing the relevant property rights. United

States v. Miller, 317 U.S. 369, 374 (1943) (“[V]alue is to be ascertained as of the

date of taking.”). For our purposes the parties agree the date of taking is March

30, 2012, which is when Northern perfected its right to take physical possession

of the property by posting security and providing notice to relevant landowners.

See App. 1638–72.

      Over the course of its operations, Northern discovered that volumes of

storage gas injected into the Cunningham Field did not always match volumes

      3
       (...continued)
of eminent domain. See 15 U.S.C. § 717f(h); Kan. Stat. Ann. § 55-1205.
      4
        We refer to the 2008 and 2010 Extension Areas collectively as the
“Extension Area.”

                                        -5-
withdrawn from the field. This mismatch indicated that at least some amount of

gas was migrating outside of the field’s primary storage area boundaries. For

example, in the early 1990s Northern discovered that approximately 10 BCF of

storage gas had migrated to a sandstone layer directly beneath the Viola

Formation, known as the Simpson Formation. In 1996, Northern obtained FERC

and KCC approval to include the Simpson Formation within the Cunningham

Field’s certified boundaries. Later, when Northern began producing gas from the

2010 Extension Area, it noticed that injected volumes were exceeding withdrawn

volumes, again indicating gas migration.

      Northern subsequently discovered that gas was leaking out of the

Cunningham Field across a lengthy fault originally thought to form a physical

barrier to gas migration across the field’s northern boundaries. In an effort to

curb this migration, Northern engaged in an array of legal and administrative

efforts against companies that were allegedly producing gas from areas north of

the field’s boundaries, which tended to draw the storage gas away. After it

obtained FERC certification for (and the associated power of eminent domain

over) the 2010 Extension Area, Northern initiated proceedings to condemn the

land under the NGA. 5

      5
       Section 717f(h) of the NGA establishes the relevant right of eminent
domain. It provides,

      When any holder of a certificate of public convenience and necessity
                                                                   (continued...)

                                         -6-
      As part of its initial complaint, Northern sought “[a]n immediate injunction

against further exploration, production, and operation . . . to protect and preserve

the [Cunningham Field] from irreparable harm done by further production of

Northern’s storage gas and to comply with the 2010 Certificate Order.” See App.

273. Northern therefore filed a motion asking the district court to order that the

Producers’ wells be “shut in” (i.e., closed) pending resolution of its claims. It

obtained a preliminary injunction to this effect on December 22, 2010. See N.

Nat. Gas. Co. v. L.D. Drilling, Inc., 759 F. Supp. 2d 1282 (D. Kan. 2010); App.

695–96.




      5
       (...continued)
      cannot acquire by contract, or is unable to agree with the owner of property
      to the compensation to be paid for, the necessary right-of-way to construct,
      operate, and maintain a pipe line or pipe lines for the transportation of
      natural gas, and the necessary land or other property, in addition to right-
      of-way, for the location of compressor stations, pressure apparatus, or other
      stations or equipment necessary to the proper operation of such pipe line or
      pipe lines, it may acquire the same by the exercise of the right of eminent
      domain in the district court of the United States for the district in which
      such property may be located, or in the State courts. The practice and
      procedure in any action or proceeding for that purpose in the district court
      of the United States shall conform as nearly as may be with the practice and
      procedure in similar action or proceeding in the courts of the State where
      the property is situated: Provided, That the United States district courts
      shall only have jurisdiction of cases when the amount claimed by the owner
      of the property to be condemned exceeds $3,000.

15 U.S.C. § 717f(h).

                                         -7-
      Meanwhile, the district court exercised its authority under Federal Rule of

Civil Procedure 71.1 6 and appointed a three-person commission with the powers

of a Rule 53 “master” 7 to determine an appropriate condemnation award. The

commission conducted a trial and recommended an award totaling $7,310,427,

including: (1) $5,950,740 for oil and gas in place on the date of taking; (2)

$1,086,347 for gas storage and buffer value of the Extension Area tracts; (3)

$226,540 for surface takings and damages; and (4) $46,800 for eight Extension

Area wells.

      The district court adopted the commission’s findings and recommendations

as its own, and entered final judgment requiring Northern to pay the Landowners

and Producers the award recommended by the commission, plus interest. Both

sides appealed, challenging various aspects of the condemnation award.

                                  II. Analysis

      6
         Federal Rule of Civil Procedure 71.1 governs the procedural aspects of
NGA condemnation proceedings. See Fed. R. Civ. P. 71.1(a) (“These rules
govern proceedings to condemn real and personal property by eminent domain.”).
It allows a court to “appoint a three-person commission to determine
compensation,” and gives such a commission “the powers of a master under Rule
53(c).” See Fed. R. Civ. P. 71(h)(2).
      7
         Federal Rule of Civil Procedure 53 gives a “master”—including a three-
person commission appointed pursuant to Rule 71.1—the power to “regulate all
proceedings,” “take all appropriate measures to perform the assigned duties fairly
and efficiently,” and “if conducting an evidentiary hearing, exercise the
appointing court’s power to compel, take, and record evidence.” Fed. R. Civ. P.
53(c)(1). In reviewing a master’s report, the district court must generally decide
de novo all objections to both findings of fact and conclusions of law made or
recommended by the master. See Fed. R. Civ. P. 53(f)(3)–(4).

                                         -8-
      The parties raise a number of issues relating to the valuation of the storage

gas and the proceedings below.

      First, Northern argues that the value of storage gas in and under the

Extension Area on the date of taking should not have been included in the

condemnation award. This contention also implicates challenges to the

commission’s valuation of future production and the district court’s instruction

that, when calculating the value of lost future production, the commission should

ignore the inhibition on production triggered by the preliminary injunction that

shut in the producing wells.

      Second, Northern and the Landowners dispute the valuation of gas storage

and buffer rights for Extension Area tracts, as well as the inclusion of that value

in the condemnation award.

      Third, the Producers reject the valuation of the eight Extension Area wells,

which included only a “salvage” value for casing materials remaining in each

wellbore.

      Fourth, the Landowners and Producers argue they are entitled to additional

compensation to cover their attorneys’ fees.

      We address each of these issues in turn, reviewing the district court’s

determinations in these condemnation proceedings to determine “whether proper

legal standards were applied in resolving the issue of just compensation and

whether any supplemental findings of the district court were clearly erroneous.”

                                         -9-
United States v. 179.26 Acres of Land, 644 F.2d 367, 368 (10th Cir. 1981)

(citations omitted). We consider a commission’s findings “only to see whether

the district court properly accepted and approved them as not being clearly

erroneous.” Id. at 368–69 (citations omitted). A district court commits reversible

error in adopting the commission’s conclusions “only if the commission

misapplied the law or made findings contrary to the clear weight of the evidence,”

and we “will not retry the facts.” United States v. 2,560.00 Acres of Land, 836

F.2d 498, 501 (10th Cir. 1988) (citations omitted). “[A] determination by the

commission based on sharply conflicting evidence should be viewed as

conclusively binding.” Id. (citations omitted).

      For the following reasons, we reverse in part and affirm in part. We

disagree with the inclusion of the value of storage gas in and under the Extension

Area on the date of taking because we find that the Landowners and Producers

had no right to produce such gas after the date of certification. We affirm the

remaining aspects of the condemnation award and the district court’s denial of

attorneys’ fees.

      A. Ownership of the Storage Gas in and Under the Extension Area

      Northern first argues the district court erred by requiring it to compensate

the Landowners and Producers for the value of “in place” storage gas in and

under the Extension Area lands on the date of taking. This issue turns on whether

Northern owned the relevant storage gas on March 30, 2012 (i.e., the date of

                                        -10-
taking). Northern maintains that it should not have been required to compensate

the Landowners and Producers for “taking” storage gas that it already owned. We

agree that Northern owned the gas on the date of taking.

      Resolution of this issue requires us to apply Kansas law. The relevant

statutory authority is the Underground Storage of Natural Gas Act, which Kansas

enacted in 1951 and amended in 1993. The original act was enacted to promote

the conservation of natural gas in furtherance of “the public interest and welfare

of [the] state,” see Kan. Stat. Ann. § 55-1202, and set forth various provisions to

regulate the underground storage of natural gas. The 1993 amendment, in turn,

addresses property ownership rights of injected (rather than native) natural gas,

which is at issue here. 8 The injected gas provision provides, in general, that all

      8
          In full, Section 55-1210 provides,

              (a) All natural gas which has previously been reduced to
              possession, and which is subsequently injected into underground
              storage fields, sands, reservoirs and facilities, whether such
              storage rights were acquired by eminent domain or otherwise,
              shall at all times be the property of the injector, such injector's
              heirs, successors or assigns, whether owned by the injector or
              stored under contract.

              (b) In no event shall such gas be subject to the right of the owner
              of the surface of such lands or of any mineral interest therein,
              under which such gas storage fields, sands, reservoirs and
              facilities lie, or of any person, other than the injector, such
              injector's heirs, successors and assigns, to produce, take, reduce
              to possession, either by means of the law of capture or otherwise,
              waste, or otherwise interfere with or exercise any control over
              such gas. Nothing in this subsection shall be deemed to affect the
                                                                           (continued...)

                                          -11-
natural gas “injected into underground storage fields, . . . whether such storage

rights were acquired by eminent domain or otherwise, shall at all times be the

      8
          (...continued)
                right of the owner of the surface of such lands or of any mineral
                interest therein to drill or bore through the underground storage
                fields, sands, reservoirs and facilities in such a manner as will
                protect such fields, sand, reservoirs and facilities against
                pollution and the escape of the natural gas being stored.

               (c) With regard to natural gas that has migrated to adjoining
               property or to a stratum, or portion thereof, which has not been
               condemned as allowed by law or otherwise purchased:

                      (1) The injector, such injector's heirs, successors and
                      assigns shall not lose title to or possession of such gas if
                      such injector, such injector's heirs, successors or assigns
                      can prove by a preponderance of the evidence that such
                      gas was originally injected into the underground storage.

                      (2) The injector, such injector's heirs, successors and
                      assigns, shall have the right to conduct such tests on any
                      existing wells on adjoining property, at such injector's sole
                      risk and expense including, but not limited to, the value of
                      any lost production of other than the injector's gas, as may
                      be reasonable to determine ownership of such gas.

                      (3) The owner of the stratum and the owner of the surface
                      shall be entitled to such compensation, including
                      compensation for use of or damage to the surface or
                      substratum, as is provided by law, and shall be entitled to
                      recovery of all costs and expenses, including reasonable
                      attorney fees, if litigation is necessary to enforce any
                      rights under this subsection (c) and the injector does not
                      prevail.

               (d) The injector, such injector's heirs, successors and assigns
               shall have the right to compel compliance with this section by
               injunction or other appropriate relief by application to a court of
               competent jurisdiction.

                                           -12-
property of the injector.” Kan. Stat. Ann. § 55-1210(a) (emphasis added). And

“[i]n no event shall such gas be subject to the right of the owner of the surface of

such lands . . . or of any person, other than the injector, . . . to produce, take,

reduce to possession, either by means of the law of capture or otherwise, waste,

or otherwise interfere with or exercise any control over such gas.” Kan. Stat.

Ann. § 55-1210(b).

      As for “natural gas that has migrated to adjoining property or to a stratum,

or portion thereof, which has not been condemned as allowed by law or otherwise

purchased,” the injected natural gas provisions in the Kansas law provide that the

injector “shall not lose title to or possession of such gas if [it] can prove by a

preponderance of the evidence that such gas was originally injected into the

underground storage.” Kan. Stat. Ann. § 55-1210(c)(1). By its own terms,

however, § 55-1210(c) applies only to gas that has migrated to “adjoining

property” and does not address gas that has migrated beyond adjoining property or

within a field’s certified boundaries. 9 As we explain, § 55-1210(c) therefore does

not apply to the gas at issue here.




      9
        “Adjoining property” is not further defined in the Kansas Storage Act,
but has been interpreted to include “any section adjacent to a storage field,” such
that “any section of land which touched a section containing a storage field was
adjoining.” See Williams Nat. Gas Co. v. Supra Energy, Inc., 931 P.2d 7, 14
(Kan. 1997). This comports with the “usual and ordinary meaning” of
adjoining—i.e., “contiguous or touching” Id. (citation omitted).

                                           -13-
      The meaning of the Kansas Storage Act is guided by a series of cases from

the Kansas Supreme Court decided between 1985 and 2013, including two cases

involving Northern in some capacity. In 1985, the court first addressed the

interplay between injectors of storage gas and the common law “rule of capture,”

under which the first person to “capture” a certain resource, such as natural gas,

has rightful ownership to it. In Anderson v. Beech Aircraft Corp., 699 P.2d 1023

(Kan. 1985), the court held that Beech Aircraft—a private corporation that was

(1) not a natural gas public utility, and (2) did not have a certificate authorizing

an underground storage facility, but nonetheless (3) used the property of an

adjoining landowner for gas storage without authorization or consent—lost title to

non-native gas that it had injected into an underground reservoir. Id. at 1031–32.

The court made clear that Beech Aircraft attempted to create an underground

storage reservoir “without acquiring . . . the right to do so.” See id. Because

Beech Aircraft’s activities as an injector were unauthorized, the injected gas

became subject to the common law “rule of capture.” See id. When the gas was

subsequently produced by a company with an oil and gas lease on the adjacent

land, it became the property of the producing company. Beech Aircraft could not

recover for this “lost” gas.

      In the next relevant case, Union Gas System, Inc. v. Carnahan, 774 P.2d

962 (Kan. 1989), the Kansas Supreme Court further analyzed the effect of

certificate authority under Kansas law. In rejecting Union’s ownership claim, the

                                          -14-
court held that a natural gas public utility that injected gas into an underground

storage field for many years without certificate authority and subsequently sought

to recover the value of such gas produced by others, was “not entitled to recover

for any of its gas produced . . . prior to January 13, 1986, the date of the

Commission’s certificate.” Union Gas, 774 P.2d at 967. The court explained

that, before the date of certification, Union had “placed itself under the rule of

Anderson” by failing to seek a certificate. See id. This gas was therefore subject

to the rule of capture and, when produced, became the property of the producer.

      As for the gas produced after the date of certification, Union was entitled

to recover its value, because when it acquired the certificate, its status changed;

“[i]ts operation was given official sanction and its gas was identified.” See id. at

968. After the date of certification, then, the gas “became an exception to the

rule of capture expressed in Anderson.” Id.; see also id. (“[A]s soon as Union’s

storage operation became authorized and its gas identifiable, the gas was no

longer ferae naturae and subject to the rule of capture. The title to Union’s

captured gas remained in Union. Thus, Union did not forfeit its natural gas

produced after [the date of certification] even though it acquired no title to the

. . . property until the date of taking.”). Union Gas thus illustrates the importance

of certificate authority.

      The third case relevant to our analysis addressed § 55-1210(c)’s application

to storage gas that had migrated to adjoining property before the enactment and

                                          -15-
effective date of the statute (i.e., July 1, 1993), but was produced from the

property after that date. The court held that the injector (Northern) lost title to

natural gas it had injected into underground storage but that subsequently

migrated to adjoining property prior to July 1, 1993, even though the gas had not

yet been produced. See N. Nat. Gas Co. v. Martin, Pringle, Oliver, Wallace &

Bauer, L.L.P., 217 P.3d 966, 975–76 (Kan. 2009). Under the common law

“ownership-in-place” theory, “petroleum and gas belong[] to the owner of the

land ‘as long as they are on it, or in it, or subject to [the landowner’s] control.’”

Id. at 974 (citation omitted). For example, the gas belongs to the owner of the

land where the gas is located and, when the gas “escape[s] and go[es] into other

lands, or come[s] under another’s control, the title of the former owner is gone.”

Id. (citation omitted). Kansas state law subsequently modified the common law

scheme, but because Northern “did not obtain a certificate to condemn the

adjacent landowners’ property prior to July 1, 1993, the adjoining landowners

possessed,” pursuant to the ownership-in-place doctrine, “a right, title, and

interest in and to the gas which had migrated to the adjoining property as of that

date.” Id. at 975.

      As the court explained,

      [P]rior to July 1, 1993, the landowners adjoining Northern’s
      underground gas storage area possessed the legal right to produce and
      keep the injected gas which had migrated onto their property, unless
      and until Northern obtained a certificate to expand its storage area onto
      their land and paid them for that privilege through a condemnation

                                       -16-
      action. [Kan. Stat. Ann. § 55-1210] abolished that right, as well as
      permitting migrating gas to trespass upon adjoining land.

Id. at 976. In other words, before the 1993 amendment to the Kansas Storage Act

clarified the property rights to injected natural gas, the common law ownership-

in-place theory applied. Section 55-1210, however, “abolished” landowners’

common law rights to produce and keep injected gas that migrated onto their

properties. The court again emphasized that certificate authority is critical, and

the “failure” to acquire the proper certification “places the utility squarely under”

the rule of capture set forth in Anderson. See id. at 975.

      Finally, in 2013 the court addressed ownership of “previously injected

storage gas that migrated at least 2 to 6 miles beyond the certificated boundaries.”

See N. Nat. Gas Co. v. ONEOK Field Servs. Co., 296 P.3d 1106, 1121 (Kan.

2013). The ONEOK court held that § 55-1210 “abolished the rule of capture as to

natural gas which migrates horizontally within a stratum to adjoining property or

vertically to a different stratum, but preserved that rule as to natural gas which

migrates beyond those boundaries.” Id. at 1111. As applied to natural gas that

migrated horizontally beyond property adjoining Northern’s certified storage

field, the court found that Northern lost title to the gas. Once the gas migrated

beyond adjoining property, it “became subject to the rule of capture” and thus

became the property of those who produced the gas before June 2, 2010 (i.e., the

date Northern obtained certificate authority over the relevant property). Id.


                                         -17-
Contemporaneously with certification, however, any injector acquires storage

rights to the property and thus title to gas injected into its legally recognized

storage area. See id. at 1120; see also id. at 1125 (“[T]o the extent Northern’s

injected storage gas migrated beyond property adjoining the certificated

boundaries of its storage field, . . . Northern lost title to such gas. Consequently,

[the producers] had title to any such migrating gas produced by their wells until

. . . FERC extended the certificated boundaries of the Field to include [the

producers’] wells, or brought those wells onto property adjoining the expansion

area.”). The court clarified that § 55-1210(a) and (b) “govern ownership rights to

previously injected storage gas that remains within a designated underground

storage area,” while § 55-1210(c) governs ownership of gas that has migrated

outside of those certified boundaries. See id. (emphasis added).

      Taken together, Kansas case law and the statutory scheme set forth in § 55-

1210 emphasize the importance of timing and certification. Applying those

principles here, the date of taking was March 30, 2012, the date on which

Northern perfected its right to take physical possession of the property by posting

security and providing notice to relevant landowners. App. 1638–72. On this

date, Northern held certificates expanding its field boundaries to include all of the

Extension Area land. Indeed, it obtained private storage leases covering over

3,000 acres of the 2010 Extension Area in February 2009 (more than three years




                                          -18-
before the date of taking) and obtained certificate authority over the entire 2010

Extension Area on June 2, 2010 (nearly two years before the date of taking). 10

      Thus, while the Landowners and Producers may have held certain property

rights over the natural gas in and under their land at some point in time before

Northern obtained the authority (via private lease agreements and proper

regulatory certification) to include the property within the Cunningham Field’s

legal boundaries, these rights had been eliminated by the date of taking. On the

date of taking, the gas “in place” in and under the Extension Area land was within

the Cunningham Field’s certified boundaries as required by Kansas law and,

accordingly, was wholly Northern’s property. Because of Northern’s ownership,

the gas was not subject to the rule of capture. Thus, the commission erred by

including the value of that gas in the condemnation award when the Landowners

and Producers had no vested property rights or ownership interests in the gas on

the date of taking.

      The Landowners and Producers argue that this interpretation effectuates an

impermissible “taking” in violation of the Fifth Amendment. Under the Fifth

      10
          While the 2008 and 2010 FERC certificates did not change the
Cunningham Field’s “active storage reservoir” or “certificated capacity,” they did
expand the field’s certified “protective boundary,” “designed to protect the
storage field from gas losses due to migration.” See App. 279–311 (2010
Certificate); App. 822–42 (2008 Certificate). While the Landowners and
Producers suggest that the distinction between active reservoir boundaries and
protective boundaries may be significant, they do not cite any legal authority in
support of such a distinction. In any event, our independent review of the
applicable law does not reveal any material distinction between the two.

                                        -19-
Amendment, private property may not be taken for public use without just

compensation. See U.S. Const. amend V. The Landowners and Producers claim

Northern must pay just compensation for taking their rights to produce any

storage gas that migrated onto (1) their property, or (2) property on which they

held oil and gas leases. But this argument relies on a fundamental misconception

about the rule of capture, which the Landowners and Producers suggest gives

them vested property interests in all gas that has migrated, or will ever migrate, to

their property. The rule of capture, however, confers only a right to produce the

migrated gas. It confers no right to the gas itself. To capitalize on their

opportunity to “capture” the gas, the Landowners and Producers would have had

to actually produce the gas and would then own the produced gas. But here, the

Landowners and Producers seek compensation for gas they did not produce but

which remained in the ground on the date of taking. Rather than yielding an

unconstitutional taking, Kansas law merely prohibits the Landowners and

Producers from recovering the value of storage gas that Northern both (1)

originally owned and injected, and (2) acquired certificate authority over.

      Because we conclude Northern owned all of the gas within its certified

field boundaries after the date of certification, we necessarily disagree with the

commission’s valuation of lost future production from the Extension Area wells

(i.e., the value attributable to recoverable gas reserves in the Viola Formation

within the 2010 Extension Area on the date of taking). By including the value of

                                         -20-
recoverable storage gas reserves, which the commission determined could be

produced and exhausted within approximately 13.76 months from the date of

taking, 11 the commission relied on its finding that the Producers had a right to

produce such gas. But as we explained, the Producers only had a right to produce

the gas until the date of certification (i.e., June 2, 2010). And prior to the date of

certification, the Producers had no right to produce the gas on the 3,040 acres that

Northern had already leased because, through those leases, Northern “otherwise”

acquired storage rights for purposes of § 55-1210(a). In calculating the loss of

future production, the Producers should only be awarded the value of what they

could prove they would have produced before June 2, 2010, and only on the

Extension Area lands not including the 3,040 acres that Northern had leased

before the date of certification.

      Additionally, because the preliminary injunction shutting in the producing

wells was not issued until December 22, 2010, any effect would necessarily only

apply to potential production after the date of certification. We therefore need


      11
          The Producers challenge the commission’s 13.76-month limitation on
future production and instead urge us to adopt their so-called “continuous feed”
theory. Under the continuous feed theory, which assumes uninterrupted gas
migration would have allowed the Producers to produce a steady stream of gas
from their Extension Area wells for at least the next twenty years, Northern would
be required to pay the Producers the “net present value of all the gas that would
have been produced over the next 20 years had there been no condemnation.” See
App. 2145–49. We need not address the merits of this theory because, as we
explain, the Producers should only be awarded the value of the gas they could
have produced before the date of certification.

                                         -21-
not decide whether the district court correctly instructed the commission to

disregard the effects of that injunction.

      B. Valuation of Gas Storage and Buffer Rights

      Northern next argues the district court erred by including, as part of the

compensation owed to the Landowners for their Extension Area tracts, the value

of gas storage and buffer rights based on the tracts’ potential use and proximity to

the Cunningham Field. In particular, Northern argues that any value of gas

storage and buffer rights for the Extension Area tracts was too speculative to be

included in the award. The Landowners, on the other hand, contend the district

court erred by not attributing enough value for gas storage and buffer rights. We

disagree with both parties and affirm the district court’s inclusion and valuation

of gas storage and buffer rights for the Extension Area tracts.

      The district court instructed the commission to consider, in determining fair

market value, “all of the possible uses to which the properties could have been

put, including the highest and best uses, or the most advantageous uses, to which

the properties would be reasonably adaptable.” See App. 1975; see also id. at

1970–71 (instructing the commission to consider “[t]he most advantageous use or

the highest and best use to which the tract is reasonably adaptable”). But the

court also cautioned the commission that its considerations “must not be

speculative, conjectural or remote,” and the uses considered “must be sufficiently

probable and of sufficient duration to have an effect on the fair market value of

                                            -22-
the property.” See id. at 1975. The district court further advised the commission

that the “highest and best use” for a particular property reflects a use that is both

legally permissible and physically possible independent of the condemnor’s use,

and may involve an aggregation or assemblage of separately owned properties.

See id. at 1976.

      These instructions are consistent with Kansas law. See, e.g., Kan. Stat.

Ann. § 26-513(d)(1) (listing, as a factor to be considered in ascertaining the

amount of compensation and damages owed for a taking, “[t]he most

advantageous use to which the property is reasonably adaptable”); Kan. City Mall

Assocs. v. Unified Gov’t, 272 P.3d 600, 610 (Kan. 2012) (“In determining fair

market value, you should consider all of the possible uses to which the property

could have been put, including the best and most advantageous use to which the

property was reasonably adaptable, but your consideration must not be

speculative, conjectural, or remote.” (citations omitted; emphasis removed)).

And, when evaluating whether a potential use is too speculative, the “crucial

question” is whether there was any evidence presented about the probability of

such use. See Kan. City Mall Assocs., 272 P.3d at 610. The court will generally

affirm if there is at least “some evidence in the record . . . to support an inference

that [a use] was reasonably probable, given the state of the property and its

current use.” See id.




                                          -23-
      Northern “vehemently opposed any allocation of value . . . based on a

potential use as storage or buffer acres.” App. 2156 (emphasis added). The

Landowners, in contrast, “had a much more optimistic view of the value of their

land for gas storage or buffer purposes” and sought a one-time payment of $2,000

per acre for value derived from gas storage and buffer rights. See id. at 2159.

The commission found that “the usefulness of the properties as buffer acreage

add[ed] an incremental value of $125 per acre to all the tracts in the 2010

Extension Area immediately before the taking.” Id. at 2163–65. In reaching this

middle ground, the commission credited evidence of Northern’s own pre-

condemnation leasing efforts in the 2010 Extension Area, which (at $22 per acre

per year for a standard gas storage lease, discounted at 10% and assuming no

annual escalation of the rental price over a 25-year lease) yielded a “net present

value of $200 per acre.” Id. at 2163. But the commission did not agree that the

one-time payment of $200 per acre suggested by Northern’s leasing efforts was

wholly “in line with other data of comparable sales” in the vicinity of the

Cunningham Field. See id. at 2165. Sales of properties within the 2010

Extension Area, compared with those located further away from the field,

suggested that the market did not place “substantial” value on the gas storage or

buffer rights. Id. at 2163–65. The commission thus “synthesize[d] the value

suggested by an income approach [i.e., $200 per acre] with the data on

comparable sales” to reach its $125-per-acre determination. See id. at 2165.

                                        -24-
      Because there was at least some evidence that, if credited by the

commission, suggested a discernable market value increase for gas storage and

buffer acreage, we affirm the district court’s inclusion of such value in the

condemnation award.

      C. Valuation of the Extension Area Wells

      As part of the condemnation, Northern acquired the remnants of eight

previously drilled wells and converted them for use as observation wells. The

Producers who drilled the wells claim they are entitled to at least the full

replacement value for each well (i.e., the cost of drilling a replacement hole),

which would be approximately $225,000 per well. But the Producers also argue

they should have been compensated for the costs of fully completing a well (i.e.,

both drilling and equipping), which would be more than $400,000 per well. The

district court, however, awarded only a “salvage value” of $5,850 per well

recommended by the commission. The $5,850 award reflects the value of the

casing materials that remained in the wellbores when Northern acquired the wells.

      In rejecting the Producers’ arguments, the commission found that a full

replacement value was not warranted, because the wells “would be valued by the

market as part of the producing reserves that were associated with each well, and

the market would not attach any additional value to the wellbore itself, except for

the value of any casing remaining in each wellbore on the Date of Taking.” See

App. 2166. Moreover, “there was no evidence of any formations other than the

                                         -25-
Viola which might have productive potential in these wellbores,” so any

replacement wells would be “worthless holes in the ground.” Id. The

commission also found that Northern was not required to compensate the

Producers for the costs of equipping the wells, because the Producers “removed

the equipment from the wells.” See id. at 2166 & n. 33. Therefore, “the

equipment itself was not taken,” but rather only the casing materials remaining in

each wellbore on the date of taking. Id.

      This method of valuation is consistent with Kansas law. See, e.g., Union

Gas, 774 P.2d at 970 (noting that “factors to be considered in arriving at the

‘before’ value include . . . the salvage value of the equipment on the wells,” and

“[t]he cost of drilling and completing” wells is considered a cost of production

not included in calculating compensation owed for the taking of wellbores). We

therefore conclude that the commission’s valuation was adequately supported by

the record and affirm the district court’s inclusion of the salvage value in the

condemnation award.

      D. Attorneys’ Fees

      Finally, the Landowners and Producers argue they are entitled to additional

compensation in the form of attorneys’ fees. Although neither the federal NGA

nor Federal Rule of Civil Procedure 71.1 contains any provision concerning the

award of attorneys’ fees, the Landowners and Producers invoke two provisions of

Kansas state law in support of their claims. Because we review a district court’s

                                           -26-
decision not to award attorneys’ fees for an abuse of discretion, see Schell v. OXY

USA Inc., 814 F.3d 1107, 1126 (10th Cir. 2016), and we are not persuaded that

either state statutory provision applies, we affirm the court’s denial of attorneys’

fees.

        First, the Landowners and Producers invoke part of the Kansas Storage

Act, codified at § 55-1210(c)(3). “[W]ith regard to natural gas that has migrated

to adjoining property or to a stratum, or portion thereof, which has not been

condemned as allowed by law or otherwise purchased,” Kan. Stat. Ann. § 55-

1210(c),

        The owner of the stratum and the owner of the surface shall be entitled
        to such compensation, including compensation for use of or damage to
        the surface or substratum, as is provided by law, and shall be entitled
        to recovery of all costs and expenses, including reasonable attorney
        fees, if litigation is necessary to enforce any rights under this
        subsection (c) and the injector does not prevail.

Kan. Stat. Ann. § 55-1210(c)(3). According to its text, however, § 55-1210(c)(3)

applies only: (1) to natural gas that has migrated to “adjoining property or to a

stratum, or portion thereof” that “has not been condemned as allowed by law or

otherwise purchased”; and (2) when “litigation is necessary to enforce any rights

under [§ 55-1210(c)] and the injector does not prevail.” But this case does not

involve natural gas that has migrated to adjoining property. Instead, it involves

natural gas that migrated beyond adjoining property (i.e., gas that migrated to the

Extension Area prior to the date of certification) and natural gas migrating


                                         -27-
within a field’s certified boundaries (i.e., after certificate authority brought the

Extension Area within the Cunningham Field’s certified boundaries). We need

not decide whether Northern has prevailed, because we are not convinced that

these condemnation proceedings were “necessary to enforce any rights under . . .

subsection (c).” Rather, the proceedings were brought under the NGA and

primarily involved Kansas common law and statutory provisions § 55-1210(a) and

(b), and not (c). We therefore cannot say the district court made any error of law

or abused its discretion by declining to award attorneys’ fees under § 55-

1210(c)(3).

      Second, the Landowners and Producers invoke § 66-176, which provides, in

relevant part,

      Any public utility or common carrier which violates any of the
      provisions of law for the regulation of public utilities or common
      carriers shall forfeit, for every offense, to the person, company or
      corporation aggrieved thereby, the actual damages sustained by the
      party aggrieved, together with the costs of suit and reasonable attorney
      fees, to be fixed by the court.

Kan. Stat. Ann. § 66-176. According to its text, § 66-176 applies only to public

utilities or common carries that have “violate[d]” some provision of law for the

regulation of public utilities or common carriers. As with § 55-1210(c)(3), this

statutory provision does not apply here. These condemnation proceedings arose

under the NGA and were not predicated on any violations of “the provisions of

law for the regulation of public utilities or common carriers.” We therefore


                                          -28-
cannot conclude the district court made any error of law or abused its discretion

by declining to award attorneys’ fees under § 66-176.

                                      *    *     *

      In sum, the district court did not err in refusing to award attorneys’ fees

under Kansas law.

                                III. Conclusion

      For the foregoing reasons, we REVERSE the district court’s inclusion of

the value of storage gas in and under the Extension Area on the date of taking

when calculating the condemnation award and its inclusion of future production

to the extent that it conflicts with today’s holdings. We AFFIRM the district

court’s valuation of gas storage and buffer rights for Extension Area tracts,

valuation of Extension Area wells, and denial of attorneys’ fees. 12




      12
          In light of this disposition, we deny as moot Northern’s pending motion
for partial remand to the district court.

                                          -29-
