Asberry v. Saint Joseph Petroleum, Div. Beaver Engineering, Inc.

653 S.W.2d 412, 77 Oil & Gas Rep. 573, 1983 Tenn. App. LEXIS 576
CourtCourt of Appeals of Tennessee
DecidedMarch 2, 1983
DocketNo. 82-241-II
StatusPublished
Cited by1 cases

This text of 653 S.W.2d 412 (Asberry v. Saint Joseph Petroleum, Div. Beaver Engineering, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Asberry v. Saint Joseph Petroleum, Div. Beaver Engineering, Inc., 653 S.W.2d 412, 77 Oil & Gas Rep. 573, 1983 Tenn. App. LEXIS 576 (Tenn. Ct. App. 1983).

Opinion

OPINION

CONNER, Judge.

This lease for approximately fifty acres of land with a primary term of six months was executed by the plaintiffs-appellants, James B. Asberry and wife, Nina Asberry (lessors), and the defendant-appellee, Saint Joseph Petroleum (lessee),1 on February 28, 1979. It was a printed form lease which contained what is commonly known as a “delayed rental” provision. However, that portion was modified to read:

If no well be completed on said land on or before 6 months from said date, this lease shall terminate as to both parties.

The language relating to the base term stated:

It is agreed that this lease shall remain in force for a term of ½ years from this date and as long thereafter as oil, gas, casing-head gas, casing-head gasoline, or any of them is produced from said leased premises, or operations for drilling are continued as hereinafter provided, or op[414]*414erations are continued for the injection of water brine and other fluids into subsurface strata. Provided, however, that for injection purposes, this lease shall continue in full force and effect only as to well or wells so used and the ten acres contiguous thereto.

The Asberry lease also contained “unit-ization or pooling” and “shut-in royalty” clauses. They provide in pertinent part:

Lessee is hereby given the right and power to pool or combine the acreage covered by this lease or any portion thereof with other land, lease or leases in the immediate vicinity thereof, when in lessee’s judgment it is necessary or advisable to do so in order properly to develop and operate said premises in compliance with the spacing rules of any lawful authority, or when to do so would, in the judgment of the lessee, promote the conservation of the oil and gas in and under and that may be produced from premises. In connection with the production of oil such pooling may be in a unit or units not exceeding 50 acres each. In connection with the production of gas such pooling may be in a unit or units not exceeding 320 acres each. Lessee shall execute in writing an instrument identifying and describing the pooled acreage. The entire acreage so pooled into a tract or unit shall be treated, for all purposes except the payment of royalties on production from the pooled unit, as if it were included in this lease. If production is found on the pooled acreage, it shall be treated, as if production is had from this lease, whether the well or wells be located on the premises covered by this lease or not. In lieu of the royalties elsewhere herein specified, lessor shall receive on production from a unit so pooled only such portion of the royalties stipulated herein as the amount of his acreage placed in the unit or his royalty interest therein bears to the total acreage so pooled in the particular unit involved provided, lessee shall be under no obligation whatsoever, express or implied, to drill more than one well to each such unitized tract, regardless of when, where or by whom offset wells may be drilled.
In the event gas is discovered on the leased premises, it is agreed that during any period when, after the discovery of gas on the leased premises, gas is not being sold on account of lack of market, and if there is no apparent production or operation on said lands sufficient to keep this agreement in full force and effect, the LESSEE may pay as royalty Fifty Dollars ($50.00) per year for each shut-in gas well, and such payment will be considered as if gas is actually being produced within the terms and conditions of this oil and gas lease.... (Emphasis supplied.)

On April 15, 1979, the defendant lessee commenced drilling operations on the “Bow” property adjacent to the land which is the subject of this lease and approximately 170 feet from the plaintiff’s property line. On April 27,1979, the well referred to as Bow-Asberry # 1 was completed at a depth of 1,320 feet.

The Bow-Asberry well is located in what is known in the industry as the “Stockton Field.” This area contains two formations; the Monteagle formation at a depth of 800-900 feet, and the Fort Payne formation at a depth of 1,350-1,400 feet. The best prospect for finding oil in the Stockton Field is at the deeper Fort Payne formation.

Rules and regulations of the Tennessee Oil and Gas Board require that tracts upon which drilling is done contain various acreages depending on the well depth. The depth of the well also determines the distance that the well must be from an adjacent property line. In order to drill for oil in the Fort Payne formation, there must be twenty acre spacing between wells, 934 feet from each well and 467 feet from the adjoining property line unless the property upon which the well is located is “unitized” with another tract. A well drilled on the property leased by the defendant from the plaintiff to the Fort Payne formation below 1,000 feet would by necessity unitize the adjoining tract. However, it could have [415]*415been drilled on the Asberry property instead of the Bow premises.

After the Bow-Asberry well was completed to a total depth it was found to have potential as a gas well. Oil was not found in commercial quantities. The well was capped to await completion of construction of a pipeline to the Stockton Field scheduled for the fall of 1982, this being the only feasible way of marketing natural gas.

The lessee then attempted to “pool or unitize” a portion of the plaintiffs’ property with the Bow property upon which the well was drilled. The lessee contended the “pooled” well was completed within six months from the execution of the lease under that provision thereof. Monthly payments were submitted by the defendant to the plaintiff pursuant to the shut-in royalty clause.

However, Mr. and Mrs. Asberry refused to accept the proffered payments, contending that the lease had been terminated according to its terms because Saint Joseph Petroleum had failed to complete a well within six months. On July 23, 1981, they filed suit seeking a judicial determination to this effect.

Following the denial of Mr. and Mrs. Asberry⅛ motion for summary judgment the case was tried non-jury. The chancellor held that defendant was entitled to maintain the lease in effect under the “pooling” and “shut-in” gas clauses thereof. Plaintiffs appeal, still asserting that the requirement of completion of a well on the property within six months is controlling.

Is the lease in question ambiguous? For if so the document must be construed against the draftsman, here the defendant. Hanover Insurance Company v. Haney, 221 Tenn. 148, 425 S.W.2d 590 (1968); Associated Press v. WGNS, Incorporated, 48 Tenn. App. 407, 348 S.W.2d 507 (1961); see also 17A C.J.S. Contracts § 324 p. 217 (1963). Further, if the provisions are in conflict, the added language varying from the printed form must control.

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Cite This Page — Counsel Stack

Bluebook (online)
653 S.W.2d 412, 77 Oil & Gas Rep. 573, 1983 Tenn. App. LEXIS 576, Counsel Stack Legal Research, https://law.counselstack.com/opinion/asberry-v-saint-joseph-petroleum-div-beaver-engineering-inc-tennctapp-1983.