277 P.3d 838
Colo. Ct. App.2011Background
- Bledsoe Ranch spans over 60,418.79 gross surface acres and 37,771.64 net mineral acres in Colorado, with potential Niobrara oil and gas resources.
- In 2001, Bledsoes leased the minerals to Tipperary Oil & Gas Corp for exploration, development, drilling, production and sale of oil and gas.
- The lease is a Producers 88-Paid Up form with habendum and Pugh clauses; Exhibit A modifies these terms.
- Leases extended beyond primary term due to production/drilling; by 2007 about 150 wells were drilled; Forest Oil acquired the lease in June 2007.
- Forest Oil began Well 10-6-5-44 on July 17, 2007; completion contested; well was fractured on August 9, 2007.
- Bledsoes claimed violation of 180-day and continuous-prosecution requirements; trial court found breach, then appellate reversal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What does completion mean under the lease? | Bledsoes contend completion means ready to produce gas. | Forest Oil argues completion is delayed until fracture, i.e., production-ready. | Completion is not ambiguous; means ready to produce gas. |
| Does the 180-day clause require continuous drilling vs. defined inactivity? | Bledsoes claim more than 180 days between wells breaches the lease. | Forest Oil asserts Exhibit A allows up to 180-day gaps while drilling proceeds as defined. | Lease defines 'continuously prosecuted' as a 180-day inactivity limit; no breach if met. |
Key Cases Cited
- Cheyenne Mountain School Dist. No. 12 v. Thompson, 861 P.2d 711 (Colo. 1993) (ambiguous contract determination and use of extrinsic evidence)
- Chacon v. Am. Family Mut. Ins. Co., 788 P.2d 748 (Colo. 1990) (courts do not rewrite clear contract language)
- Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371 (Colo. 1990) (contract language interpreted in harmony with ordinary meaning)
- Ad Two, Inc. v. City & County of Denver, 9 P.3d 373 (Colo. 2000) (extrinsic evidence generally cannot contradict contract language)
- Fort Lyon Canal Co. v. High Plains A&M, LLC, 167 P.3d 726 (Colo. 2007) (extrinsic evidence must be derivable from contract terms)
- Edwards v. Hardwick, 350 P.2d 495 (Okla. 1960) (definition of completion as producing capability known to industry)