Superior Oil Co. v. Beery
Superior Oil Co. v. Beery
Opinion of the Court
This is a suit in equity wherein the complainant, Roy Beery, obtained a decree for the cancellation of an oil,
The oil, gas and mineral lease in question was executed on December 29, 1939, by Bruce Walker and wife to John D. Gholson on this 50-acre tract in which the appellee- Boy Beery now owns the 15/50th mineral interest, and the lease was transferred and assigned by Gholson during the year 1940 to the appellant, Superior Oil Company. Thereafter, on June 26, 1944, Bruce Walker and wife conveyed unto the appellee the said 15/50ths mineral interest in their 50-acre tract of land, subject to the outstanding oil,' gas and mineral lease then, held by the appellant.
The appellant’s lease provides that “This lease shall be for a term of ten years from this date (called ‘primary term’) and as long thereafter as oil, gas or other mineral is produced from said land hereunder.”
It will be observed from á reading of the foregoing-provision in the lease that there is no ambiguity therein. The primary term of the lease is stated in plain
The appellant’s lease itself did not contain a pooling or force majeure clause. It was obtained of course subject to the police powers conferred upon the State Oil & Gas Board by Chapters 117, Laws of 1932, and 305, Laws of 1936, as was likewise the mineral deed from Bruce Walker and wife to the appellee, the lease having-been executed during- the year 1939 and the mineral deed in 1944, prior to the passage of Chapter 256, Laws of 1948.
The appellee sued specifically for the value of %th of 15/320ths of the gas produced from the Dale well from the time it came into commercial production on February 1, 1947, until December 29, 1949, the date on which the lease was to expire by its terms, and for 8/8ths of the gas produced by said well thereafter prior to the trial. However, the amended bill of complaint contained a general prayer for the award of such damages as the court should find the complainant was entitled to recover. The trial court, however, awarded to the complainant 8/8ths of 15/320ths of the market value of the gas produced by the unit well on Dale’s land on the basis that the 15/50ths of the 50-acre tract bears to the area of the 320-acre gas drilling unit from the time commercial production began therefrom, upon the theory that the law of co-tenancy was applicable to the situation since it was alleged that the gas had been produced from
Although the appellee sued specifically for the market value of %th of the royalty on the basis of his mineral acreage in the 320-acre unit, prior to the expiration of the primary term of the lease and for 8/8ths of such value thereafter, he predicates his right to recovery upon one of three stated grounds: (1) that he was entitled to recover on the ground that the appellant, as lessee of the 50-acre tract, had violated its duty under its lease not to impair the value thereof, in that it had drained, and is still draining, gas from the 50-acre tract through the unit well on the Dale tract; (2) that the lessee falsely, fraudulently, wrongfully and unlawfully represented to the State Oil & Gas Board that all of the lands proposed to be included in gas drilling Unit No. 39 had been lawfully pooled, and that the lessee thus obtained a full gas allowable on the 320 acres, including the 50-acre tract in question; and (3) that he is entitled to the recovery sued for under the law of co-tenancy for the reason that Bruce Walker and his several vendees (other than his vendee Beery) of mineral interests in the 50-acre tract had executed the amendments to the lease of the appellant hereinbefore mentioned, on January 28, 1948, and March 25, 1948, whereby they authorized the said lessee to pool this lease with the other lessees in the 320-acre unit and to pool their undivided 35/50ths of the minerals under the 50-acre tract with those of other
As to the first contention, the only assumed obligation found in the lease whereby the. lessee expressly agreed to protect the rights of the appellee and his co-tenants in the leased premises, that is to say the 50-acre tract, from drainage, is in the following words: “In the event a well or wells producing oil or gas in paying quantities should be brought in on adjacent land and within 150 feet of and draining the leased premises, Lessee agrees to drill such offset wells as a reasonably prudent operator would drill under the same or similar circumstances.”
The Dale well was drilled at a distance of approximately 1,000 feet from the 50-acre tract in question which is situated in the SWti of Section 28, and it would seem that no obligation implied by law to protect the leased premises from drainage was violated where the same lessee also held a lease on the Dale tract and drilled the well thereon under the express authority of the Dale lease, and where under the conservation laws of the State, subject to which the appellee had purchased his mineral interest, the lessee of the 50-acre tract was prohibited from drilling an offset well thereon. In other words, since no express provision of the lease from Walker to Gholson was violated, it would seem that there would be no liability on the first theory of the amended bill of complaint, since the obligation implied by law to protect against drainage is inapplicable where' the lawful rules and regulations of the State Oil & Gas Board for the conservation of oil and gas are complied with.
As to the second theory of liability relied on, it was necessary that the lessee who drilled the unit well should obtain an allowable for the entire 320 acres embraced
We shall discuss the third theory of liability herein-before mentioned later in this opinion, other than to the extent of now stating that neither the appellee nor his co-tenants in the 50-acre tract were co-tenants in the sense of being entitled to share in the production from the unit well on the Dale tract except upon the theory that the 50-acre tract has been legally unitized or pooled with the other tracts in the 320-acre gas drilling Unit No. 39.
This brings us directly to a determination of whether or not this provision of the lease was actually complied with under the facts and circumstances hereinafter stated, within the meaning of Chapter 117, Laws of 1932, and Chapter 305, Laws of 1936, when read in connection with the lawful orders, rules and regulations of the
The appellant also held the oil, gas and mineral lease on the Dale tract of land on which the well was completed on July 15, 1945, but due to the lack of pipe-line facilities to the Gwinville Gas Field, it so happened that this well, which later became the unit well for gas drilling Unit No. 39 was not placed in commercial production until February 1, 1947. Prior to the complete establishment of Unit No. 39, embracing the Dale tract of 160 acres, the Bruce Walker tract of 50 acres, and lands belonging to other separate owners, all of the %th royalty was paid by the appellant to Mr. Dale, as owner and lessor of the land on which the well had been drilled.
On August 11, 1947, the State Oil & Gas Board adopted a rule and regulation which provided for a spacing unit of 320 contiguous surface acres for gas wells in the Gwinville Gas Field. On that same day, the State Oil & Gas Supervisor, acting on behalf of the State Oil & Gas Board, requested the appellant, as driller and operator of the Dale well, to file with the Board a plat or map of the lands to be included in the 320-acre unit for production of gas by this producing well, and for which a permit to drill had been granted in appellant’s favor. This plat or map was accordingly filed on August 22, 1947, and was thereafter duly approved by the State Oil & Gas Board, together with the designation of such drilling unit.
On September 11, 1947, the State Oil and Gas Board adopted a state-wide rule and regulation which provided for gas drilling units of not less than 320 contiguous' surface acres, upon which no other drilling or producing well could be located. This rule recognized that the Board could grant an exception thereto, and also to the rule adopted on August 11, 1947, as aforesaid, in regard to the Gwinville Gas Field, if such an exception “is necessary to prevent waste or to prevent the confiscation
At the time of the adoption of these orders of August 11, 1947, and September 11, 1947, the British Oil Producing Company and R. J. St. Germain, respectively, were also holders of oil, gas and mineral leases on different tracts of land covered by the plat or map that was ordered filed by the appellant, Superior Oil Company, and all of these oil, gas and mineral lessees were ordered by the Board to pool their leases, so as to develop 320 acres as a unit for the production of gas in the area to be embraced in gas drilling Unit No. 39.
These orders of the Board found and adjudicated as a fact the efficient drainage area of a gas, well in the Gwinville Gas Field to be 320 acres; they provided for the establishment of such drilling- units; they regulated the spacing of the wells; they provided the formula by which the well allowables would be determined, and allocated the same on an acreage basis; and they required that “the rights of all owners in the drilling unit upon which the well is located shall first be pooled. ’ ’ The term “owner” is then defined in the order of September 11, 1947, as “The person who has the right to drill into and to produce from a field or pool, and to appropriate the production either for himself, or for himself and another.” Pursuant to this order of the Board, an operating-agreement was duly entered into by these three lessees whereby the appellant was to operate the Dale Well No. 1 as the unit well on behalf of these owners of the leases, and also of course for the benefit of all parties interested as royalty owners in the lands involved.
On December 9, 1947, a 320-acre allowable for the production of gas was granted for gas drilling Unit No. 39, as requested by the appellant when it filed its plat or map on August 22, 1947, covering the SE1/^ of Section 29 and SW% of Section 28 in Township 9 North, Range
When this unit had been thus established by the granting of the permit to drill, the filing of the plat or map of the lands to be included in the unit and the approval thereof, the pooling of the leases by the owners as required by the State Oil & Gas Board, and the granting of the 320-acre allowable and allocating the same to each separate tract of land therein on an acreage basis, in compliance with a valid exercise of the police powers of the State through the agency of the State Oil & Gas Board for the conservation of oil and gas, the owners of the leases, Superior Oil Company, British American Oil Producing Company and E. J. St. Germain, were thereafter, deprived of the right to drill a well on any other tracts of land on which they held leases, other than the well on the Dale tract. While they were required to permit all of the other leases than the one on the Dale tract to expire by their terms, there was substituted for the right that they otherwise had to drill their leases the right to participate in the production of the unit well on the Dale tract and to receive the same proportion of the gas that they would have been entitled to receive if the well had been on a
Likewise, there was substituted for the right of the appellee and his co-tenants in the 50-acre tract in which he'owned 15/50ths of the minerals, to have a well drilled thereon during the 10-year primary term of the lease held by the appellant thereon, the right to receive the same amount of gas from the unit well as he would have been allowed to receive under the proration authorized by Chapter 305, Laws of 1936 if a well had been drilled on the 50-acre tract prior to the expiration of such primary term on December 29, 1949. This fact is uncontroverted in the record.
We recognize that as held in the case of Armstrong v. Bell, 199 Miss. 29, 24 So. 2d 10, and 3 Summers Oil & Gas, Permanent Ed. 486, Section 601, and in the cases of Koenig v. Calcote, 199 Miss. 435, 25 So. 2d 763, and Bailey v. Federal Land Bank, 207 Miss. 764, 43 So. 2d 375, the appellee had the right to receive the annual rents prior to production under the lease as provided for in his mineral deed from Bruce Walker and wife; the right to receive any royalties from production under the lease; and the reversionary fee interest in the minerals in place, to the extent of 15/50ths of the 50-acre tract in the event there was no production under the lease of the appellant during the life thereof. But the question here is whether or not the 50-acre tract was placed in production prior to the expiration of the primary term of the appellant’s lease thereon in virtue of the unitization and pooling of all of the leases in Unit No. 39 and the allocation of the
All of the oil, gas and mineral lessees in the unit have received their pro rata %ths of the gas produced by the Dale well from and after the time the leases were unitized and pooled in the manner hereinbefore stated, and on the basis that their leased acreage bears to the 320-acre drilling unit. Likewise, all of the mineral or royalty owners, other than the appellee who refused the same except for compensation, have received their %th royalty from the production of the unit well on the basis that their acreage bears to the 320-acre drilling unit. Moreover, all of these mineral or royalty owners, other than appellee, have recognized the right of the State Oil & Gas Board to unitize their interests, and at the request of the oil, gas and mineral lessees they signed, without additional compensation, pooling agreements consenting to the development of their acreage as a unit along with that belonging to other mineral owners, and they thereby undertook to consent to the pooling of their mineral acreage with that of other mineral owners and the oil, gas and mineral lessees.
Included among those who thus signed what were termed amendments to the original oil, gas and mineral leases were the co-tenants of the appellee in the 50-acre tract, who owned 35/50ths of the minerals in place under the 50-acre tract, subject to the original oil, gas and mineral lease held by the appellant thereon. But in our opinion, the subsequent execution of this pooling agreement by the co-tenants of the appellee on January 28, 1948, and March 25, 1948, after the unitizing or pooling of the leases in the unit had been completed, was an unnecessary procedure in view of the fact that we later held in the cases of Superior Oil Company v. Foote on June 9, 1952, reported in.........Miss.........., 59 So. 2d 85, and Griffith, et al. v. Gulf Refining Co., 215 Miss. 15, 60 So. 2d 518, decided October 6,1952, and Hassie Hunt Trust, et al. v. Proctor, et al., 215 Miss. 84, 60 So. 2d 551, decided Octo
In the Foote case, supra, the appeal was from an order of the State Oil & Gas Board which undertook to “integrate” the interests of all lessees and mineral owners in the units there involved, the order having been rendered in a proceeding under Chapter 256, Laws of 1948, as amended by Chapter 220, Laws of 1950. But as a jurisdictional prerequisite for the Board to entertain the petition for integration, it was required that there should be two or more separately owned tracts of iand embraced within an established drilling unit, and it was therefore necessary for the Board to find and adjudicate that the units had been theretofore duly and legally established. The Board did so find and we affirmed its action in so doing. We then pretermitted a decision of the question of whether or not the effect of the integration, which, according to all definitions to be found in standard dictionaries, means the same thing as to unitize or to pool, would be to extend the primary term of the lease, or whether the expiration of the date of the primary term prior to “compulsory” integration would have the effect of entitling the mineral owner, on whose tract of land no well had been drilled and was in production thereon, to receive 8/8ths of the gas instead of Vsth after the expiration of the primary term of the lease which the mineral owner had given, or subject to which he had bought minerals under the lands described therein.
We are now confronted with the necessity of deciding this precise question in the instant case. In this connection, we are of the opinion that where the lands were unitized by the lessees and the leases were pooled, and the establishment of a gas drilling unit was completed under the authority of Chapter 117, Laws of 1932, Chap
At any rate, this Court held in the case of Green, et al. v. Superior Oil Company, et al., ...... Miss......., 59 So. 2d 100, decided May 26, 1952, that where the wells were drilled and production begun on the units under the statutes in effect prior to Chapter 256, Laws of 1948, the applicable legislation is Chapter 117, Laws of 1932 and Chapter 305, Laws of 1936. All of the proceedings had and done in the instant case up to and including the making of the first monthly allowable and the effective date thereof was prior to the expiration of the primary term and during the year 1947, and therefore long prior to the expiration of the lease here involved, on December 29, 1949; and hence the governing statutes are those of 1932 and 1936, as held in the case of Green, et al. v. Superior Oil Company, et al., supra. In other words, we think that the decision in the Green case went a long way toward deciding the issue now before us. It cited the case of California Company v. State Oil & Gas Board, 200 Miss. 824, 27 So. 2d 542, 28 So. 2d 120, which held that “the 1932 and 1936 statutes had the effect of vesting in the Board the power to prescribe rules for the
If the Board had the authority to establish drilling units and to require the oil, gas and mineral lessees to pool their leases, we think that it inevitably follows that each lessee is entitled to participate to the extent of %ths of the production from the unit well on the basis that its leased acreage bears to the 320-acre drilling unit, less their pro rata share of the expense of drilling and operating the well and severance taxes, and that this cannot be true if all of the mineral owners in the unit other than Dale are given 8/8ths of the production of gas after the primary term of their leases expire, and on the basis that such mineral owner’s acreage bears to the entire unit area. For instance, if the appellee is permitted to recover 8/8ths of 15/320ths of the value of the production of the gas from the Dale well, then the appellant would receive nothing from the appellee’s 15 mineral acres,, nor could the British-American Oil Producing Company and B. J. St..Germain, as oil, gas and mineral lessees receive %ths of the production of the gas from the unit well on the basis that their leased acreage bears to the 320-acre unit, if their lessors could claim 8/8ths after the expiration of the primary term.
Moreover, unless the 160-acre tract on which the Dale well is located could share on behalf of Dale %th of 160/320th of the gas drained from the 50-acre tract, upon the theory that the 160 acres has been unitized and pooled with the 50-acre tract, then he would be entitled under the law of capture to %th of all the gas produced from the well on his 160 acres.
Thus, it will be seen that the correlative rights of the British-American Oil Producing Company and B. J. St. Germain, as lessees of other tracts in the unit, and those
The right substituted in favor of the appellee, as above stated, has the effect of not taking away any valuable right of the appellee in violation of due process of law; whereas, on the other hand, if the oil and gas lessees are not permitted to share in the production of gas from the unit well on the basis that their leased acreage bears to the entire 320-acre unit, they are deprived of a constitutional right in violation of due process of law in that they were forbidden under the conservation laws of the State, as declared by the statutes last above mentioned and under the orders, rules and regulations of the said Oil & Gas Board adopted pursuant thereto, to drill a well on their leased acreage in the unit — a right granted unto said lessees under and by virtue of the contract provisions of their leases. They were required to pool their leases by the State Oil & Gas Board under the statutes and the orders, rules and regulations aforesaid,
But it is urged by the appellee that the lessees could have protected themselves against this contingency by inserting a pooling clause in the respective leases, or by purchasing the right to pool from the mineral owners as an amendment to each original lease, or that they could have inserted in the original lease a force majeure clause. But we are of the opinion that the lessees were given the right to pool their leases, and were in fact required to do so, by the statutes involved and by the orders, rules and regulations of the State Oil & Gas Board thereunder; and that it was a reasonable exercise of the police powers of the state when the said Oil & Gas Board, the delegated agency of the legislature, adopted its spacing rule on September 11, 1947, requiring that “the rights of all owners in the drilling unit upon which the well is located shall first be pooled”, and then defining the term “owner” in the said order as “The person who has the right to drill into and produce from a field or pool, and to appropriate the production either for himself, or for himself and another.”
The observation last above made is true as a reasonable conclusion, because the State Oil & Gas Board usually has jurisdiction of oil, gas and mineral lessees when they undertake to drill an oil or gas well in the State, since they are thereby engaged in local activities and are subject to the jurisdiction of the Board, whereas it frequently occurs that the royalty owners in an oil or gas field in this State usually reside in a number of different states, and it would be difficult for the Board to require them to do anything in regard to observing the conservation laws in the development of an oil or gas field. Moreover, such mineral or royalty owners by the
It was insisted at the bar either in this case or the companion case of Superior Oil Company v. Alfred Foote, et al., No. 38,562, which has been considered along with the instant case, that the land or mineral owner whose property is under an oil, gas and mineral lease, is entitled to have a well drilled on the particular tract of land covered by the lease, as contemplated by the lease contract. Such right is only nominal at most, however, when it does not appear that it would be any advantage or convenience to the land or mineral owner to have the well located on his land instead of on an adjacent tract, and when he is given the right to receive the same amount of oil or gas from the unit well on the adjacent tract as he would have been allowed to receive under proration if a well had been drilled on his tract during the primary term of the lease. In other words, his damage, if any, resulting from failure to drill on his land under such circumstances would be de minimis. Moreover, in the case of Pace, et al. v. State, ex rel. Nice, Attorney General, et al., 191 Miss. 780, 4 So. 2d 270, this Court recognized that it would be to the disadvantage of a 99-year lessee of sixteenth section lands for an oil, gas and mineral lessee of a sixteenth section to have the right of ingress and egress to the leased premises to explore for oil and gas and to develop the land for the production thereof, and the Court declared that the surface lessee would be entitled to compensation for the damage that may he sustained to his surface rights on account thereof.
It follows from what is said in the foregoing paragraph that a land or mineral owner is not deprived of any
An attribute of sovereignty, such as the police power of the state to conserve its natural resources, needs no constitutional sanction for its valid exercise; it is a power inherent in the existence of a government.
As to whether or not the reversionary interest in fee in and to the 15/50ths of the minerals under the 50-acre tract became vested in the appellee at the expiration of the 10-year primary term of the lease in question because of the failure of the lessee to produce oil, gas or other mineral from the tract prior to December 29, 1949, it
While the appellee does not sue specifically for the benefits resulting from the unitization or pooling of the leases, and does not concede that he ratifies the same, he does sue for 15/320ths of the value of the gas upon the stated ground that to such extent he has been damaged in that the gas produced by the unit well in part has been drained from the 50-acre tract. It is unnecessary for us to hold that the bringing of the suit had the effect of ratifying the unitization or pooling of all of the mineral interests in the unit, or that we base our decision upon any theory of ratification, but we think that the facts alleged and proved do sustain the theory that the gas, -the value of which is sued for as damages to the complainant, was in fact drained or produced from the 50-acre tract through the unit well, and that all of the lands in the unit were placed in production under the theory and philosophy of the conservation laws, and also
We are not unmindful of the holding of the numerous authorities cited by the appellee to the effect that the Court must give effect, to the terms of the lease as written, but for the many reasons hereinbefore stated we have reached the conclusion that there was no failure of production of gas from the 50-acre tract under and by virtue of the lease thereon prior to the expiration of the primary term thereof. None of the mineral owners whose interests are involved in the unit are entitled to any portion of the production of gas from the Dale well except upon the theory that it was producing gas from their several tracts of land under and by virtue of the oil and gas conservation laws. The extent of their participation in the production from the unit well is controlled by the terms of the leases on each respective tract which declare the extent to which they are entitled to participate in any production. Beyond question, it is true that Dale would be entitled to %th of all the production from the unit well unless his land has been pooled with the other tracts in the unit, since the State Oil & Gas Board has not recognized the unit except as embracing 320 acres. No factual basis is disclosed in the record that would have justified the granting of exceptions as to any particular tract in the unit since the same is composed of two quarter sections which make a perfect unit of 320 contiguous surface acres, and no complaint is made as to the size or shape of the unit as approved and established, or as to the location of the unit well thereon.
In the ease of Griffith, et al. v. Gulf Refining Company, supra, the appellants were mineral owners and had signed no pooling agreements. The Gulf Refining Company held a lease on 250 acres and obtained an allowable upon that acreage to drill and develop the same as a unit. Griffith and others were mineral owners
In the case of Hassie Hunt Trust, et al. v. Proctor, et al., 215 Miss. 84, 60 So. 2d 551, the appellant, Hassie Hunt Trust, drilled a producing oil well on the north 30 acres of a 40-acre tract on which 30 acres it held an unquestioned lease, whereas the appellees, Proctor and others, held a lease on the south 10 acres of the 40-acre tract. There was no pooling agreement, but the Court held that when the appellant drilled on the 30 acres and obtained an allowable on the 40 acres as a drilling unit it became liable to account to the appellees for %th of %ths of the production from the 40 acres, less ^th of the cost of drilling, equipping and operating the well and less !4th of the operator’s %ths of the severance taxes.
It is true that neither of these two cases involved the question of the right of a mineral owner to receive 8/8ths of the production after the expiration of the primary term of a lease, but the point is that the Court nevertheless allowed Griffith and others in one case,
- The Court cites the case of Placid Oil Company v. North Central Texas Oil Company, 19 So. 2d 616, from the Supreme Court of Louisiana, in the Griffith and Hassie Hunt Trust eases, supra. That case involved a dispute over the ownership of the %th royalty. Briefly the facts were that Parten owned the royalty in Tract A and the North Central Texas Oil Company owned the royalty in Tract B. Each tract was under lease to Hunt Oil Company and contained forty acres. The spacing rules provided for 80-acre drilling units consisting of two adjacent 40-acre tracts. The lessee applied for a permit to drill and filed a plat of the 80-acre drilling unit comprising both Tracts A and B. The permit was issued and the well was drilled on the tract owned by Parten. He claimed all of the royalty because the well was on his tract and there was no pooling order as to the royalty and no voluntary agreement. The Court held that the royalty owners in each tract were entitled to their share of the production from the unit well. The lessee had been ordered by the Commissioner of Conservation to combine the two 40-acre tracts and the Court held that the effect of the Hunt Oil Company obtaining the permit to drill and the order of the Board to combine the two tracts into a unit “was in fact a unitization of the two 40-acre tracts”, and the Court further said:
“The effect of the order was to substitute for the right of every owner of a mineral interest in a tract of land having an area less than 80 acres — to receive all of his proportionate share of any oil or gas that might*695 be produced from the Bodcaw sand through a well drilled upon the land in which he owned the mineral interest —the right to receive only his proportionate share of any oil or gas produced from the Bodcaw sand through a well drilled upon an 80-acre drilling unit embracing the land in which he had his mineral interest.”
But especially in point is the case of Hardy v. Union Producing Company, (La.) 20 So. 2d 734, wherein the Court said: “Plaintiffs’ argument is not tenable because the defendants in reality have not failed to perform any obligation of their contract. There was no obligation resting upon the defendants to drill a well during the primary term of the lease in the circumstances of this case according to a reasonable interpretation of the contract. If the contract should be annulled, plaintiffs could not drill a well on their 47-acre tract of land because it forms a part of the 640-aere drilling unit on which a well drilled by the Southern Production Company, Inc., is producing gas in paying quantities. Plaintiffs, as the owners of the leased premises, are entitled to receive the same revenue as they would receive if the well located in the Northeast Quarter of the Northwest Quarter of Section 11 was located on their 47 acres in Fractional Section 10. In other words, if the well of the Southern Production Company, Inc., was located on plaintiffs’ 47-acre tract of land in Fractional Section 10, the production would be prorated among all the owners of the mineral rights in the drilling unit in the same proportion in which the production is now being distributed. . . .
“So in this case, the clause in the lease requiring defendants to drill a well on the'leased premises within the primary term of five years is not applicable where a well producing gas in paying quantities has been drilled on land within the drilling unit of which the leased land forms a part and where the lessee is prohibited by orders of the Department of Conservation from drilling a well on the leased premises. In other words, the right*696 of defendants to drill a well on the 47-acre tract covered by the lease was in effect taken away from them by the orders of the Commissioner of Conservation, with, however, the right reserved to them, as well as to the plaintiffs, to share in the production of the gas produced from the unit in proportion to their ownership. Defendants’ hands were literally tied as the result of the orders issued by the Commissioner of Conservation and they could do nothing whatsoever to prevent the primary term of the lease from expiring without drilling a well thereon. ’ ’
We think that whether a drilling unit has been established under constitutional provision or under valid statute's of the Legislature and the orders, rules and regulations enacted and adopted pursuant to the constitutional police power of the State, the effect of the unitization or pooling of leases should be the same. Moreover, it is the duty of the Court to give our conservation statutes, and the measures adopted thereunder by a state agency created by the Legislature to carry out the public policy of the State, such a construction as would reasonably render the same constitutional and vqlid. The Court sustained their constitutionality on the former appeals involving this and other gas drilling units in the Gwinville Gas Field. Unless requiring oil and gas lessees to pool their several leases in a given area and to develop the area as a unit with only one producing well thereon has the effect of unitizing or pooling the respective interests of the mineral owners in the area, then the requirement for the pooling of the leases cannot be upheld as constitutional'unless such action has the effect of placing all of the lands in the unit in production and extending the primary terms of the leases. Otherwise, only the lessee on the tract on which the producing well is drilled could receive any benefit from the leases in the unit.
In the instant case, the appellant, Superior Oil Company, expressly concedes in the concluding paragraph of
The appellant contends that it has been willing at all times to settle with the appellee according to its above concession, but it madé no tender of this portion of the gas except on condition that the appellee would sign an amendment to the original lease, and this portion of the gas was not unconditionally tendered unto the appellee in the pleadings. We are of the opinion that the defendant, Superior Oil Company, could not have relieved itself of the cost in the trial court proceedings without having made an unqualified tender of the amount to which it now concedes the complainant was entitled to receive.
From the foregoing views, it follows that the decree of the trial court in cancelling the appellant’s claim under its lease and awarding the complainant 8/8ths of 15/320ths of the gas produced from the Dale well from and after the same came into commercial production was error, and that the cause should be reversed and remanded in order that it be ascertained what sum of money the complainant is entitled to receive on the basis of yyh of 15/320ths of the gas from and after commercial production on February 1, 1947, by the unit well.
But it is strongly urged on behalf of the appellee that to thus limit the portion of gas that he is entitled to receive from the date the unit well came into commercial production, and throughout the period that the same may remain in production, is to hold that the State Oil
In the Green case, supra, we said: “In California Company v. State Oil & Gas Board, 1946, 200 Miss. 824, 27 So. 2d 542, 28 So. 2d 120, this Court held that the 1932 and 1936 statutes had the effect of vesting in the Board the power to prescribe rules for the spacing of oil and gas wells, and to regulate the drilling for and production of oil and gas. We also think that the same statutes by necessary implication authorized the Board to estab
However, it is further urged that the oil and gas lessees could pay the royalty owners enough to get them to voluntarily agree to the pooling of their mineral interests. But this contention overlooks the fact that the operation of a unit well for production of gas in a given area would be left to the will and pleasure of the mineral owners, some of whom may not be willing to agree to anything at any price. We think that when the Court, in the cases above enumerated, upheld the orders of August 11, 1947, and September 11, 1947, the last of which orders defined an ‘ ‘ owner ’ ’ who could be required to pool, as “The person who has the right to drill into and to produce from a field or pool, and to appropriate the production either for himself, or for himself and another,” it then followed that we must go further and hold that requiring the oil and gas lessees to pool
Moreover, under these two later statutes if the owners of two or more separately owned tracts cannot agree, then the right is given to the State Oil & Gras Board to “integrate” the several interests, and in such event there is no defense available to the objector if the unit has been legally established and one of the owners of a separately owned tract in the unit is unwilling to agree to his mineral interest being unitized, pooled or integrated with the others.
Under the conservation laws hereinbefore discussed, an oil and gas lessee in a proposed drilling unit may obtain an exception to the general spacing rule where the granting of such an exception would prevent waste or the confiscation of the property of the applicant, but in
Moreover, we rejected the contention (by a failure to respond thereto on Suggestion of Error) in the case of Hassie Hunt Trust, et al. v. Proctor, et al., supra, that Proctor and others could have petitioned for an exception as to the 10 acres on which they held a lease in a 40-acre oil • drilling unit there involved, there being no reason for the granting of such an exception. Nor did we hold in the case of Griffith, et al. v. Gulf Refining Co., et al., supra, wherein the appellants were mineral owners, that an exception should have been obtained for a well on the 90-acre tract which was a part of the 250-acre unit on which the permit for a well had been issued to drill as a unit.
This opinion has been prolonged to great length, both because of the importance of the questions involved and the necessity for studying nearly seven hundred pages of briefs and a voluminous record in this and the companion case with the view of obtaining the benefit of the thought and research given to each case by all of the several firms of attorneys interested. Naturally, it has
Reversed and remanded.
Dissenting Opinion
dissenting:
Under the terms of the contract here involved, the lease was for a term of ten years, “and as long thereafter as oil, gas or other mineral is produced from said land hereunder. ’ ’ There was no provision for production by operation of law, as might be contemplated from forcible pooling. The only kind of production allowed for was “hereunder,” that is, under this lease contract. Obviously the draining of gas from this land incidental to a well nearby was not within the contemplation of the parties at the time of the execution of the lease. And since no well was drilled on this acreage during the ten-year period, there was no production from this land “hereunder.” Consequently, on December 29, 1949, the expiration date of this lease, Beery’s 15/50ths reversionary interest became complete.
In the case of Koenig v. Calcote, et ux, 199 Miss. 435, 25 So. 2d 763, Calcote and wife, on October 4, 1935, executed a deed to Koenig for an undivided one-half interest in all oil, gas and minerals under 238 acres, subject to an outstanding oil and gas lease held by Sun Oil Company, executed on October 12, 1934, for a primary term of ten years. The land was not in production at the expiration of the primary term. This Court held that Koenig, under his deed, acquired “An undivided one-half interest in the reversionary fee in the minerals in place
But the majority opinion holds that the State Oil & Gas Board had the power, under Chapter 117, Laws of 1932, and Chapter 305, Laws of 1936, to adopt its orders of August 11, 1947, and September 11, 1947, and thereby integrate and forcibly pool Beery’s interest in this particular drilling unit.
It should be borne in mind that the Constitution of 1890, which, by Section 6, Article 3, thereof, recognizes the police power of the State, also contains a prohibition against the impairment of contracts, for Section 16, Article 3 thereof provides as follows: “Ex post facto laws, or laws impairing the obligation of contracts, shall not be passed.”
It is my view, with the greatest deference, that neither of the foregoing chapters delegated to the Board the power to force owners in a given unit to pool their interests. To this end, an analysis of the applicable provisions of those chapters is in order.
The powers granted to the Board are set out in Section 5 (a), Chapter 117, supra, the applicable part of which is as follows: “The Board hereby created shall have authority to adopt and promulgate such rules and regulations as may be reasonable and proper and as it may deem necessary for the conservation of crude oil or petroleum and/or natural gas produced in the State of Mississippi and to provide such rules and regulations for the drilling, development, sinking, deepening, aban
In this grant of power, nothing whatever is said about pooling, forced pooling, or integration.
Evidently in an effort to encourage the discovery and production of gas, by Section 38 of said chapter, the percentage of the open flow capacity that gas wells may be allowed to produce, and the sizes of tracts and the volume of flow permitted were fixed for 160, 80, 40, 20, 10, 5, and less than 5, acres. And the twelfth paragraph of said Section 38 provides for the location of the well on a given acreage, and for the drilling of offset wells, and that “such offset well or wells shall be allowed to produce the same percentage of open flow capacity as the well or wells so offset.”
Not only is there no provision in Chapter 117, supra, which authorizes forced pooling, but, on the contrary, the language of Section 40 thereof is at complete variance with the idea of forced pooling, and, in my opinion, is positive proof that forced pooling was not within the contemplation of the Legislature, because that section encourages voluntary agreements between operators and royalty holders and declared that, when such agreements are approved by the Board, they shall not be held to violate the statutes relating to monopolies or contracts and combinations in restraint of trade. This section is as follows: “Agreements made in the interest of conservation of oil and gas, or the prevention of waste, between and among operators owning separate holdings in the same oil and gas pool, or in any area that appears from geological or other data to be underlaid by a common accumulation of oil and gas, or both, or between and among such operators and royalty owners therein for the purpose of bringing about the development and operation of said pool, or area, or any part thereof, as a unit of establishing and carrying out a plan for the cooperative development and operation thereof, when such
Chapter 305, supra, merely amended Section 9, Chapter 117, supra, so as to provide a detailed method for the proration of gas and oil production.
It is true that in California Company v. State Oil & Gas Board, 200 Miss. 824, 27 So. 2d 542, it was held that the Board had the power to prescribe the general rule and regulation as to the spacing of oil and gas wells and to provide for exceptions thereto under given circumstances. In other words, the Board could prescribe the requisite number of acres for a gas unit. The opinion dealt solely with the proposition of spacing, and neither expressed nor implied that the Board could coerce or require the owners in a unit to pool their interests. Compare Dailey v. Railroad Commission, 133 S. W. 2d 219, where the Court of Civil Appeals of Texas said: “If it be assumed that the conservation statutes authorize the Commission to require pooling of acreage and that such pooling is not inhibited by the fundamental laws of both the state and nation, upon which question we do not pass, a complete answer to the pooling contention is that the spacing rule in question does not provide for the pooling of lands. . . . The Commission can not arbitrarily require any pooling of acreage where it has no rule or regulation prescribing and defining pooling ...”
As against the contention that forcible intégration and pooling should be implied, I find myself impressed by the fact that, although amendments to this effect were introduced in the Legislature during the 1940, 1942, 1944 and 1946 Sessions, in each instance, such amendments failed of passage. While there is authority to the contrary, “Courts construing a statute will take judicial notice of an attempted amendment thereof which failed
Moreover, the first enactment of the Legislature, which expressly authorized forcible pooling and integration, is found in Section 10 (a), Chapter 256, Laws of 1948. It was there provided that when the persons owning the drilling rights and the rights to share in the production from an established drilling unit “have not agreed to integrate their interests, the Board may, for the prevention of waste or to avoid the drilling of unnecessary wells as to a drilling unit of forty acres in area or less, but as to no drilling unit of greater area, require such persons to integrate their interests and to develop their lands as a drilling unit. (Emphasis supplied.) That section not only did not delegate to the Board authority to require integration of drilling units of more than forty acres, but actually prohibited such forced integration. And it was not until the passage of Chapter 220, Laws of 1950, under Section 3 thereof, after the expiration of the lease in this case, that the Legislature delegated to the Board the power to integrate interests without reference to the number of acres in the unit.
Besides, if the Acts of 1932 and 1936, supra, in fact authorized compulsory integration and pooling of interests, then the subsequent Acts of 1948 and 1950, supra, were indeed vain and useless enactments. On the contrary, the very passage of these later Acts, to me, is convincing proof that the Legislature deemed that it had not, by the earlier Acts, delegated to the Board the power to compel owners in a given unit to pool their interests.
Thus, if it can be said that the effect of the August 11, 1947, and September 11, 1947, orders of the Board was to integrate and pool Beery’s interest in this unit, then such orders should be declared ineffectual to accomplish those purposes, because the Board had not theretofore been invested with such power by the Legislature.
The majority opinion advances the proposition that the requirement of 320 acres for a drilling unit prohibited the appellant from carrying out its contract, and, unless the orders of August 11, 1947, and September 11, 1947, pooled these interests, it would be unjustly deprived of its property rights.
One answer to this contention is that the Board could, and did, make exceptions to the spacing pattern. It appears that, in this same field, Gulf Refining Company drilled 22 wells, and 20 of them were exceptions; Humble Oil & Refining Company drilled 32 wells, and six of them were exceptions; and that appellant drilled 17 wells, but that not one of them was an exception. In other words, the appellant, according to this record, made no effort whatsoever to obtain exceptions, and thereby prevent the confiscation of its property rights.
Another answer is that appellant made a solemn contract by which it agreed that, if it did not produce gas and oil from the land under this lease within ten years, its rights therein would cease. See Section 16, Article 3, Constitution of 1890, supra.
In Harmon v. Fleming, 25 Miss. 135, wherein two slaves were hired for a year and both of them died during the year, it was held that, since the parties knew, at the time of making the contract, that the slaves were subject to death before the expiration of the service, in the absence of a stipulation for an abatement of price in the event of death, there was no legal right to demand an abatement. The opinion stated the common law rule as follows: “Where the law casts a duty on a party, the performance shall be excused, if it be rendered im
In Piaggio v. Somerville, 119 Miss. 6, 80 So. 342, it was held that the risk from unrestricted submarine attacks did not release from the contract to deliver a shipload of lumber, for it was said that: “the rule is that when a party by his own contract creates a duty or charge upon himself he is bound to discharge it, although so to do should subsequently become unexpectedly burdensome or even impossible; the answer to the objection of hardship in all such cases being that it might have been guarded against by a proper stipulation. ’ ’
In Chism, et ux. v. Hollis, et al., 152 Miss. 772, 118 So. 713, as regards the enforcement of contracts, this Court said: “This lease imposes a possible burden on appellants’ land. The parties were legally capacitated to contract. This Court does not make contract for such parties, and, under such circumstances, cannot substitute its opinion of what would be advantageous to the parties for their solemn agreement, and, whether wise or unwise, the parties must remain bound thereby. To hold otherwise would, in a measure, constitute the Court the guardian of the unwise. This step we cannot take.”
In Bradley v. Howell, 161 Miss. 346, 134 So. 843, this Court said: “The province of courts in respect to contracts extends not a single step farther than the enforcement thereof as made by the parties, and courts must be careful that they go no farther. If the court should fail in enforcement, it would be only failure or omission; but, if upon any procedure or pretext the court
In Browne v. Bryan Lumber Company, 188 Miss. 71, 194 So. 296, where the contract for the sale of crossties provided that they were to be shipped by water, it was held that even though it became impossible for the seller to ship by water, such fact did not relieve performance of the contract as regards his liability to a broker for his commission, and cites Harmon v. Fleming, supra, and Piaggio v. Somerville, supra, with approval.
The lease contained no provision for the preservation of the rights of appellant in event of governmental intervention or limitation or frustration whereby the performance of the contract might become impossible of fulfillment. In my opinion, such failure on the part of the appellant so to stipulate does not justify this Court in making for it a contract which it did not see fit to make for itself. Harmon v. Fleming, supra; Piaggio v. Somerville, supra.
The case of Berline v. Waldschmidt, 156 Pac. 2d 865, decided by the Supreme Court of Kansas on March 10, 1945, is directly in point. In that case Berline acquired a lease which had been executed by Waldschmidt on May 27, 1939, for one-half of the minerals on a 5-acre tract. The lease was to run for a period of five years and as long as oil and gas should be produced from-the premises. This lease was also subject to an outstanding oil and gas lease, and Berline had no right to develop under his lease until after the expiration of the prior lease on November 15, 1943. He sought an extension because he was- prevented by governmental rules and regulations from drilling. The opinion of the Court, in applying the doctrine of commercial frustration, said that: “it is predicated upon the fundamental premise of giving relief in a situation where the parties could not reasonably
The opinion further referred to the laws in force in that state at the time of making the contract to-wit: ‘ ‘ On the date of the execution of the mineral deed there was in force and effect (Laws 1939, Ch. 227, now G. S. 1943 Supp. 55-602 to 55-509 (b), inch), regulating the production of oil in Kansas, and giving the Corporation Commission of the State authority to make and enforce rules, regulations and orders, in connection therewith. Prior to that time and as early as 1931 Kansas had recognized the necessity of conservation and elimination of waste and from that time down to 1939 comprehensive legislation had been enacted regulating and insuring the production of crude oil and natural gas without waste. . . . So, at that time, it must be concluded the appellant knew, or if he did not know he was bound to know, that the laws of Kansas permitted the spacing of oil wells in a manner similar to that subsequently provided for by the federal legislation which resulted in the situation described in his petition.” See also Gas Ridge, Inc. v. Suburban Agricultural Properties, Inc., 150 Fed. 2d 363, a Texas case.
The appellant knew about Beery’s interest prior to, and at the time of, drilling the well, if it made any investigation of the land records. It knew that, in accordance with the contract, he would have a 15/50ths reversionary fee interest on December 29, 1949. It was in the same position in this regard as Hassie Hunt Trust was in Hassie Hunt Trust v. Proctor, 215 Miss. 84, 60 So. 2d 551, namely that the Proctors were claiming a lease on the south ten acres of the forty involved. In that case, this Court held that the Hassie Hunt Trust was liable to the Proctors for a %th interest in the production from the oil well, less %th of the cost of drilling and maintenance thereof. In my opinion, if the Court should follow that case, it would be necessary to affirm this one.
The appellant has changed its position completely since the original hearing before the State Oil & Gas Board, and which was heard by this Court under the style of Superior Oil Company v. Beery, _________Miss.........., 59 So. 2d ‘689. The appellant recognized the necessity of obtaining voluntary pooling agreements, and secured
In Superior Oil Company v. Foote, 214 Miss. 857, 59 So. 2d 85, the Court upheld the validity of Section 10, Chapter 256, Laws of 1948, as amended by Section 3, Chapter 220, Laws of 1950, under which the State Oil & Gas Board was authorized to require the owners in an oil or gas drilling unit to pool and integrate their interests to prevent waste or the drilling of unnecessary wells. In the opinion in that case the Court said this: “The Board’s order integrated the interests of appellees and all other owners, and correctly stated that it did not adjudicate what those interests were, that is, whether the establishment of the drilling units or the order of integration had the effect of extending or reinstating the primary terms of the leases. Hence we do not consider or decide those questions. We review only the order.”
In Green v. Superior Oil Company, .........Miss.........., 59 So. 2d 100, the Court said: “This is essentially a companion case to Superior Oil Company v. Foote, 214 Miss. 857, 59 So. 2d 85. It involves substantially the same issues as were raised in the Foote case, concerning the validity of an order of the State Oil and Gas Board requiring appellants to pool and integrate their interests in two gas drilling units in the Gwinville Field with all of the other owners in the units. We have studied carefully the record in the present case, and for purposes of the decision refer to and adopt the opinion in the Foote case referred to above. A few additional com
The court there disclaimed any purpose of deciding the issue now presented in the following words: “Appellants also state that Superior should have reasonably foreseen that spacing rules would at some time be adopted by the Board, when Superior obtained its leases in the late 1930’s, and should have incorporated in its leases pooling clauses; that having failed to do this Superior cannot be relieved of its duties as lessee and of the terms of the leases by the compulsory pooling order of the Board; and that impossibility arising subsequent to the making of a contract does not excuse nonperformance of it as to events reasonably foreseeable. 17 C. J. S., Contracts, Section 463; 1 A. L. I., Restatement, Contracts, Sec. 288. Appellants rely upon Berline v. Waldschmidt, 1945, 159 Kan. 585, 156 P. 2d 865. However, this argument presupposes that under the statutes the Board’s actions extended the primary terms of the leases, and we do not consider or express any opinion upon that point in this case. The Board’s order directed the integration of appellants’ interests whether they were unleased, or subject to leases. In the latter event, appellants ’ interest would consist in part of a possibility of reverter.”
In Superior Oil Company v. Griffith, 214 Miss. 891, 59 So. 2d 104, on the authority of Hutchins v. Humble Oil & Refining Company, ......... Miss.........., 59 So. 2d 103, and Superior Oil Company v. Foote, supra, the Court reversed the judgment of the circuit court and upheld the order of the Board and said: “but likewise without adjudicating the effect of such order upon the nature or extent of the rights of the respective owners.”
In Hutchins v. Humble Oil & Refining Company, supra, it was said: “We are therefore without power in this proceeding to adjudicate the effect of the order upon
In Superior Oil Company v. Beery, supra, in construing the case of Superior Oil Company v. Foote, supra, the Court said: “In that case, the Court did not decide whether the establishment of the drilling units or the order of integration had the effect of extending or reinstating the primary terms of the leases. Neither do we decide that question in this case, but leave the same for consideration and decision, when and if such question may be properly before us. ’ ’
Although this Court, in five decided cases, said that it was not deciding whether the establishment of drilling units or the orders of integration had the effect of extending or reinstating the primary terms of the leases, the majority opinion now says: “In other words, we think that the decision in the Green case (59 So. 2d 100) went a long way toward deciding the issue now before us.”
But even assuming that, under the Green case, supra, the 1932 and 1936 Acts, by necessary implication, authorized the Board to establish drilling units, this is a far cry from the further step of compelling the holders of interests in such drilling units to pool their interests. In other words, although the Board, under such assumption, had the power to designate a certain 320 acres as a gas drilling unit, it still was without power to compel the drilling of a well, and was without power, until the enactment of Chapter 220, Laws of 1950, to require the affected parties to pool their interest. After the designation of the unit, the parties could take it or leave it alone.
While the Legislature, by the Acts of '1932 and 1936, granted to the Board, in my opinion, very limited powers, the effect of the majority opinion is to hold that such powers were, in fact, unlimited, and that the Board, under the guise of preventing waste and avoiding the
I am unwilling to approve or justify the impairment and destruction of the rights of citizens, based and founded upon solemn written contracts, by invoking the police power of the State, unless and until the sovereign, through its Legislature, shall make that purpose clear and decisive. In the sincere and earnest belief that the wrong result has been reached in this case, I must, with the greatest deference, respectfully dissent.
ON SUGGESTION OF ERROR
29 Adv. S. 34
64 So. 2d 357
Appellee again argues that the 1932 and 1936 conservation statutes did not authorize the State Oil & Gas Board to promulgate rules and orders establishing drilling units, and that therefore there was accomplished no pooling of all the mineral interests in Unit No. 39. However, that question in substance had already been decided adversely to this contention in the following cases: Superior Oil Company v. Beery, 59 So. 2d 689 (Miss. 1952); Green v. Superior Oil Company, 59 So. 2d 100 (Miss. 1952); Superior Oil Company v. Foote, 214 Miss. 857, 59 So. 2d 85, 844 (1952); Superior Oil Company v. Griffith, 214 Miss. 891, 59 So. 2d 104 (1952), suggestion of error sustained in part, 214 Miss. 900, 60 So. 2d 505; Hutchins v. Humble Oil & Refining Company, 59 So. 2d 103 (Miss. 1952); Superior Oil Company v. Morgan, 59 So. 2d 105 (Miss. 1952). To the same basic effect are Griffith v. Gulf Refining Company, 215 Miss. 15, 60 So. 2d 518 (Miss. 1952), Hassie Hunt Trust v. Proctor, 3 Adv. S. 5, 60 So. 2d 551 (Miss. 1952), and Humble Oil & Refining Company v. Welborn, 15 Adv. S. 1, 62 So. 2d 211 (Miss. 1953).
Appellee’s contention that the Court has placed an unwarranted construction upon the habendum clause
Appellee suggests that we should take judicial notice of the fact that bills to amend the conservation statutes, in order to expressly confer the power of compulsory pooling on the Board, failed of passage in the 1940, 1942, 1944, and 1946 sessions of the Legislature, but this circumstance, if it exists, is not persuasive of legislative intent as to an already existing statute. Sears Roebuck & Company v. State Board of Optometry, 213 Miss. 710, 726, 57 So. 2d 726 (1952).
It is argued that the remedy of compulsory pooling is a judicial or quasi-judicial function, and for a compulsory , order to be constitutionally valid, it must have been granted after notice and hearing to the parties affected by it; ’that no notice was given to appellee prior to the creation of the unit, and that therefore its creation is void as being violative of the due process clause.
Appellee concedes that in making regulations for spacing and for proration of production the Board acts in a legislative capacity, citing California Company v. State Oil & Gas Board, 200 Miss. 824, 27 So. 2d 542 (1947). And in that case the Court also held that in the granting of an exception to the spacing rules the Board was acting in a legislative and not a judicial capacity.
The first Beery case, 59 So. 2d 689, adopted and followed the decision in Superior Oil Company v. Foote, 214 Miss. 857, 59 So. 2d 85, 94 (1952). It held that the
In Griffith v. Gulf Refining Company, 215 Miss. 15, 60 So. 2d 518, 521 (Miss. 1952), it was there also held that where the unit was created without formal notice and hearing, under the laws prior to the 1948 Act, the lessee in the spacing and drilling of wells represented the royalty owners. A similar result was reached in Hassie Hunt Trust v. Proctor, 215 Miss. 84, 60 So. 2d 551 (Miss. 1952).
The foregoing principle established in these cases as to the creation of pooled units under the 1932 and 1936 statutes represents a practical and equitable result. The general rule is that in the drilling and spacing of wells the lessee represents the royalty owners. The Board was authorized to establish rules for spacing and for drilling units, which it did, after notice and hearing prior to the field-wide rules. There are two or more tracts within the unit, and once the unit is established no other well
Moreover, on this record there would have been no basis for the granting of an exception to the spacing rules, so as to allow the drilling of a well on the 50-acre tract in which appellee had a 15/50th interest subject to lease. An exception could be granted under the statutes and rules prior to the 1948 law only to prevent waste or to avoid confiscation of property. It was not necessary to prevent waste. The Board had already adjudicated that one well would efficiently drain 320 acres, and there is no showing to the contrary. As was held in the first Beery case, and in Superior v. Foote, 214 Miss. 857, 59 So. 2d 85, 95, the 1947 rules “for the Gwinville Field are premised on the finding by the Board that such rules are necessary to prevent waste. ’ ’
The only other basis for an exception would be in order to prevent confiscation of appellee’s property. The Board’s rule for exceptions before the 1948 Act was similar to Buie 37 of the Texas Bailroad Commission. The Supreme Court of Texas, in Gulf Land Company v. Atlantic Befining Company, 131 S. W. 2d 73, said “The term ‘confiscation’ evidently has reference to depriving the owner or lessee of a fair chance to recover the oil and gas in or under his land, or their equivalents in kind. It is evident that the word refers principally to drainage. ” The orders of August and September, 1947, re
Moreover, as the Court observed in the original opinion, the statutes dealing with exceptions to the drilling rules do not contemplate that the owner of an undivided mineral interest, here 15/50ths in a 50-acre tract subject to lease, would be entitled to have an exception granted and a well drilled on the tract for the benefit of his undivided interest only, where all of his co-tenants in the tract are participating in unit production and are not therefore eligible to join in a request for an exception. Appellee seeks in this suit in equity to participate in the production from the unit well located on lands other than his (which he could not do at common law), but he does not want to also assume the responsibilities and duties incurred by those within the unit. This inequitable position in a converse situation was condemned in the Griffith and Hassie Hunt cases.
Appellee next argues that the express repeal of the 1932 and 1936 statutes, by Chapter 256, Laws of 1948, destroyed any pooling of appellee’s interest which may
Section 21 of Chapter 256 repeals only the 1932 and 1936 statutes and not established drilling units. Nor is an implication of the latter type of result warranted by the enactment in Section 10 of a compulsory pooling statute for future use. Section 21 does not have the scope imputed to it by appellee. The statute repeals the 1932 and 1936 laws and “all other laws and parts of law in conflict herewith.” It does not repeal completed actions of the Board prior thereto. It is a general repealing statute, and in effect operates as a declaration of what would be the legal effect of the act without that provision. It does not warrant an implication of a more extensive repeal. 50 Am. Jur., Statutes, Section 520. The same text in Section 526 says that the repeal of a statute does not affect rights which have accrued and vested under the repealed statute, and that construction is to be avoided which will give a retrospective operation to a repealing statute.
Unit No. 39 was created and established before the effective date of the 1948 Act. Section 21 has prospective operation only and is not retrospective. It was not designed to cancel accrued or vested rights and to have retrospective operation. Nor do its terms warrant such a reading as would raise that serious constitutional issue. And of equal significance,. the suggested interpretation would result in the cancellation of every unit created and every act done by the Board prior to the 1948 Act. We do not think that this was the legislative intent.
Appellee says finally that the pooling order of the Board of September 20, 1950, made under the 1950 statute, was held valid in Superior Oil Company v. Beery, 59 So. 2d 689, and that such order rendered res judicata
However, the original decision of this Court on appeal from the 1950 integration order expressly held that Unit 39 had been “legally established” prior to the order of September 1950. That case did not consider or adjudicate whether the effect of the establishment was to extend the lease. That question was expressly pretermitted, and that is the question here. Hence the integration order of September 20, 1950, and this Court’s decision concerning it, in 59 So. 2d 689, is not res judicata of the issue decided here, since the present issue was not considered in the first Beery case. Moreover, the petition of Superior Oil Company in the first Beery case asked the Board for “the establishment or re-establishment, designation or re-designation, approval or re-approval of gas drilling Unit No. 39.” The final order of the State Oil & Gas Board, dated September 20, 1950, which was there affirmed, adjudicated that the lands in question “have been heretofore duly and legally established as gas drilling and producing Unit No. 39”; and that the same was “reapproved”. Hence appellee’s argument that the order of 1950 adjudicated that prior thereto there had been no unit established has no factual basis in the record. The order itself, on the contrary, reflects an adjudication that the unit had previously been legally established as a gas drilling and producing unit.
Suggestion of error overruled.
Dissenting Opinion
Dissenting.
It is my opinion that the suggestion of error should be sustained.
The fallacy in that holding lies in the fact that the establishment of a drilling unit is not the same thing as the creation of a pooling arrangement with respect to the several mineral interests. It appears clear that when a drilling unit is established, the particular acreage is set aside as the area upon which one well may be drilled by those having the right to drill under leases; and that the establishment of such unit does not in and of itself change the property rights of the interested parties nor force integration of mineral interests within the unit. The difference and distinction between the establishment of a drilling unit on the one hand and forced pooling of mineral interests on the other, is well illustrated by the provisions of Chap. 256, Laws of 1948. Of course, that statute does not apply in substance to the case at bar, because it was enacted after the pertinent events in this case had occurred. However, it is convincing upon the distinction between the terms referred to.
Sec. 4(g) of said Chap. 256 defines the word “owner” as “the person who has the right to drill into and produce from any pool, and to appropriate the production either for himself or for himself and another or others.” In other words, the lessee is the owner. Sec. 6(c) grants to the board authority to make rules, regulations, and orders for several purposes, including “(11) To regulate the spacing of wells and to establish drilling units.”
We now come to Sec. 10(a) of this statute, which has to do with pooling. It is there provided that when separately owned tracts of land are embraced “within an established drilling unit”, the “person owning the drilling rights therein” (the lessee), and the “rights to share in the production therefrom” (the royalty owners), may validly agree to integrate their interests and develop their lands as a drilling unit. It will be noted that, as a condition precedent to the right of the persons having the drilling rights and the persons, having the right to share in production to validly agree to integrate their interests, there must be an established drilling unit. This is recognized in the decisions of this Court which have upheld forced pooling under said Chap. 256, Laws of 1948, as amended by Chap. 220, Laws of 1950. Said Sec. 10(a) of the 1948 statute further provides that if “such persons” have not agreed to integrate their interests the board may, as to a drilling unit of 40 acres in area or less, require “such persons” to integrate their interests and to develop their lands as a drilling unit. It is to be observed that Sec. 10(a), in dealing with integration of interests or pooling of interests, either by voluntary agreement or by directive of the hoard, deals with
If, under the 1948 act, forced integration can be provided only upon a showing that precedently a drilling unit has been established, it then follows that the establishment of the drilling unit is something separate and distinct from the pooling and integration of mineral interests. This Court has held in The Superior Oil Company v. Foote, 214 Miss. 857, 59 So. 2d 85, and in other cases cited in the original opinion and in the majority opinion on the suggestion of error, that under the 1932 and 1936 statutes the board had authority to establish drilling units and that it did establish drilling units. This proposition is now settled and, it appears, correctly, since these statutes authorized the board to regulate drilling, development, etc., in order to prevent waste and protect the common source of supply. However, in each of these cases concerning gas units in the Grwinville field, the Court expressly excluded from the decision any consideration and any action with respect to property rights as between lessors and lessees, or with respect to the .extension of primary terms of leases. In other words, the Court declined at that time to determine whether those acts and transactions which served to establish drilling units under the statutes of 1932 and 1936, also served to enforce integration and pooling of mineral interests within such units. That question is squarely
The 1932 and 1936 statutes granted to the board general power only with respect to the regulation of drilling and development, without specifying details. This Court has held that in the exercise of that power the hoard established certain drilling units based on spacing regulations. In my opinion, those statutes of 1932 and 1936 did not empower the hoard to force integration and pooling of interests. Furthermore, the hoard did not consider that it possessed that power, nor did it attempt to exercise such power. The effect of the original opinion in the case at bar is to hold that those statutes of 1932 and 1936 empowered the hoard to force integration, and that the board did in fact force integration, even though it entered no order nor took any action which purported to exercise such power. That holding is, in my view, erroneous.
It is recognized that when Unit No. 39 was established, Superior was confronted with a difficult situation, in that only one well could be drilled on the 320 acres, and there was no pooling provision in its • lease. It appears that Superior was in danger of not being able to extend its lease beyond the primary term, because the spacing regulations and the establishment of the unit prevented it from drilling a well upon the land included within its lease. That situation in which Superior found itself seems to have had great weight with the Court, as shown by the original opinion.
It is to be kept in mind that although the board had promulgated spacing regulations requiring drilling units of 320 acres, yet that the actual establishment of the drilling unit was the result of voluntary action of Superior and other interested lessees in taking appropriate steps to designate and establish the unit and obtain hoard approval thereof. When the unit was so established and when it appeared that only one well could he drilled upon the unit, it seems that Superior had several courses of
The other course of action which was open to Superior was to proceed to pool or integrate its interest as lessee with similar interests of. other parties, and proceed to develop the unit as established, receiving its proper portion of the production, whatever that might be. That was the course which Superior followed when it was unable to come to an agreement with Beery with respect to integration of his mineral interest.
Great weight has been given in the original opinion to the fact that Beery is and will be entitled to receive the same material benefits from royalties from the well drilled on the adjoining tract in the unit, as he would have received if a well had been-drilled on the tract in which he owns a mineral interest. The argument based thereon is very persuasive, when this case is viewed upon a practical basis. However, it seems to me that Beery owned and owns a definite title to fifteen mineral acres, which was subject to a lease, expiring on a fixed day,
There are other propositions involved in this ease, but it is not deemed necessary to set forth my views thereon, since, in my opinion, the suggestion of error should be sustained for the reasons stated.
ON MOTION TO RETAX COSTS
65 So. 2d 455
This motion is controlled by the decision in the case of The Superior Oil Company v. Alfred Foote, et al., No. 38562, this day decided.
Motion to retax costs of transcript on basis of 25$ per 100 words sustained, on condition that the Chancery Clerk furnish a correct, amended statement of costs.
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