Miami Corp. v. Exxon Co., USA

509 So. 2d 39, 95 Oil & Gas Rep. 284, 1987 La. App. LEXIS 9648
CourtLouisiana Court of Appeal
DecidedMay 27, 1987
DocketNo. CA 86 0449
StatusPublished

This text of 509 So. 2d 39 (Miami Corp. v. Exxon Co., USA) 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
Miami Corp. v. Exxon Co., USA, 509 So. 2d 39, 95 Oil & Gas Rep. 284, 1987 La. App. LEXIS 9648 (La. Ct. App. 1987).

Opinion

ALFORD, Judge.

The defendant lessee, Exxon Corporation (Exxon) appeals the trial court’s action granting the plaintiff lessor’s motion for summary judgment which ordered Exxon to release a portion of the leased acreage. In dispute is a forty-five acre tract.

According to the uncontested facts, the plaintiff lessor, Miami Corporation (Miami) granted Exxon a mineral lease on January 4, 1980, covering more than 2000 acres in the Bayou Carlin Field in St. Mary Parish. The lease had a primary term of three years. Included in the leased acreage were two units that had been created by the Commissioner of Conservation (commissioner) on September 4, 1968: MA-7 RB SUA and MA-7 RB SUB. There had been no production from these units since before October 1, 1977. In early 1982, Exxon began drilling a well within the physical boundaries of MA-7 RB SUA. That well, originally designated as the Miami Corporation V-2 Well (V-2 well), was completed as a gas well on October 12, 1982.

[41]*41CHRONOLOGY OF EVENTS

The property in question in the instant suit is forty-five acres located in the unit MA-7 RB SUB, rather than in the unit MA-7 RB SUA, on the day the well was completed. Exxon admits that no further drilling or reworking operations were undertaken. Pursuant to a request from Exxon, dated October 19, 1982, the commissioner held a public hearing on November 17, 1982, and issued Order No. 470-0-9 which authorized Exxon to utilize the V-2 well as the substitute unit well for the existing unit MA-7 RB SUA. On November 23, 1982, Exxon notified the commissioner, and all interested owners and represented parties, that Exxon intended to apply for dissolution of the existing units, MA-7 RB SUA and MA-7 RB SUB, and for formation of a new unit, MA-7 RA-1 SUB, composed of approximately 219 acres. These 219 acres consisted of approximately 174 acres in the existing unit MA-7 RB SUA and 45 acres in the existing unit MA-7 RB SUB. Exxon stated that this action was being taken because new geological data revealed that the V-2 well was producing from the RA-1 reservoir rather than the unitized RB reservoir. On December 8, 1982, having received no response or objection from any source, including Miami, Exxon filed its formal application for the formation of the unit and the dissolution of the existing units. Thereafter, Exxon requested and was granted a production allowable on the V-2 well based on the boundaries of the existing MA-7 RB SUA unit. Approximately six weeks later, by letter dated February 3, 1983, Exxon asked to have the allowable for the V-2 well cancelled as the substitute well for the MA-7 RB SUA unit and to have a new allowable issued for the well as a lease well, based on the productive acreage plat which contained the same acreage as the proposed MA-7 RA-1 SUB unit. The commissioner complied and issued an authorization fixing a new allowable based on Exxon’s request, dated February 9, 1983.

In a letter dated February 26, 1983, Miami made demand upon Exxon for a partial release of all portions of the leased premises outside of the boundaries of the MA-7 RB SUA unit. Following a public hearing on March 2, 1983, the commissioner issued Order No. 540-C-10 which dissolved the two existing RB units and established the RA-1 unit as requested by Exxon, effective as of the hearing date. Thereafter, on April 15, 1983, the commissioner revoked the February 9 allowable and reinstated the MA-7 RB SUA allowable stating that this allowable should have been in effect until the dissolution of the unit on March 2, 1983. In May, Exxon attempted to release the leased acreage to Miami except for the acreage contained in the newly created unit. Included in the retained acreage were the forty-five acres in dispute. On June 14, 1983, Miami filed the instant suit, seeking to have the lease terminated as to all acreage outside the old MA-7 RB SUA unit as it existed on February 10, 1983, to have Exxon account to Miami for all production attributable to the forty-five acres in dispute and to have Exxon pay for all costs, expenses and legal interest. The matter came before the trial court on cross motions for summary judgment. After considering the memoranda, affidavits and exhibits and hearing the arguments, the trial court ruled in Miami’s favor.. We agree.

LEASE PROVISIONS

Both parties to the lease in question are extremely knowledgeable about mineral leases. Contained in the lease drawn up by Miami are the provisions in Paragraph Fourth that:

(I) After discovery of oil, gas or other hydrocarbon upon the leased premises (during or after the Primary Term) Lessee shall ... conduct drilling or reworking operations upon the leased premises, with not more than one hundred twenty (120) days elapsing between cessation of actual drilling or reworking of one well and the beginning or actual drilling or reworking of another.
******
(III) In the event Lessee shall fail or cease to conduct drilling or reworking operations on the leased premises as [42]*42above provided, this lease and the rights of Lessee hereunder shall ipso facto terminate without notice, demand or putting in default, as to all portions of the leased premises except those portions, if any, which Lessee may be permitted to retain under Paragraphs EIGHTH (II) or (III) hereof, whichever is applicable; and Lessee shall promptly deliver to Lessor a suitable, recordable release.

The lease, in Paragraph Eighth provides, in pertinent part, that:

(I) If, while this lease is in force, Lessee should default in the performance of any obligation hereunder, as a condition precedent to Lessor bringing suit, Lessee shall be notified in writing of the facts relied upon as constituting a breach, and Lessee, if in default, shall have sixty (60) days after receipt of such notice to comply with the obligations imposed by virtue of the lease....
(II) In case of cancellation or forfeiture of this lease ... Lessee may ... retain each well producing, being worked on, or drilling, in compliance with the terms of this lease, together with ... one hundred sixty (160) acres if it be a gas well, or such larger or smaller acreage around same as may, at the time of such cancellation or forfeiture, be allocated thereto as a drilling unit or required in order to produce its full allowable, under any state or federal law, order, rule or regulation_(emphasis ours)

Since no further drilling or reworking operations were undertaken, both parties agree that February 10, 1983, is the date representing 120 days after the cessation of drilling activities.

RETAINED ACREAGE

Exxon contends that the lease was maintained as to all of the leased land because gas was being produced from the leased acreage prior to expiration of the primary three-year term. However, Paragraph Fourth (I) clearly states that once gas has been discovered, as in this case, the lessee must begin additional drilling or reworking operations within 120 days after the cessation of actual drilling or reworking of a well. Since Exxon admits it did not begin any drilling or reworking operations on the leased premises before February 10, 1983, the lease itself provides that the rights of Exxon terminated as of February 10, 1983, except as to a certain amount of acreage around the producing well. Thus we are faced with determining the amount of acreage retained by Exxon, according to the lease provisions.

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Bluebook (online)
509 So. 2d 39, 95 Oil & Gas Rep. 284, 1987 La. App. LEXIS 9648, Counsel Stack Legal Research, https://law.counselstack.com/opinion/miami-corp-v-exxon-co-usa-lactapp-1987.