units . In dismissing their complaint , the district court held it lacked subject matter jurisdiction because Garaas did not exhaust their administrative remedies before the North Dakota Industrial Commission ( commission ). The Supreme Court affirmed .
The trusts owns minerals in McKenzie County , where Petro-Hunt operates a section line well in a four-section spacing unit created by the commission . The Garaas Trusts brought suit against Petro-Hunt in district court for declaratory relief and damages claiming Petro- Hunt should not have allocated any proceeds for production from the section line well to the underlying , or base , spacing unit , which they claim diluted the Garaas Trusts ’ interest in the overlapping spacing unit where the section line well was located . The Supreme Court began its analysis by explaining dismissal for lack of subject jurisdiction is appropriate if the plaintiff fails to exhaust their administrative remedies , which presents a question of law reviewed de novo . A plaintiff must exhaust their administrative remedies at the appropriate administrative agency – here , the commission – before making a claim in court . The purpose of requiring exhaustion of remedies is based on the separation of powers doctrine , which preserves agency authority and promotes judicial efficiency . The exhaustion requirement also recognizes the agency ’ s initial decisionmaking responsibility , and allows for the exercise of its expertise in resolving the dispute , as determined by the legislature .
The exhaustion requirement applied to Garaas ’ s claim because the commission has broad authority under N . D . C . C . Chpt . 38-08 to regulate oil and gas development , and its powers are continuous and exclusive . Because the Garaas Trusts ’ claims required factual findings by the commission related to the correlative rights of the owners in the pool , including the owners in the base spacing unit , the trusts were first required to bring their claims to the commission , not the district court , to allow the commission to exercise its jurisdiction , make the necessary findings of fact , and develop a complete record . Because the Garaas Trust failed to bring its claims to the commission , the Supreme Court held the district court properly dismissed their complaint for failing to first exhaust their administrative remedies . If the Garaas Trust does not agree with the commission ’ s conclusions , they may then file an appeal with the district court pursuant to N . D . C . C . Chpt . 28-32 .
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