Edmundson Bros. Partnership v. Montex Drilling Co.

672 So. 2d 1061, 95 La.App. 3 Cir. 981, 1996 La. App. LEXIS 752, 1996 WL 148515
CourtLouisiana Court of Appeal
DecidedApril 3, 1996
DocketNo. 95-981
StatusPublished
Cited by1 cases

This text of 672 So. 2d 1061 (Edmundson Bros. Partnership v. Montex Drilling Co.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Edmundson Bros. Partnership v. Montex Drilling Co., 672 So. 2d 1061, 95 La.App. 3 Cir. 981, 1996 La. App. LEXIS 752, 1996 WL 148515 (La. Ct. App. 1996).

Opinions

JjKNOLL,'Judge.

This appeal concerns the judicial cancellation of a mineral lease for the lessees’ failure to produce in paying quantities. Montex Drilling Company (Montex), the Succession of Moncrief and W.A. Moncrief, Jr. (the Mon-criefs) appeal an adverse judgment rendered on a motion for summary judgment brought by the lessors, Edmundson Brothers Partnership and Elizabeth Edmundson (the Ed-mundsons).

FACTS

On June 14, 1980, Ernest E. Edmundson, Jr. and his wife, Elizabeth Edmundson, executed an oil, gas, and mineral lease (the Durham lease) in favor of Durham Enterprises, Inc. The lease covered 1,200 acres of land and was executed for a five-year primary term. The lease provided, in pertinent part:

The rights granted shall be maintained in effect ... after the primary term ... for so long as oil, gas or some other mineral is hbeing produced in paying quantities with reasonable diligence looking to the production thereof.

The Durham lease was transferred several times. In 1983, W.A. Moncrief, Sr., the owner of the Durham lease at that time, drilled a producing well, the Edmundson No. 1, on the leased property. In 1986, Mr. Edmundson transferred his mineral interest in the land covered by the Durham lease to his wife, Elizabeth Edmundson. Consequently, Mrs. Edmundson became the sole mineral lessor of the property covered by the Durham lease.

[1063]*1063On December 10, 1991,, Mrs. Edmundson made written demand on W.A. Moncrief, Jr. for development of the property covered by the Durham lease and adjacent property covered by another mineral lease. In 1992, Montex, a corporation owned by W.A. Mon-crief, Jr. and his son, C.B. Moncrief, drilled a well on property adjacent to the property covered by the Durham lease.

On May 15, 1992, Mrs. Edmundson conveyed all of her interest in the minerals underlying the lands covered by the Durham lease to Edmundson Brothers Partnership. On May 14,1993, Edmundson Brothers Partnership requested a release of the non-productive acreage covered by the Durham lease. When Montex refused, the Edmund-sons filed this suit for lease cancellation.

Based upon Montex’s answers to interrogatories concerning the income and expenses of the Edmundson No. 1 well, the Edmund-sons moved for partial summary judgment. Relying upon La.R.S. 31:124, the Edmund-sons argued that Montex’s answers to the interrogatories showed that there was no material issue of fact and accordingly, they were entitled to cancellation of the Durham lease because the lease was not being maintained by the production of oil or gas in paying quantities. The trial court granted the Edmundsons’ motion for partial summary judgment and canceled the Durham lease. This appeal followed.

|8Montex and the Moncriefs contend on appeal that the trial court erred: (1) in determining that the Durham lease failed to produce in paying quantities; (2) in considering the overhead expenses charged by the lessee/operator, Montex, in the calculation of total operating expenses chargeable to the Durham lease in determining whether the lease produced in paying quantities; and (3) alternatively, in refusing to allow Montex and the Moncriefs to maintain their lease rights as to 40 acres surrounding the Edmundson No. 1 well. We affirm.

SUMMARY JUDGMENT

Montex and the Moncriefs contend that there were genuine issues of material fact that precluded the entry of summary judgment.

In Hartman v. Vermilion Parish Police Jury, 94-893 (La.App. 3 Cir. 3/1/95); 651 So.2d 476, writ denied, 95-0778 (La. 5/5/95); 654 So.2d 326, we stated:

Appellate courts review summary judgments de novo, applying the same standards of review used by trial courts in rendering the judgments at the district court level. Reynolds v. Select Properties, Ltd., 634 So.2d 1180, 1183 (La.1994). A motion for summary judgment is properly granted if there is no genuine issue of material fact, and the mover is entitled to judgment as a matter of law. La.Code Civ.P. art. 966.' The mover bears the burden of proving that no genuine issue of material fact exists and that he is entitled as a matter of law to the requested judgment. All summary judgment evidence is scrutinized closely and any inferences to be drawn from it are viewed in a light most favorable to the party opposing the motion. In addition, all allegations made by the opposing party are taken as true and any doubt arising between his allegations and the mover’s is resolved in his favor. Self v. Walker Oldsmobile Co., Inc., 614 So.2d 1371 (La.App. 3 Cir.1993).

Hartman, 651 So.2d at 478-479.

La.R.S. 31:124 provides, in pertinent part: When a mineral lease is being maintained by production of oil or gas, the production must be in paying quantities. It is considered to be in paying quantities when production allocable to the total original right of the lessee to share in production under the lease Ins sufficient to induce a reasonably prudent operator to continue production in an effort to secure a return on his investment or to minimize any loss.

With regard to the focal issue of whether they were maintaining the Durham lease by production of oil or gas in paying quantities, Montex and the Moncriefs question the trial court’s inclusion of operating expenses in its calculations and its use of the twelve months prior to filing suit as the temporal reference for its calculations.

Initially, Montex and the Moncriefs contend that Montex was the owner/operator of the Edmundson No. 1 well. As such, they [1064]*1064argue that the trial court should not have included overhead expenses in its calculation of expenses.

We start with the general proposition that where the lessee is also the operator, the operator’s overhead cannot be included in the operating expenses charged to the lease. Menoah Petroleum, Inc. v. McKinney, 545 So.2d 1216 (La.App. 2 Cir.1989). This rule does not apply where the unit is being operated by a party other than the lessee. Men-oah Petroleum, supra (citing 2 Kuntz, The Law of Oil & Gas, § 26.7(m) 1964).

In the case sub judice, the record shows that the Moncriefs assigned their rights under the lease to Montex on March 16, 1990. Notwithstanding this assignment, the joint billing summaries that Montex prepared indicate that it billed the leasehold owners for the overhead expenses. Thus, even if we consider Montex as the opera-torAessee, we find that the rationale for not including operating expenses does not apply since it did not have responsibility for these expenses. Therefore, we find no error in the trial court’s inclusion of the operating expenses when it determined whether the Ed-mundson No. 1 well was producing in paying quantities.

Montex and the Moncriefs next contend that the trial court should have based its calculations on the figures between December 1991, the date the Edmundson ^Partnership made demand for development, and June 1998, the date the partnership and Mrs. Edmundson filed suit to cancel the lease. Montex and the Moncriefs argue that the trial court’s use of the twelve months prior to the filing of suit was improper.

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Related

Edmundson Bros. v. Montex Drilling Co.
731 So. 2d 1049 (Louisiana Court of Appeal, 1999)

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672 So. 2d 1061, 95 La.App. 3 Cir. 981, 1996 La. App. LEXIS 752, 1996 WL 148515, Counsel Stack Legal Research, https://law.counselstack.com/opinion/edmundson-bros-partnership-v-montex-drilling-co-lactapp-1996.