COYLE et al. v. NORTH AMERICAN OIL CONSOLIDATED et al.
No. 36205.
Supreme Court of Louisiana
Feb. 2, 1942.
Rehearing Denied June 29, 1942.
9 So.2d 473
Dimick & Hamilton and John B. Files, all of Shreveport, for appellees.
Plaintiffs own 120 acres of land in one tract, situated in what is known as the Cotton Valley Oil Field in Webster Parish,
On August 26, 1936, they executed an oil and gas lease in favor of M. Carl Jones, covering the N.E. 1/4 of the S.E. 1/4 of Section 29. Jones, the lessee, transferred the lease to Elva M. Austin, and Austin in turn transferred it to the North American Oil Consolidated, one of the defendants.
On the same day, Robert M. Coyle, one of the plaintiffs, granted an oil and gas lease to Mrs. Sibyl York, wife of Sam York, covering the N.E. 1/4 of the S.W. 1/4 of Section 28. Mrs. York assigned the lease to Austin, and Austin assigned it to the North American Oil Consolidated.
On August 25, 1936, Robert M. Coyle leased for oil development the N.W. 1/4 of the S.W. 1/4, Section 28, to the Root Petroleum Company. The North American Oil Consolidated is the present owner of the lease covering the N.E. 1/4 of the S.E. 1/4 of Section 29 and the N.E. 1/4 of the S.W. 1/4 of Section 28, and the Root Petroleum Company is the present owner of the lease covering the N.W. 1/4 of the S.W. 1/4 of Section 28. These companies are the defendants in two suits brought by the plaintiffs to cancel the leases. The issues involved in each of the suits are identical, and for that reason the two suits were consolidated for the purpose of trial.
In the Cotton Valley Oil Field there are at least two well defined and separate strata of oil-bearing sands. One is known as the Travis Peak sand or stratum, and the other is designated as the Bodcaw or
The leases here involved contain the usual stipulation that, in case oil, distillate, or gas is discovered and produced from the land within the primary term of the leases, if they be kept alive for that time, then the leases shall remain in force and effect so long as any one of those commodities is produced. Plaintiffs alleged, and it is admitted, that the leases have been developed in so far as the Bodcaw or Lower Marine stratum is concerned. One of the defendants drilled a well on the N.E. 1/4 of the S.E. 1/4 of Section 29 to a depth of 8,200 feet, which well is now producing oil in paying quantities. The other defendant drilled a well to the same depth on the land in Section 28, which well is also producing oil in paying quantities. But no oil, distillate or gas has been produced from the Travis Peak sand or stratum.
Plaintiffs alleged in each of their suits that, while defendants had made no effort to develop the leases on their land in so far as the Travis Peak sand or stratum is concerned, yet defendants held leases on lands south of and adjacent to plaintiffs’ land and had drilled two wells on those lands into the Travis Peak sand, which wells had been producing oil or distillate in paying quantities and were producing at the time these suits were filed. They alleged further that the wells on the lands
In the alternative, plaintiffs alleged that, in case it should be held that they were not entitled to have the leases cancelled on account of the lessees’ failure to drill offset wells, then, in that event, they were entitled to have the leases cancelled in so far as the Travis Peak sand or stratum was concerned, because the lessees had abandoned that sand or stratum. They alleged that the lessees’ failure and refusal to develop was an abandonment.
Defendants in limine filed exceptions of no cause and no right of action. These exceptions were grounded upon the proposition that, according to plaintiffs’ allegations, oil was being produced from the Bodcaw or Lower Marine formation at the time the suits were filed, and that there-
We are not called upon to decide in this case, and do not decide, the question whether, in a case of this kind where it is shown that there are two or more separate and distinct strata of oil-bearing sands in land, each stratum should be considered a separate and distinct oil field. But, for the purposes of this decision, the Travis Peak sand or stratum will be considered as one field, and the Lower Marine sand or stratum as another, or separate, field. We shall consider these as separate and distinct fields, because counsel for the respective litigants concede that they are separate fields. In oral argument and in briefs they speak of them as separate fields
There was judgment in the lower court rejecting plaintiffs’ demands and ordering their suits dismissed at their costs. From this judgment plaintiffs appealed.
We take up first the question whether plaintiffs are entitled to have these leases cancelled because the lessees have failed, and now refuse, to drill offset wells.
In a case note found in 19 A.L.R. page 441, under the heading Oil and Gas Lease-Protection Wells, the general rule relating to the particular issue here involved is stated as follows:
“The burden of proof is upon the lessor of land for oil and gas production to show that the location of wells upon adjoining premises is such that, taken in connection with the character of the oil or gas stratum, they will drain a sufficient quantity of oil from his premises to justify the lessee in going to the expense of drilling offset wells in order to save the oil or gas for their mutual benefit.”
This is a general statement or expression of the rulings made by this court and the courts of Kentucky, Ohio, and Oklahoma. See especially the case of Hart v. Standard Oil Co., 146 La. 885, 84 So. 169.
Counsel for plaintiffs concedes that the above is a correct statement of the general rule and is applicable here in so far as this particular point is concerned. The question, then, is whether plaintiffs have discharged the burden of showing that the location of the wells upon the adjacent
The trial judge in his very able and elaborate written opinion stated his conclusion on this point as follows:
“We have carefully reviewed the testimony in this case and our conclusion is that the plaintiffs have entirely failed to sustain the burden of proving that the wells on the adjacent property will drain a sufficient quantity of oil from their premises (if any at all) to justify the lessee in going to the expense of drilling offset wells. In fact, the only evidence that may tend to indicate a slight drainage is from the testimony of the experts offered by the defendants.
“In considering the operations on adjacent premises together with the extent of the oil reservoir in the Travis Peak, the established facts are all found to be against plaintiffs.”
In support of his conclusions, the judge quoted the testimony of witnesses called by plaintiffs and that of witnesses called by defendants. Among these were geologists who testified that they had been in the Cotton Valley Oil Field for a number of years and had observed conditions relating to the Travis Peak sand and had personally examined cores taken from numerous wells drilled there. They testified that it is now well known that the Travis Peak sand is what is generally referred to as lenticular in formation-that is, this oil-bearing
The experts testified, and this is conceded, that in so far as the Bodcaw or Lower Marine formation is concerned, the oil-bearing sand is uniform, and that up to date each well drilled into that formation has produced, and is at present producing, oil or distillate in paying quantities. There is no uncertainty as to production from that sand. For that reason the operators begin drilling in all cases with the knowledge that they may have to drill into that sand in order to get production. In drilling into that sand, they necessarily have to drill through the Travis Peak stratum, and, when they reach the depth where oil is found in the Travis Peak sand, they are careful to take and examine cores of their drillings to see whether oil in paying quantities may be produced from that stratum. If they find oil in paying quanitities in that stratum, they never drill
In developing the leases here involved by the drilling of two wells to the Bodcaw or Lower Marine formation, the testimony shows clearly that, when the Travis Peak stratum was reached, the drilling superintendent made numerous cores or tests to determine whether production could be had from that sand, and the tests showed definitely that production could not be obtained from that stratum. It was for that reason that the wells were drilled to the lower field.
It is reasonable to suppose that, if these operators could have produced oil in paying quantities from the Travis Peak stratum at a drilling cost of approximately $40,000, they would not have spent, as they did, approximately $120,000 to get production from the lower formation.
The two wells on the tract south of and adjacent to plaintiffs’ property were drilled to the Travis Peak sand, and each produced oil in paying quantities. However, the testimony shows that one of the wells
One of plaintiffs’ own witnesses was asked whether the sand gets thinner as it goes north in the vicinity of plaintiffs’ property, and he said, Possibly less productive. He was then asked, Would it also be true if you went north of those wells [the wells drilled to the south of plaintiffs’ property] that it would be still less productive? His answer was, That is a lenticular sand. It indicates that it is pinching out as it goes north.
The testimony shows that the two wells drilled on the property south of plaintiffs’ land have been producing for slightly more than two years, and that up to the present time neither has produced enough oil to pay the expenses of drilling and operation. And, as we have stated, the testimony shows that the production from these wells is growing less all the time, and one of them produces only about eight barrels a day. The indications are that in the future neither well will produce enough oil to pay for its operation. Plaintiffs’ witness, Mr. Egloff, testified that for 10 years he had been employed by the Hunt Oil Com-
After carefully reading the testimony of each of the witnesses called by plaintiffs and each of those called by defendants, we are convinced that the trial judge did not err in his finding that the plaintiffs had utterly failed to make out their case on this point.
As to the alternative plea that the leases be cancelled in so far as the Travis Peak formation or field is concerned, on the ground that it has been abandoned by the lessees, the trial judge held that there had been no abandonment of that field. Both in oral argument and in briefs, counsel for plaintiffs has argued at length and most earnestly that the trial judge erred in so holding. The major point stressed by him was that, in as much as the lessors had not yet developed the Travis Peak field and had refused to do so, this field should be returned to the lessors in order that they might themselves develop it. He urged that we reverse the decision as to that point.
But, if we should conclude that the judge erred in his ruling on that point, we could not render judgment cancelling the leases,
In so far as the issue of abandonment of the leases is concerned, it is necessary that the case be remanded in order that all interested parties may be cited and served according to law.
For the reasons assigned, the judgment appealed from, rejecting plaintiffs’ demands that the leases be cancelled on the ground that the lessees had failed and refused to
O‘NIELL, C. J., concurs in the decree but not in the expression that the provisions of the code that are applicable to ordinary leases are applicable also to mineral leases.
On Rehearing.
PONDER, Justice.
A rehearing was granted in this case on the application of the plaintiffs and the application of the defendants. Both, the plaintiffs and the defendants, applied for a rehearing solely and only as to that part of our decree relating to the plaintiffs’ alternative demand, seeking to have the leases canceled insofar as the Travis Peak sand or stratum is concerned on the ground that the defendants have abandoned this sand or stratum. The plaintiffs and defendants have raised no complaint as to our holding herein in other respects. In fact, all the parties to this suit concede that the holding is correct except as to the alternative demand. All the parties to this suit contend that there is no necessity for the remanding of the case for the purpose of making those who have acquired interests in the leases as a result of the unitizing
The plaintiffs contend that the lessees’ failure and refusal to develop the Travis Peak sand or stratum operated as an abandonment, and that the leases should be canceled insofar as this sand or stratum is concerned. They argue that inasmuch as it is shown from the tests made in the two wells drilled by the defendants that the Travis Peak sand or stratum would not produce oil on this property, that the actions of the defendants in making no other effort to produce oil from this sand or stratum amounted to an abandonment of it.
The position taken by the plaintiffs is predicated on the ground that when there are two or more separate or distinct strata of oil bearing sands in lands, each should be considered a separate and distinct oil field. While we did not pass on this question on the original hearing of the appeal, yet we stated in the opinion handed down by us that the respective litigants conceded that the Travis Peak stratum and the Lower Marine stratum were separate fields. The defendants have taken exception to this
We have to look to the leases to ascertain just what the intentions of the parties were in this respect.
The rule is well established that mineral leases must be construed as leases, and that the codal provisions applicable to ordinary leases must be applied. Tyson v. Surf Oil Co., 195 La. 248, 196 So. 336.
“The duration and the conditions of leases are generally regulated by contract, or by mutual consent.”
Article 2684, Revised Civil Code .
“Agreements legally entered into have the effect of laws on those who have formed them.”
Article 1901, Revised Civil Code .
Under the provisions of
“When the intent of the parties is evident and lawful, neither equity nor usage can be resorted to, in order to enlarge or restrain that intent, nor can any law operate to that effect, unless it be some prohibition or other provision, which the parties had no right to modify or renounce.”
Article 1963, Revised Civil Code .
Under the plain and unequivocal terms of the lease contracts, the leases are to remain in full force and effect as long as oil is produced. Oil is now being produced in paying quantities under the leases from the Lower Marine stratum. There is no language used in the lease contracts to indicate that it was ever intended that different strata or levels were to be considered separate oil fields. Undoubtedly these lease contracts contemplate that they shall remain in force and effect as long as oil is produced from the lands, irrespective from what level or stratum it is found. If it had been otherwise, some provision to that effect would have been written in the contracts. Moreover, there is no evidence in this record going to show that the defendants ever had any intention of abandoning the Travis Peak stratum. The mere fact that the defendants drilled through the Travis Peak stratum, where no oil was found, to the Lower Marine stratum in order to find oil would not indicate any intention on their part to abandon the Travis Peak stratum. The defendants have complied with their lease contracts by producing oil on the lands from the level or
For the reasons assigned, our original decree is amended by striking out that part of it which sets the judgment aside insofar as the issue of abandonment is concerned and ordering the case to be remanded to cite and serve, according to law, all parties who had acquired interests in the leases as a result of the pooling agreements. The judgment is further amended by rejecting the plaintiffs’ alternative demand of abandonment. As thus amended, the judgment is affirmed at appellants’ cost.