Grynberg v. Texas Oil & Gas Corp. (In re Grynberg)

22 B.R. 358, 1982 Bankr. LEXIS 3572
CourtDistrict Court, D. Colorado
DecidedAugust 9, 1982
DocketBankruptcy No. 81 M 2724
StatusPublished

This text of 22 B.R. 358 (Grynberg v. Texas Oil & Gas Corp. (In re Grynberg)) is published on Counsel Stack Legal Research, covering District Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Grynberg v. Texas Oil & Gas Corp. (In re Grynberg), 22 B.R. 358, 1982 Bankr. LEXIS 3572 (D. Colo. 1982).

Opinion

MEMORANDUM OPINION AND ORDER

ROLAND J. BRUMBAUGH, Bankruptcy Judge.

The Debtor, Jack J. Grynberg, seeks to quiet title to an oil and gas lease and seeks damages for trespass thereon. The Debtor alleges the disputed lands (“Section 1 lands”) are held by production and therefore the Defendants trespassed when they drilled a well on the Section 1 lands. As damages, the Debtor seeks the value of the property taken: all the production from the Section 1 well, less the reasonable drilling costs incurred by the Defendants. Additionally, the Debtor seeks to inure to the benefit of two Farmin Agreements between Texas Oil and Gas Corp. (“Texas”) and Chandler and Associates, Inc. (“Chandler”) and Texas and W. C. McBride-Silurian Oil Co. (“Silurian”)

The Defendants contend that the Debt- or’s lease to the Section 1 lands expired in [360]*360November, 1968 at the end of the primary term for lack of production. Alternatively, Defendants contend that even if the lease as to the Section 1 lands extended beyond the primary term, any interest therein has been abandoned by Grynberg by his lack of activity. Finally, the Defendants assert that if there was a trespass, then the Plaintiff is only entitled to recover the value of the minerals in place and would not be entitled to reap the benefits of independent contracts with third parties.

On November 26, 1963, Josephine R. Dearth Jamieson and Charles V. S. Jamie-son executed an oil and gas lease in favor of Arvid D. Ideen, which covered lots 5 and 6 of Section 6, Township 23 North, Range 103 West, 6th P.M. and N Vn SE Vi of Section 1, Township 23 North, Range 104 West, 6th P.M., approximately 152.32 acres, located in Sweetwater County, Wyoming. The lease carried a primary term of 5 years and continued for “as long thereafter” as hydrocarbons were produced or other specific operations were continued. The lease contained neither a standard pooling clause nor a Pugh clause.1 The 1963 lease was assigned to the Plaintiff on March 20, 1964 and recorded in Sweetwater County shortly thereafter. Plaintiff paid all of the delay rentals due under the entire 1963 lease from November 26, 1964 to November 25, 1967.

In April of 1965, the Plaintiff, the Jamie-sons and the other parties with leasehold interests in Section 6 lands, entered into a communitization agreement to pool the Section 6 lands. Paragraph 8 of the agreement provides for the effect of production on the unit in the following manner:

The commencement, completion, continued operation or production of a well or wells for communitized substances on the communitized area shall be construed and considered as the commencement, completion, continued operation of production on each and all of the lands within and comprising said communitized area, and operations or production pursuant to this agreement shall be deemed to be operations or production as to each lease committed hereto.

Only the Section 6 lands of the 1963 lease, approximately 72.32 acres, were committed to the communitization agreement.

A commercially productive well (“Section 6 well”) was completed in November of 1965 within the Section 6 unit on lands not subject to the 1963 lease. The well continues to produce in paying quantities and is the only well within the communitized area. No well was drilled on the lands covered by the 1963 lease prior to the expiration of the primary term in November, 1968.

On October 26, 1972, the Wyoming Oil and Gas Conservation Commission ordered that all of the lands in Sections 6 and 1, as well as a number of other sections in Township 23 North Ranges 103 and 104 West, be subject to 640 acre drilling units. In effect, this restricts operations to one well in each 640 acre Section.

On April 30, 1974, the Jamiesons and Defendant Gulf Oil Corp. (“Gulf”) entered into an oil and gas lease which covered, in addition to other lands, the 80 acres in Section 1 which had been the subject of the 1963 lease (T 23 N, R 104 Wx, 6th P.M.; Section 1: N V2 SE Vi). Gulf thereafter conveyed a working interest in the 1974 lease to Texas and retained an overriding royalty interest.

On May 12, 1978, Texas entered into a Farmin Agreement with Chandler under which Texas was to drill a well in the SE Vi of Section 1 and Chandler was to assign a working interest in its oil and gas lease covering other lands in Section 1 and an adjacent section. Texas entered into an agreement similar in terms to the Texas-Chandler agreement on August 16, 1978 with W. C. McBride-Silurian Oil Co.

Texas began drilling operations in late 1978 on the disputed lands and a producing gas well was completed in 1979. On March 30, 1979, the parties holding interests in [361]*361Section 1 entered into a communitization agreement pooling all of the lands in Section 1. In August of 1981, some 12 months after discovery, Grynberg informed Texas that the Section 1 well encroached upon land to which he claimed a prior interest under the 1963 lease.

The issues which remain to be decided are: (1) did the Plaintiff’s interest in Section 1 lands expire under the terms of the 1963 lease; (2) if no expiration occurred, did Plaintiff nonetheless abandon any interest in those lands, and; (3) if a trespass occurred, what is the correct measure of damages?

The validity of the 1963 lease as to the Section 1 lands depends initially upon the “thereafter” clause of that lease. The lease provides for a primary term of 5 years, continuation during which is dependent upon payment of delay rentals or production and continuation after which is dependent upon production in some form “from said leased premises.”

It is undisputed that no well was drilled upon the 1963 lease lands during the primary term. Delay rentals were paid, however, up through November of 1967. Therefore, unless production under the 1965 communitization agreement is attributable to the 1963 lease, the lease expired of its own terms in November of 1967. The com-munitization agreement provides that operation or production “on the communitized area shall be construed [as operation or production] on each and all of the lands within...” said communitized area. This language requires a finding that production from the Section 6 well is to be attributed to the Section 6 lands of the 1963 lease and therefore carries the lease through and beyond its primary term. See 6 Williams and Meyers, Oil and Gas Law, § 952 at 704.2 (1981 Rev.). In this the parties are in agreement.

The question then becomes the effect of the communitization agreement upon that portion of the 1963 lease not committed to the agreement. While the language itself is subject to differing interpretations, after considering the evidence and testimony of the parties, it is the opinion of this Court that the 1965 communiti-zation agreement caused a severence of the 1963 lease.

Grynberg testified that in his opinion the communitization agreement did not cause a severence of the 1963 lease, but that the Section 1 lands were held by the production of the Section 6 well. The expert witness for the Plaintiff also opined that the Section 6 well held the Section 1 lands by constructive production under the terms of the communitization agreement. He admitted, however, that there is no case law which supports his opinion. He also stated that he based his opinion of non-severence on the lack of either a pooling clause or a Pugh clause in the lease, as inclusion is standard practice in the industry.

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

Related

United States v. Wyoming
331 U.S. 440 (Supreme Court, 1947)
Scott v. Pure Oil Co.
194 F.2d 393 (Fifth Circuit, 1952)
Brixey v. Union Oil Company of California
283 F. Supp. 353 (W.D. Arkansas, 1968)
Boatman v. Andre
12 P.2d 370 (Wyoming Supreme Court, 1932)
Phillips v. Hamilton
95 P. 846 (Wyoming Supreme Court, 1908)

Cite This Page — Counsel Stack

Bluebook (online)
22 B.R. 358, 1982 Bankr. LEXIS 3572, Counsel Stack Legal Research, https://law.counselstack.com/opinion/grynberg-v-texas-oil-gas-corp-in-re-grynberg-cod-1982.