Slawson Exploration Company, Inc. And Donald C. Slawson v. Vintage Petroleum, Inc.

78 F.3d 1479, 1996 U.S. App. LEXIS 4391, 1996 WL 107568
CourtCourt of Appeals for the Tenth Circuit
DecidedMarch 12, 1996
Docket94-3431
StatusPublished
Cited by4 cases

This text of 78 F.3d 1479 (Slawson Exploration Company, Inc. And Donald C. Slawson v. Vintage Petroleum, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Slawson Exploration Company, Inc. And Donald C. Slawson v. Vintage Petroleum, Inc., 78 F.3d 1479, 1996 U.S. App. LEXIS 4391, 1996 WL 107568 (10th Cir. 1996).

Opinion

BRORBY, Circuit Judge.

Plaintiffs Slawson Exploration Co., Inc., and Donald C. Slawson (referred to collectively as “Slawson”) appeal the district court’s order granting summary judgment in favor of defendant Vintage Petroleum, Inc. (hereafter ‘Vintage”) on Slawson’s claim it, not Vintage, is entitled to participate in an oil and gas lease acquired by Oryx Energy Co., formerly Sun Exploration Co. (hereafter “Sun/Oryx”) in 1991. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

I

In September 1986, Slawson and Sun/Oryx executed a preprinted Model Form Operating Agreement published by the American Association of Petroleum Landmen, providing, inter alia, that Slawson would drill a well (hereafter “the Tiller # 1-9 well”) into the Red River formation in Richland County, Montana. On the same day, Slawson and Sun/Oryx entered into a participation agreement covering an area of mutual interest that included the Tiller # 1-9 well site. The participation agreement provided Slawson and Sun/Oryx would jointly explore and develop the area of mutual interest, and

During the term of this [area of mutual interest], if any party hereto (“Acquiring Party”) acquires any oil and gas leases or any interest therein, any unleased mineral interest or any farmouts or other contracts with respect thereto which affect lands and minerals lying within the [area of mutual interest] (“Mineral Interest”), the Acquiring Party shall promptly advise the other party hereto (“Offeree”) of such acquisition. In such event, Offeree shall have the right to acquire its proportionate interest in such Mineral Interest in accordance with the other provisions of this [area of mutual interest].

The area of mutual interest was to remain in effect for twelve months, “or as long as the Operating Agreement covering the [area of mutual interest] lands remains in effect, unless sooner terminated by the parties.”

Although the operating agreement required Slawson to drill the Tiller # 1-9 well into the Red River formation, Slawson later determined the well would be a commercial producer from the shallower Duperow formation. After Slawson completed the Tiller # 1-9 well in the Duperow formation, it attempted to acquire a 320-acre spacing unit. Slawson’s attempt met with opposition, and the Montana Board of Oil and Gas Conservation ultimately ordered a 160-acre spacing unit in October 1987.

Two years later, in September 1988, Vintage purchased several properties from Slaw-son, including the Tiller # 1-9 well and its then 160-acre spacing unit, for $55 million. In the Assignment, Bill of Sale and Conveyance, executed in November 1988, Slawson assigned Vintage

1. All right, title and interest in and to those certain oil, gas and mineral leases, described in Exhibit “A” attached hereto and made a part hereof, in and to the entire estates created by the leases, lieens *1481 es and permits described in Exhibit “A” and “A-l” (herein called the “Leases”) ... insofar as the Leases cover and relate to the hydrocarbons under the land described in Exhibit “A” and “A-l” (herein called the “Land”), together with identical undivided ■ interests in and to all the property and rights incident thereto, including but not limited to all rights in, to and under all agreements, leases, permits, easements, right-of-way, licenses, joint operating agreements, pooling and spacing orders, communitization agreements, and other instruments in any way related thereto.

The Tiller # 1-9 well is listed in Exhibit A to the Assignment, Bill of Sale and Conveyance. Exhibit A states as follows: “Tiller unit # 1-9: This assignment is expressly limited to the spacing unit for the Tiller # 1-9 well, being the E/2 NE/4 Section 9, and all of Section 10, T25N, R55E, Roosevelt, MT.” 1 Sun/Oryx operated the Tiller # 1-9 well after the acquisition.

By January 1991, production from the Duperow formation had become uneconomical, so Sun/Oryx recompleted the Tiller # 1-9 well in the deeper Red River formation using its existing wellbore. Under applicable regulations, the appropriate spacing unit for a well in the Red River formation was 320 acres. Sun/Oryx therefore expanded the Tiller # 1-9 spacing unit from 160 acres to 320 acres by acquiring new leases covering an additional 160 acres adjacent to the existing spacing unit (hereafter “the additional 160 acres”). In June 1991, Sun/Oryx informed Slawson it had acquired the additional 160 acres, but that it believed Vintage, as Slawson’s assignee, was entitled to participate in the additional acreage pursuant to the 1986 participation agreement. Shortly thereafter, Slawson brought this action in district court, seeking a declaratory judgment that it, not Vintage, is entitled to participate in the additional 160 acres under the 1986 participation agreement. The parties filed cross-motions for summary judgment, and the district court entered judgment in favor of Vintage. This appeal followed.

II

The parties have stipulated that the participation agreement between Slawson and Sun/ Oryx remains in effect by virtue of continuing operations within the area of mutual interest, that Sun/Oryx’s acquisition of the additional 160 acres was the type envisioned by the original participation agreement, that the additional 160 acres were within the area of mutual interest, and that the participation agreement obligated Sun/Oryx to offer an interest in the additional 160 acres either to Vintage or to Slawson. Vintage contends, however, that Slawson assigned its interest in the participation agreement when it executed the Assignment, Bill of Sale and Conveyance, and that Vintage, as Slawson’s assignee, has succeeded to any participation rights Slawson might have had in the additional 160 acres. In response, Slawson contends Exhibit A to the Assignment, Bill of Sale and Conveyance makes it clear it did not intend to assign its right to participate in the additional 160 acres to Vintage. The case therefore turns on how we interpret the Assignment, Bill of Sale and Conveyance, and Exhibit A.

It is well established under Kansas law, which the parties agree governs this case, that in construing a contract “the intent of the parties is the primary question.” Alcancias, Inc. v. Klippel, 250 Kan. 458, 827 P.2d 37, 44 (1992) (citation omitted). “Unless a written instrument is ambiguous or vague in its terms, that intention must be determined from the instrument as a whole or, as is often stated, from its ‘four corners’, which simply means that all of the language used anywhere in the instrument should be taken into consideration and construed in harmony with other provisions of the contract.” Texaco, Inc. v. Holsinger, 336 F.2d 230, 233 (10th Cir.1964) (applying Kansas law), cert. denied, 379 U.S. 970, 85 S.Ct. 669, 13 L.Ed.2d 563 (1965). A contract is ambiguous only if “the application of the rules of interpretation to the face of the instrument leaves it genuinely uncertain as to which of two or more mean *1482

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78 F.3d 1479, 1996 U.S. App. LEXIS 4391, 1996 WL 107568, Counsel Stack Legal Research, https://law.counselstack.com/opinion/slawson-exploration-company-inc-and-donald-c-slawson-v-vintage-ca10-1996.