Potts v. United States

126 F. Supp. 170, 130 Ct. Cl. 88, 1954 U.S. Ct. Cl. LEXIS 27
CourtUnited States Court of Claims
DecidedNovember 30, 1954
Docket50051
StatusPublished
Cited by11 cases

This text of 126 F. Supp. 170 (Potts v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Potts v. United States, 126 F. Supp. 170, 130 Ct. Cl. 88, 1954 U.S. Ct. Cl. LEXIS 27 (cc 1954).

Opinions

WHITAKER, Judge.

The construction of the Denison Dam and Reservoir on the Red River flooded the .following described property:

■ NW^. of the SE14, Section 20, Township 6 South, Range 7 East, Marshall County, Oklahoma, containing 40 acres, more or less.

Plaintiff Hugh Frank Potts had an oil and gas lease on it, and he sues for a taking.

[171]*171On December 30, 1941, in anticipation of the flooding of these lands, defendant purchased them from John Marshall, but prior to the purchase, he had executed an oil and gas lease to Colbert H. Marshall, which was assigned by him to plaintiff Hugh Frank Potts on September 8, 1942.

In 1950 Potts assigned the lease to plaintiffs, Roy A. Godfrey and Ernest O’Hearn, for a consideration of $42,000, and they also sue for a taking.

Defendant admits the taking; the question presented is, what is just compensation and who is entitled to recover it.

The pertinent facts presented to us can be briefly stated. On January 25, 1945, plaintiff Potts entered into a contract with the Bryan Petroleum Corporation of Tulsa, Oklahoma, for the drilling of an oil well on the land described. It was estimated that the well could be completed within 60 to 75 days. On February 9, 1945, drilling was commenced at a site at the approximate center of the property, which had an elevation of 610 feet. At this time the level of the lake was approximately 603 feet.

Prior to the commencement of drilling, Potts asked the Army engineers at Denison, Texas and Tulsa, Oklahoma, when it was expected that the level of the lake would reach 610 feet. From what the engineers told him and other investigation made by him, he concluded that the lake would not reach this elevation until 90 days after drilling operations had commenced or probably later.

His estimate, however, proved to be wrong. On March 15, 1945, due to unexpected heavy rainfall, the lake reached an elevation of 617 feet. But even prior thereto seepage from the encroaching waters caused the drilling machinery to bog down, and drilling operations were abandoned by the Bryan Petroleum Corporation on February 27, 1945, as it had a right to do under its contract with plaintiff. At this time the well had been sunk about one-fourth of its expected depth.

Later, plaintiff caused to be erected above the surface of the waters a platform to support the drilling machinery, and an oil well was drilled in the bottom of the lake at another site.

In the case of a taking, the measure of just compensation is the difference in the market value of the property taken before and after the taking. For parallel examples, see Vandiver v. United States, 67 Ct.Cl. 125; 11,000 Acres of Land, More or Less, Situated in Smith County, Tex. v. United States, 5 Cir., 152 F.2d 566, 568, certiorari denied 328 U.S. 835, 66 S.Ct. 980, 90 L.Ed. 1611.

Since in 1945 there were no sales of gas and oil leases in the area here concerned upon which a market value at or near the time of taking could be established, resort must be had to other factors. United States v. Miller, 317 U.S. 369, 374, 63 S.Ct. 276, 87 L.Ed. 336. See also American-Hawaiian Steamship Co. v. United States, Ct.Cl., 124 F.Supp. 378.

Expert testimony has been introduced to show the difference in market value of the leasehold here involved before and after inundation. Our task is to evaluate this testimony and to arrive at a figure which in our judgment represents just compensation.

Defendant’s witness C. V. Sidwell testified that plaintiff Potts’ lease was worth $240,000 before the inundation, and $200,000 thereafter, a difference of $40,-000. Sidwell is a graduate geologist and the head of the Department of Petroleum Production at the University of Tulsa, Oklahoma. He had had extensive experience as a consultant for major oil companies and for the United States.

Plaintiffs’ witness, O. H. Hill, was a consulting petroleum geologist with experience in the valuation of leasehold estates. He valued the lease before the inundation at only $200,000, as against Sidwell’s valuation of $240,000. However, after inundation he valued the leasehold at only $20,000. But this must be considered in the light of the fact that after five years of extraction of oil, plain[172]*172tiffs .Godfrey and O’Hearn paid $42,000 for it. Again, his valuation of $20,000 •is to be compared with Sidwell’s figure of $200,000. Anyway, Hill said the difference in market value before and after ■inundation was $180,000.

Another of plaintiffs’ witnesses, Ed J. Kubat, a successful, independent Oklahoma oil operator, put the highest valuation of all on the lease before inundation, ■except the plaintiffs themselves. He 'valued it at $300,000, as against Hill’s valuation of $200,000, and Sidwell’s valuation of $240,000. But he did not place á value on it after inundation.

As might be expected, the testimony of .plaintiffs, Potts and Godfrey, placed the difference before and after inundation at •a much larger figure than any of the experts.

There is thus a wide variation in the testimony of the experts. How shall we evaluate their testimony?

The following is of some assistance. The proof shows that it would cost about .$50,000 more to drill a well after the lánds had been flooded than it would cost to drill it on dry land. The proof also shows that it would cost about $1,000 a year to operate a well sunk through the waters of the lake over what it would cost to operate one on dry land.

In addition, since the cost of operation was greater after inundation than it was before, it would have become unprofitable to continue drilling earlier after inundation than it would have before inundation.

Drilling operations were stopped in 1952, at which time the well was producing only 7 barrels of oil a day. At that time it was thought that the salvage value of the pipe in the well would be greater than the profit from further operation. But had the lands not been flooded, the well could have been operated profitably for some longer time. However, the proof is quite indefinite as to how long the well could have been operated profitably, or what the profit would have been.

Plaintiff Potts also asks us to take into account the cost of relocating his well, after that well started on dry land had been inundated. Potts started the dry land operation without any assurance that the land would not be flooded before the well could be sunk to the required depth. He took the risk of completing the drilling before inundation. Had he deferred drilling operations until the maximum water level had been reached, the cost of relocating the well would not have been incurred.

Because of the inundation of these lands plaintiffs have been forced to spend an amount of money more than they would have spent otherwise, and they may have been deprived of some additional profit that could have been realized from further drilling on dry land.

This is about all there is to aid us in evaluating the expert testimony, aside from the character, experience, and qualifications of the witnesses.

Taking all the above into consideration, we are of the opinion that $75,000 would fairly compensate plaintiff Potts for the taking of his mineral rights.

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Potts v. United States
126 F. Supp. 170 (Court of Claims, 1954)

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Bluebook (online)
126 F. Supp. 170, 130 Ct. Cl. 88, 1954 U.S. Ct. Cl. LEXIS 27, Counsel Stack Legal Research, https://law.counselstack.com/opinion/potts-v-united-states-cc-1954.