Smith v. West Virginia Oil & Gas Co.

365 So. 2d 269
CourtLouisiana Court of Appeal
DecidedFebruary 9, 1979
Docket13661
StatusPublished
Cited by12 cases

This text of 365 So. 2d 269 (Smith v. West Virginia Oil & Gas Co.) 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
Smith v. West Virginia Oil & Gas Co., 365 So. 2d 269 (La. Ct. App. 1979).

Opinion

365 So.2d 269 (1978)

William A. SMITH, Ditta Investments Inc., John E. Boullt, and A. M. Camp, Plaintiffs-Appellants,
v.
WEST VIRGINIA OIL & GAS CO., et al., Defendant-Appellee.

No. 13661.

Court of Appeal of Louisiana, Second Circuit.

October 30, 1978.
Rehearing Denied December 13, 1978.[*]
Writ Granted February 9, 1979.

*270 William A. Hargiss, Monroe, for plaintiff-appellant.

Oliver & Wilson by C. McVea Oliver, Monroe, for appellee.

George M. Wear, Monroe, for sublessees.

*271 Before PRICE, MARVIN and JONES, JJ.

JONES Judge.

Plaintiffs, William A. Smith; Ditta Investments, Inc.; A. M. Camp and John E. Boullt, appeal an interlocutory judgment rejecting their application for a preliminary injunction enjoining defendant, West Virginia Oil and Gas Company, Inc. from constructing a gas pipeline on plaintiff Ditta's property, and alienating gas from plaintiffs' property.

The four plaintiffs own the minerals on separate tracts of land totaling 160 acres depicted by diagonal lines on the plat below.

Smith_ _ _ _ _ _ _ W-― of SW-ž of NW-ž Ditta Investments- E-― of SW-ž of NW-ž NW-ž of SW-ž less North 60 feet of W-― Boullt_ _ _ _ _ _ _ NE-ž of SW-ž Camp _ _ _ _ _ _ _ SE-ž of SW-ž

All plaintiffs own the surface and minerals except Camp who owns the minerals only, having sold his tract with a reservation of minerals in 1969.

In 1919 West Virginia Timber Company granted a mineral lease covering 19,000 acres to Henry Bernstein. The lease contained no primary term, but required the lessee to drill five wells. The first well was required to be commenced within 90 days of the execution of the lease. At least one succeeding well was required to be started within 60 days of the completion of each former well until the total of five wells had been drilled. Each producing well would earn a lease on approximately 3000 acres surrounding it and the lease would continue as long as minerals were produced in paying quantities.

On March 12, 1920, Henry Bernstein assigned the lease insofar as it was applicable to approximately 2800 acres to West Virginia Oil and Gas Company, Inc. The 160 acres owned by the plaintiffs were included within the acreage assigned. On October 14, 1929, the successor of Henry Bernstein, lessee, assigned the lease insofar as it was applicable to approximately 245 acres to ShoVan Producing Company, Inc. Neither of these acts of assignment contained any overriding royalty nor any control of the assigned acreage nor was there any requirement that the assignee drill any wells on the assigned acreage.

*272 On January 16, 1945 a Stipulation and Transaction of Compromise was executed in the matter styled "George Breece Lumber Company, Inc., et al. v. West Virginia Oil and Gas Company, Inc., et al. on the docket of the U.S. District Court for the Western District of Louisiana wherein the owners of the property subject to the Bernstein lease and the current owners of the lease in settlement of the litigation cancelled the lease except insofar as it affected approximately 1000 acres of the leased acreage. The acreage retained subject to the lease included a portion of that assigned to West Virginia and the acreage assigned to ShoVan, and 80 acres assigned to Union Producing Company. The language of the stipulation and transaction of compromise with regard to the West Virginia and ShoVan acreage which remained subject to the lease is as follows, to-wit:

"2. It is stipulated and agreed that the West Virginia Oil and Gas Company, Inc., by adequate development pursuant to the terms of the mineral leases from the West Virginia Timber Company and/or George Breece to Henry Bernstein, has earned a lease (which is hereby ratified, confirmed and acknowledged so long as oil or gas is produced and marketed therefrom) on the following described land:
T 18 NR 4E Sec. 5 - W-― Sec. 8 - N-― of NW-ž T 18 NR 5E Sec. 3 - E-― of NW-ž Sec. 3 - NW-ž of SW-ž Sec. 4 - NE-ž
3. It is stipulated and agreed that the ShoVan Producing Company, Inc., by adequate development pursuant to the terms of the mineral lease from the West Virginia Timber Company and/or George Breece to Henry Bernstein, has earned a lease (which is hereby ratified, confirmed and acknowledged so long as oil or gas is produced and marketed therefrom) on the following described land:
T 18 NR 4E Sec. 8 - Lots 2, 3, 4, 5 SW-ž of NE-ž Sec. 7 - Lots 1, 2, 3 Sec. 6 - Lot 11"

This compromise agreement was incorporated in a final decree of the court by judgment rendered in the matter on May 9, 1945. The compromise reduced the 2800 acres received by West Virginia in the assignment from Bernstein to approximately 680 acres and provided the lease would continue "so long as oil or gas is produced and marketed therefrom."

West Virginia drilled numerous producing wells upon the leased premises but all wells had ceased to produce prior to 1977 with the exception of one well located on the N-― of the NWž of Section 8 shown on the plat as West Virginia well No. 8. This well stopped producing entirely in November of 1977 because of a gas leak in the line. This leak was only repaired and production resumed on March 10, 1978. This well only produced 6599 MCF of gas during 1977 and the gas was sold by West Virginia at the rate of 9Ē per MCF pursuant to a gas contract then in force. The well under these circumstances produced gas in 1977 valued at $593. Expenses related to the upkeep of the well in 1977 were $1,592.07. There was no evidence that the production of the well following the repair of the leak in the line would be any better than it had been during the year 1977.

In 1974 West Virginia entered into a farmout agreement to sublease to Roy M. Teel, after such time as Teel had drilled and completed wells commercially producing gas on the leased tract.[1] In September and October of 1977, Teel and his assignees, in an effort to earn the sublease under the farmout agreement, drilled one well on each of the four plaintiffs' property which are reflected by squares on the plat. These wells are capable of producing gas but have never been placed in production.

*273 On December 13, 1977, plaintiffs Ditta and Smith made demand by letter upon defendant for an act reflecting that the lease had terminated for failure to produce in paying quantities. Plaintiff Boullt wrote a similar letter demanding cancellation of the lease on December 21, 1977 and plaintiff Camp wrote such a letter on February 11, 1978. Defendant did not respond to the demand for cancellation and on March 1, 1978 plaintiffs filed this suit to cancel the West Virginia lease for cessation of production, failure to produce in paying quantities, and for damages for drainage. On that date, Herbst (Teel's assignee) wrote Ditta advising it he intended to construct a pipeline along the east boundary of Ditta's property for the purpose of connecting the newly drilled gas wells to a meter station of the City of Monroe with whom he had entered a contract to sell the gas contemplated to be produced from the new wells. Upon receipt of this letter, plaintiff amended his suit and sought a temporary restraining order (which was granted), a preliminary injunction and thereafter a permanent injunction enjoining West Virginia and all persons acting upon their behalf from the construction of the pipeline and production of the gas from the recently drilled wells on plaintiffs' property.

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365 So. 2d 269, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-west-virginia-oil-gas-co-lactapp-1979.