Edmonston v. Home Stake Oil & Gas Corp.

629 F. Supp. 620, 88 Oil & Gas Rep. 458, 1986 U.S. Dist. LEXIS 28598
CourtDistrict Court, D. Kansas
DecidedMarch 4, 1986
DocketNo. 85-1171-K
StatusPublished
Cited by3 cases

This text of 629 F. Supp. 620 (Edmonston v. Home Stake Oil & Gas Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Edmonston v. Home Stake Oil & Gas Corp., 629 F. Supp. 620, 88 Oil & Gas Rep. 458, 1986 U.S. Dist. LEXIS 28598 (D. Kan. 1986).

Opinion

MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

This is a quiet title action concerning three-quarters of a section of land, the North Half (N/2) and Southeast Quarter (SE/4) of Section 31, in Kiowa County, Kansas. Defendants own a defeasible term mineral interest, an undivided interest in and to all oil, gas and other minerals in the entire three-quarters tract. Plaintiff Edmonston purchased title to the tract in 1979, succeeding to the original grantors’ reversionary rights against the defendants. The dispositive issue is whether defendants’ defeasible term mineral interests in the entire tract were extended by a Kansas Corporation Commission compulsory unitization order, which included only a portion of the tract, followed by off-tract production on the unitized acreage. Under Kansas case law and the Kansas Compulsory Unitization Act, that order and unitized production extended the term interests only in the included acreage. Defendants’ term interests in the non-unitized N/2 expired when actual production on the entire tract [622]*622ceased in 1973. Their remaining interests in the unitized SE/4 expired when the unitized area terminated in 1984. Plaintiff is now entitled to judgment against the defendants, quieting title to the entire tract in his name.

The parties have stipulated to the controlling facts (R. 10). Defendants’ interest originated in a written instrument designated “Sale of Oil and Gas Royalty”, dated June 12, 1956, which provided the interest was to continue “for a period of the next ten years from June 11, 1956 and as long thereafter as oil and/or gas is produced from these premises or the property is being developed or operated.” Notwithstanding its designation as a “Royalty”, that instrument was a mineral deed granting a base or determinable fee in the oil, gas and other minerals in place. Baker v. Hugoton Production Co., 182 Kan. 210, 212, 320 P.2d 772 (1958). The parties agree defendants’ interest arising from that instrument is a defeasible term mineral interest.

In 1962, within the 10-year primary term of defendants’ interest, the Lewis “C” Well was drilled and completed on the SE/4. The well produced oil and/or gas in paying quantities until plugged and abandoned on April 7, 1973. The parties agree the development, production and operation of the Lewis “C” extended beyond the primary term defendants’ term mineral interest in the entire tract, the SE/4 and the N/2 of Section 31. Baker v. Hugoton Production Co., 182 Kan. 210, Syl. ¶ 1, 320 P.2d 772 (1958).

Pursuant to the Kansas Compulsory Unitization Act, K.S.A. 55-1301 et seq., on May 24, 1968 the Kansas Corporation Commission (KCC) ordered unitization of the Nichols Pool in Kiowa County. The unitized area included the SE/4, but not the N/2, of Section 31. The KCC order incorporated by express reference the plan of unitization agreed upon by the necessary 75% of the royalty, term and working interest owners of the Nichols Pool. (R. 10, Ex. C, p. 3.) Paragraph 3.4 of that plan provided operations or production anywhere on the unit shall be considered as operations or production in each tract within the unit, the effect being to “continue in effect each lease, term royalty, or other agreement as to all lands covered thereby just as if such operations had been conducted and a well had been drilled on and was producing from each tract.” (R. 10, p. 4.) During operation of the Nichols Pool from 1968 through 1984, actual production was obtained within the unitized area but none was ever physically attempted or obtained within the surface boundaries of the SE/4 of Section 31. The KCC terminated the Nichols Unit effective November 20, 1984.

After the Lewis “C” Well on the SE/4 was plugged in 1973, no producing oil well or gas well was physically located on the N/2 of Section 31. On September 27, 1983, pursuant to various oil and gas leases from plaintiff’s predecessor in interest, and the defendants or their predecessors in interest, Vincent Oil Corporation began drilling operations on the Edmonston No. 1 Well, spudded in the NE/4 of Section 31. The Edmonston No. 1 was subsequently completed as a gas well capable of producing in paying quantities. However, the well was shut in because the operator was unable to immediately obtain a gas contract and market for sale of gas from the well. The lessors received shut-in royalty payments attributable to the N/2. In the summer of 1985 the operator secured a market and pipeline for sale of gas from the Edmonston No. 1 Well, and began production.

At no time after the Lewis “C” Well was plugged on April 7, 1973, has any producing oil well or gas well ever been physically located or drilled upon the SE/4 of Section 31.

The parties have distilled the issues in this case to two:

1. Did the statutory unitization of the Nichols Pool under the Kansas Compulsory Unitization Act- extend defendants’ defeasible term mineral interests through November 20, 1984, as to all the subject property even though only the SE/4 was included in the unit?
[623]*6232. Did the commencement of the Edmonston No. 1 Well on September 27, 1983 on the NE/4 of the subject property, and the discovery of gas in paying quantities on December 6, 1983 coupled with diligent and continuous efforts to secure production and a market, which culminated in the production and sale of gas on June 27, 1985, operate to extend the term mineral interest?

The first question, because it is resolved in plaintiff’s favor, is the dispositive issue.

Plaintiff relies on the Kansas Supreme Court’s opinion in Classen v. Federal Land Bank of Wichita, 228 Kan. 426, 617 P.2d 1255 (1980), for his contention the unitization of the SE/4 coupled with production elsewhere on the unitized land did not extend defendants’ term mineral interests in the non-unitized N/2. Classen and its companion case, Friesen v. Federal Land Bank of Wichita, 227 Kan. 522, 608 P.2d 915 (1980), were based on a set of facts similar to those before us. Those cases involved three tracts of land: the NW/4 of Section 8 (Tract 1); the NE/4 of Section 7 (Tract 2); and the SW/4 of Section 5 (Tract 3). Defendant Land Bank owned a defeasible term mineral interest in all three tracts. Tract 1 was voluntarily unitized with the remainder of Section 8, followed by off-tract unitized production in that section. Plaintiff Friesen challenged defendants’ term mineral interest in Tract 2. Friesen, 227 Kan. 522-23, 608 P.2d 915. Classen challenged defendants’ interests in the unitized Tract 1 and the non-unitized Tract 3. Classen, 228 Kan. at 427-28, 617 P.2d 1255.

In Friesen, defendant argued it retained its term mineral interest in Tract 2.

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Related

Akandas, Inc. v. Klippel
827 P.2d 37 (Supreme Court of Kansas, 1992)
Edmonston v. Home Stake Oil & Gas Corp.
854 F.2d 1323 (Fourth Circuit, 1988)
Edmonston v. Home Stake Oil & Gas Corp.
762 P.2d 176 (Supreme Court of Kansas, 1988)

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Bluebook (online)
629 F. Supp. 620, 88 Oil & Gas Rep. 458, 1986 U.S. Dist. LEXIS 28598, Counsel Stack Legal Research, https://law.counselstack.com/opinion/edmonston-v-home-stake-oil-gas-corp-ksd-1986.