Lor, Inc. v. Martin Exploration Co.

489 So. 2d 1326
Louisiana Court of Appeal·Decided May 28, 1986·No. CA 85-0344 to CA 85-0348·Published·Cited by 10 cases

Opinion

489 So.2d 1326 (1986)

LOR, INC.
v.
MARTIN EXPLORATION COMPANY, Chevron USA, Inc., F.F.K. Gas & Oil Properties f/k/a F.F.K. Oil Company, and W.R. Fairchild Construction Company, Ltd. and its General Partners, Wiley Fairchild, Charles D. Fairchild, Herbert D. Fairchild and Rodney Fairchild
NEWPARK PIPE & SUPPLY, INC.
v.
MARTIN EXPLORATION COMPANY, Chevron USA, Inc., F.F.K. Gas & Oil Properties f/k/a F.F.K. Oil Company, and W.R. Fairchild Construction Company, Ltd. and its General Partners, Wiley Fairchild, Charles D. Fairchild, Herbert D. Fairchild and Rodney Fairchild
NEWPARK WASTE TREATMENT SYSTEMS, INC.
v.
MARTIN EXPLORATION COMPANY, Chevron USA, Inc., F.F.K. Gas & Oil Properties f/k/a F.F.K. Oil Company, and W.R. Fairchild Construction Company, Ltd. and its General Partners, Wiley Fairchild, Charles D. Fairchild, Herbert D. Fairchild and Rodney Fairchild
NEWPARK FLUID SERVICES, INC.
v.
MARTIN EXPLORATION COMPANY, Chevron USA, Inc., F.F.K. Gas & Oil Properties f/k/a F.F.K. Oil Company, and W.R. Fairchild Construction Company, Ltd. and its General Partners, Wiley Fairchild, Charles D. Fairchild, Herbert D. Fairchild and Rodney Fairchild
GUILLORY TANK TRUCK SERVICES, INC.
v.
MARTIN EXPLORATION COMPANY, Chevron USA, Inc., F.F.K. Gas & Oil Properties f/k/a F.F.K. Oil Company, and W.R. Fairchild Construction Company, Ltd. and its General Partners, Wiley Fairchild, Charles D. Fairchild, Herbert D. Fairchild and Rodney Fairchild.

Nos. CA 85-0344 to CA 85-0348.

Court of Appeal of Louisiana, First Circuit.

May 28, 1986.

*1327 Emmett Sole, Lake Charles, James Kuhn, Denham Springs, for defendants/appellees-Chevron.

Edward D. Wegmand, New Orleans, for plaintiffs/appellants-Lor, Inc.; Guillory Tank Truck Service; Newpark Resources, et al.

John Dale Powers, Baton Rouge, for defendants/appellees-F.F.K. Gas and Oil.

Before EDWARDS, LANIER and JOHN S. COVINGTON, JJ.

LANIER, Judge.

These are five consolidated suits by furnishers of labor, services and supplies on a dry hole oil well seeking recognition and enforcement of privileges granted by the Louisiana Oil, Gas and Water Well Lien Act, La.R.S. 9:4861. Subsequently, the furnishers filed a supplemental and amending petition alleging that other drilling and production units had been established on portions of the leased premises on which their privileges attached, that the defendants had the power to conceal and dispose of any revenues accruing to the mineral lease thereon and that said furnishers were entitled to a writ of sequestration to protect their privileges. The trial court issued a writ sequestering (1) the oil, gas and mineral lease in question; (2) all oil, gas or other minerals produced from the lease; (3) the proceeds of the sale of any oil, gas or other minerals produced from the lease; and (4) all oil, gas and other minerals produced from the well for which the labor, services *1328 and supplies were furnished. The lessee in the lease filed a motion to dissolve the writ of sequestration in its entirety or, in the alternative, to limit the sequestration order to the production and proceeds of the dry hole well. After a hearing, the trial court rendered judgment dissolving the writ of sequestration insofar as it pertained to two forced conservation units which covered parts of the leased premises and which had producing wells. The furnishers took this suspensive appeal.[1]

FACTS

The basic facts in this case are set forth in JHJ Limited I v. Chevron U.S.A., Inc., 617 F.Supp. 729, 731 (M.D.La.1985), as follows:

Chevron is the lessee in an oil, gas and mineral lease dated November 10, 1973, referred to as the Wunsch lease, covering some 127 acres of land situated in Livingston Parish.
By an order dated October 15, 1981, the Commissioner of Conservation created a unit (the S Unit) which included about 89 acres of Chevron's Wunsch lease. The Commissioner ordered that each tract included in the unit was to share in production from the unit well in proportion to the surface area each tract bears to the entire surface area of the unit. The unit was created for the purpose of insuring orderly mineral development, to prevent waste and to avoid the drilling of unnecessary wells.
Although Chevron received timely notice of the unit application and the hearing thereon, it chose not to participate in or oppose the proceedings.
The Commissioner's order designated Celt Oil Co., Inc. as the unit operator and Celt requested Martin Exploration Company to handle the engineering aspects of the drilling of the unit well.
The Commissioner chose Chevron's Wunsch lease as the surface location for The S Unit well. Again, Chevron had notice of this hearing but chose not to attend or to participate.
Chevron agreed to let Martin use its Wunsch lease surface rights but refused to participate in the cost of the drilling of the well. Subsequently, Martin was designated as unit operator, vice Celt.
. . . .
The well was spudded in on January 15, 1982.
. . . .
Subsequently, Chevron granted a farmout agreement to Martin covering that portion of the Wunsch lease (about 89 acres) which was included in the S Unit, effective March 1, 1982. Under the farmout agreement, Martin would earn an interest in the lease if the well drilled at its sole cost produced minerals in paying quantities.
. . . .
In June 1982, when the well had reached a depth of 19,954 feet, Martin suspended operations and no further operations have taken place since then. The well has never been completed as a commercial producer and Martin has never *1329 earned any interest in the Wunsch lease.
. . . .
Portions of the Wunsch lease have also been force pooled into two other units by orders of the Louisiana Commissioner of Conservation, the H Unit and the F Unit. Unit wells on both of those units have been successfully completed and Chevron's Wunsch lease has a working interest in all production from each of those wells. Neither well is physically located on the Wunsch lease and Chevron's participation in the production arises solely from the force pooling orders of the Commissioner.

The furnishers herein and the amounts of their claims are as follows:

1.  Newpark Fluid Services,
    Inc.                      —        $1,135,423.07
2.  Guillory Tank Truck
    Services, Inc.            —             7,823.40
3.  Newpark Waste
    Treatment Systems, Inc.   —            30,062.75
4.  Newpark Pipe and Supply,
    Inc.                      —           473,991.02
5.  LOR, Inc.                 —            18,675.40
                                      _____________
       TOTAL                          $1,665,975.64

All of the labor, services and supplies provided by these furnishers went into the drilling of the Wunsch # 1 well in the S Unit. None of the labor, services and supplies were furnished for the unit wells in the F and H Units.[2]

EXTENT OF LOUISIANA OIL WELL PRIVILEGE

At the time[3] the Wunsch # 1 well was drilled on the Wunsch lease, La.R.S. 9:4861 provided as follows:

Any person who performs any labor or service in drilling or in connection with the drilling of any well or wells in search of oil,

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Lor, Inc. v. Martin Exploration Co., 489 So. 2d 1326 (La. Ct. App. 1986).

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