Mieth v. Ranchquest, Inc.

177 S.W.3d 296, 166 Oil & Gas Rep. 607, 2005 Tex. App. LEXIS 2079, 2005 WL 615594
CourtCourt of Appeals of Texas
DecidedMarch 17, 2005
Docket01-02-00461-CV
StatusPublished
Cited by26 cases

This text of 177 S.W.3d 296 (Mieth v. Ranchquest, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mieth v. Ranchquest, Inc., 177 S.W.3d 296, 166 Oil & Gas Rep. 607, 2005 Tex. App. LEXIS 2079, 2005 WL 615594 (Tex. Ct. App. 2005).

Opinion

OPINION ON FURTHER REHEARING

SAM NUCHIA, Justice.

We grant appellee’s motion for further rehearing, withdraw our opinion issued May 20, 2004, and issue this opinion in its place.

*300 In October 1997, appellants sued appel-lees to recover damages caused to their surface estate by appellees’ operations at and re-entry of an abandoned oil and gas well. The case was tried to a jury in 2001, and the jury found that Texical Energy Corporation d/b/a Texical, Inc. (Texical) was 100% hable for negligence proximately causing injury to appellants’ property. The jury awarded $200,000 as reasonable costs to repair appellants’ property, $10,000 in exemplary damages, and $88,000 in attorney’s fees, but found no diminution in the value of appellants’ property. The trial court concluded that the injury to the property was permanent and, therefore, that the correct measure of damages was the diminution in value to the land. Because the jury found no diminution in value, the trial court rendered judgment for appellees. We affirm.

I. Background

A. The Lease Operation

Appellants own the surface of a 973-acre tract of grazing land in Austin County, Texas. Appellants referred to this tract, purchased in 1952 by Charles Kaechele, appellants’ deceased father, as the “Best” tract. In 1992, appellants and the owners of the mineral estate executed an oil and gas lease to appellee Ranchquest, Inc. (Ranchquest). Sometime before March 16, 1996, drilling operations were begun on the well known as Best No. 2 well, which was located on the northern 300 + acres of the 973-acre tract.

Robert Leon and Robert Huckaby, the individual appellees, owned or controlled a group of corporations, including appellees Ranchquest, Texical, Tex-Atic Resources, Inc. (Tex-Atic), and Amcas, Inc. (Amcas). Ranchquest acquired oil and gas leases, and Texical operated the oil and gas wells on those leases. At the time of trial, Leon and Huckaby used Tex-Atic to operate oil and gas wells on the leases acquired by Ranchquest. Leon and Huckaby used Amcas as the repository for investors’ funds to be used in drilling, completing, equipping, and operating oil and gas wells drilled on behalf of Texical or Tex-Atic on leases acquired by Ranchquest. Appellee Pensor Production Company (Pensor) is a drilling contractor.

In July 1996, Pensor entered into a contract with American Cascade Energy, Inc., Texical’s predecessor, to provide the rig and crew that would take over the drilling on the Best No. 2 well. In August 1997, Pensor’s contract was amended to add the Best No. 3 well. Appellees continued operations on the Best No. 2 well through the remainder of 1996 and into 1997. Ap-pellees did not construct reserve pits or a ring levee around the Best No. 2 well surface location until after March 1997. As a result, the drilling operations discharged drilling fluids, diesel fuel, oil, and saltwater onto appellants’ pasture and raw sewage into open pits. Although appellees decided to construct a reserve pit for the Best No. 2 well in 1997, they never closed it. The Best No. 2 well produced for a few days in December 1997 and January 1998, but was no longer producing at the time of trial.

In August 1998, appellees began working on the Best No. 3 well, also located on the northern 300 + acres of the tract. Although a reserve pit and a ring levee were constructed for the Best No. 3 well, appel-lees pumped fluids out of the pit and into a ditch that had been dug to run fluids into a nearby creek.

B. Texas Railroad Commission Reports

During trial, the trial court admitted the Railroad Commission (the Commission) reports on the Best Nos. 2 and 3 wells into evidence. The Commission inspected the operations and conditions maintained on *301 the Best No. 2 well location 24 times, and cited the Best No. 2 well on almost every inspection for violating Railroad Commission Statewide Rule 8 (Rule 8). 1 On March 3, 1999, the Commission issued a report containing findings of fact regarding alleged violations committed at the Best No. 2 well. The report notes that the Commission conducted inspections from December 18, 1996 through August 28, 1998. The Commission found that the operator had caused or allowed the discharge of 20 to 30 gallons of lubricating oil from machinery. 2 The Commission also found overflowing mud tanks combined with rain wash-off from the rig affecting an area approximately 100 by 150 feet on the west side of the rig. In addition, other oil discharges from around the diesel motors had flowed from a 70-by-8-foot pit into an adjacent pasture. The Commission noted that, by January 23, 1997, the affected area had increased in size to approximately 300 by 500 feet and that the inspectors had observed an oil and diesel sheen. 3 The report noted that the operator was also using the reserve pit for disposal of raw sewage from a trailer house and that recent rainwater had caused the pit to overflow.

The Commission’s report on the Best No. 3 well showed that, in August 1998, appellees began work on this well. Before commencing drilling operations, appellees constructed a reserve pit and a ring levee at the Best No. 3 well location. However, appellees pumped fluids out of the reserve pit and into a ditch that had been dug to run the fluids into the East Little San Bernard Creek. The Commission made 22 inspection visits to the Best No. 3 well location and found numerous violations of Rule 8. Unlike the Commission’s factual findings on the Best No. 2 well, the Commission’s findings of fact on the Best No. 3 well were not included in the record. As of the time of trial, the reserve pit on the Best No. 3 well location was still open.

C. Testimony

1. Frank Roberts, Jr.

At trial, Frank Roberts, Jr., a consultant for appellees, testified that the site around the Best No. 3 well was cleaned up during the summer of 1999 and was left in as good a shape as it could have been after a drilling completion. The reserve pits on the Best Nos. 2 and 3 well sites were still in existence and were then open because appellants had threatened the contractor and told him not to close the sites. The black, cracked, thick substance shown in photographs taken by appellants in February 1999 was simply a mixture of graphite and glycerin used in conjunction with mud to get the pipe to slide free. This mixture, which was regularly used in these types of drilling operations, was non-toxic and could easily be disposed of. Pensor took over the drilling operations on the Best No. 2 well in July 1996, but did not construct a ring levee and reserve pit until early 1997. The drilling operations ended sometime in early June 1997.

Roberts, who was working with Texical on the Best No. 3 well at the time, arrived at the site shortly after the Commission had inspected the Best No. 3 well. The *302 inspection revealed that the reserve pit had overflowed and had reached the road drainage, discharging into the creek at a rate of one gallon per minute.

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177 S.W.3d 296, 166 Oil & Gas Rep. 607, 2005 Tex. App. LEXIS 2079, 2005 WL 615594, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mieth-v-ranchquest-inc-texapp-2005.