Deep Rock Oil Corp. v. Bilby

1947 OK 207, 186 P.2d 823, 199 Okla. 430, 1947 Okla. LEXIS 727
CourtSupreme Court of Oklahoma
DecidedJuly 1, 1947
DocketNo. 32361
StatusPublished
Cited by5 cases

This text of 1947 OK 207 (Deep Rock Oil Corp. v. Bilby) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Deep Rock Oil Corp. v. Bilby, 1947 OK 207, 186 P.2d 823, 199 Okla. 430, 1947 Okla. LEXIS 727 (Okla. 1947).

Opinion

CORN, J.

This is an appeal from a judgment rendered in favor of plaintiffs, in an action brought to recover damages for defendant’s alleged failure to drill a second offset oil well on a 40-acre tract in which plaintiffs owned an undivided 25-acre interest, resulting in damage-to plaintiffs by drainage of oil from under their lands. A jury was waived, the cause tried to the court, and judgment rendered against defendant for $3,000.

On May 28, 1943, defendant completed a well known as Price No. 1 on a 40-acre tract adjoining plaintiffs’ land on the west. Defendant owned all the leases surrounding plaintiffs’ land. The discovery well was completed at a time when federal regulations over the industry prescribed 40-acre spacing.

July 23, 1943, defendant completed a well on plaintiffs’ land which was a diagonal offset to the discovery well. This well, known as Bilby No. 1, was abandoned as a dry hole, on November 5, 1943.

In January, 1944, defendant began negotiating with the federal authorities for release of the 40-acre drilling restrictions, and for permission to use optional spacing in the pool. March 17, 1944, defendant secured relaxation of the rules so as to permit 10-acre spacing.

During this period plaintiffs unsuccessfully had sought to have defendant drill a second well as a direct offset to Price No. 1. May 12, 1944, the plaintiffs’ attorney advised defendant by letter that plaintiffs would not accept further delay rentals; and that the bank (where rentals were required to be deposited) had been directed not to receive further rentals, as the plaintiffs intended to bring suit. On May 19th, the bank received defendant’s check in payment of delay rentals for 1944.

The bank then advised defendant it was holding Bilby’s $20 rental payment in a special account, but nothing was said about Traugh’s $50 rental payment. Defendant advised the bank the rentals had been tendered and if plaintiffs wished to reject same the money should be returned.

The record shows that after the Bilby No. 1 well was abandoned as a dry hole, the defendant drilled numerous other wells in the vicinity, while carrying on extensive exploration work (geologic and seismographing) in an effort to determine the value of the Bilby lease for further drilling.

In August, approximately three months after filing of this action, defendant commenced a direct offset to the discovery well, this well, being known as Bilby No. 2. In October the operation was completed as a producing well, from the same formation as the discovery well, recovery being at the rate of 271 barrels per day.

This basis of plaintiffs’ suit was that immediately upon the removal of the federal drilling restrictions the defendant was bound to drill an offset well on plaintiffs’ land. Further, that the failure to drill and complete the well within a reasonable time resulted in Price No. 1 draining plaintiffs’ land, thus preventing the offset well from being as [432]*432large a producer as the discovery well, thereby damaging plaintiffs by causing them a loss of at least $3,000 in royalties. The evidence showed the Bilby No. 2 declined rapidly in production after completion.

The testimony as to whether defendant conducted its operations as a prudent operator in view of all circumstances was in sharp conflict. The plaintiffs’ witnesses testified that a reasonable time for beginning operations would have been from 30 to 90 days after relaxation of the spacing restrictions.

The testimony as to whether drainage had taken place was also in conflict. Plaintiffs’ witnesses, other than one geologist, were oil producers who were familiar with this particular development. In substance, their testimony was that the discovery well (Price No. 1) was higher on the producing formation than plaintiffs’ well; that as oil and gas were produced the water came in -to replace the oil and gas; that channeling took place in the oil sands and there definitely had been drainage from under the plaintiffs’ land.

One geologist testified for plaintiffs as a scientific expert. His testimony was that this pool was on á small, sharp structure, and that production from the discovery well caused channeling in the oil sand, water thereafter coming into the formation in place of the oil; that there had been drainage; that 30 to 60 days would have been a reasonable time within which to drill an offset well (to the Price No. 1).

Defendant’s evidence was given by scientific experts employed by the company, and by other experts who had participated in the compilation and evaluation of scientific data regarding plaintiffs’ land. Their testimony was directed toward showing that defendant had acted as a prudent operator in view of all circumstances, based upon geologic findings in the vicinity; that the field was on a peculiar or “freak” formation which required very careful study; that there was an obstruction between the two wells and that there was no drainage from the Bilby No. 2 to the Price well.

Defendant has presented five propositions as grounds for reversal of this judgment, the first of which is that both Bilby and Traugh were bound by acceptance of the delay rentals when paid to the bank.

When the rentals were paid May 19th, the Price No. 1 was a producing well. Defendant asserts that such fact was known to plaintiffs and that they were bound to return the money if they did not intend to accept same, otherwise they waived their right to maintain any action for damages for drainage.

The record reflects that on May 12, 1944, plaintiffs’ attorney advised defendant by letter that no further rentals would be accepted, and that a suit was to be filed.

Defendant relies upon the rule announced in Carter Oil Co. v. Samuels, 181 Okla. 218, 73 P. 2d 453, to the effect that where a lease provides for payment of delay rentals to a bank, acceptance of the payments is implied when deposit is made, and if the lessor does not wish to accept the rental, he is bound to give notice of his intention before such rentals are due.

Plaintiffs expressly notified defendant they would not accept further rentals. This notice was given 'before the rentals were due. The bank -was also notified of this. Neither of the plaintiffs ever received any payment after the notice was given, although Bilby’s portion was held by the bank in a special account and defendant was notified of such fact. Traugh testified he had never received any payment.

Under these circumstances it is apparent that the rule relied upon by defendant has no application, and the trial court was correct in finding there had been no acceptance of the rentals as would constitute a waiver of plaintiffs’ right to bring this action.

[433]*433Next to be considered is defendant’s contention that plaintiffs failed to make out a case, in that there was no proof whether the Bilby No. 2 (offsetting the Price No. 1) would prove to be a commercial well.

Supporting this defendant urges a suit for damages for drainage can only be maintained on the same basis as a suit to cancel a lease for lack of diligence in development, and that under the decisions of this court, the plaintiff, in order to be entitled to recover, must prove that the undrilled location, if drilled, would be a profitable or commercial well, after consideration of all factors involved in development. Ramsey Oil Co. v. Davis, 184 Okla. 155, 85 P. 2d 427; Wilcox et al. v. Ryndak et al., 174 Okla. 24, 49 P. 2d 733; Gerson v. Anderson-Prichard et al. (1945) 149 F.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Davis v. Cramer
793 P.2d 605 (Colorado Court of Appeals, 1990)
Williams v. Humble Oil & Refining Company
290 F. Supp. 408 (E.D. Louisiana, 1968)
Billeaud Planters Inc. v. Union Oil Co. of Cal.
144 F. Supp. 564 (W.D. Louisiana, 1956)
Phillips Petroleum Co. v. Millette
72 So. 2d 176 (Mississippi Supreme Court, 1954)

Cite This Page — Counsel Stack

Bluebook (online)
1947 OK 207, 186 P.2d 823, 199 Okla. 430, 1947 Okla. LEXIS 727, Counsel Stack Legal Research, https://law.counselstack.com/opinion/deep-rock-oil-corp-v-bilby-okla-1947.