The Superior Oil Co. v. Magee

87 So. 2d 280, 227 Miss. 868, 5 Oil & Gas Rep. 1194, 1956 Miss. LEXIS 766
CourtMississippi Supreme Court
DecidedMay 7, 1956
Docket40016
StatusPublished
Cited by4 cases

This text of 87 So. 2d 280 (The Superior Oil Co. v. Magee) is published on Counsel Stack Legal Research, covering Mississippi Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
The Superior Oil Co. v. Magee, 87 So. 2d 280, 227 Miss. 868, 5 Oil & Gas Rep. 1194, 1956 Miss. LEXIS 766 (Mich. 1956).

Opinions

[871]*871Ethridge, J.

This is another and perhaps the final case involving gas units in the Gwinville Field in Jefferson Davis County. The controversy is over the production of natural gas from a tract of 4.65 acres in Unit No. 50. Appellee Mabelle Griffith Magee was the owner of the land when on May 14, 1940, she and her husband, the other appellee, complainants below, executed an oil, gas and mineral lease on this land, along with other lands, to John D. Gholson, who later assigned it to Superior Oil [872]*872Company. Appellees brought this suit in the Chancery Court of Jefferson Davis County on May 27, 1950, seeking to cancel the lease on the ground that its 10-year primary term had expired on May 14, 1950, and that the lease had therefore terminated. The bill also sought to obtain a judgment against appellant for the full value of the production from the 4.65 acres in Unit 50, less its proportionate share of the cost of production.

The gas well in Unit 50 was completed as a producing well on December 30, 1949. The suit was first filed in May 1950, so it was brought prior to the decisions of this Court in 1952 and 1953 interpreting the statutes and regulations of the State Oil and Gras Board with reference to the establishment of drilling units. Superior Oil Company v. Foote, 214 Miss. 857, 59 So. 2d 85, 37 A. L. R. 2d 415 (1952); Superior Oil Company v. Beery, 216 Miss. 664, 63 So. 2d 115, 64 So. 2d 357 (1953); Humble Oil and Refining Company v. Hutchins, 217 Miss. 636, 64 So. 2d 773 (1953). Although the case was not tried until 1954 and a final decree was rendered on March 23, 1955, the chancery court nevertheless sustained complainants’ contentions, and held that Unit No. 50 was not validly created, and the lease to appellant had expired as to the 4.65 acres in Unit 50.

The issues raised by the bill of complaint have long since been foreclosed by the decisions of this Court in 1952 and 1953 dealing with the formation of integrated units for production of gas and oil. The trial court was in error in rendering its decree as to Unit 50. Appellees’ main contention is that this unit was attempted to be established at a time when Chapter 256, Miss. Laws of 1948, was in effect; that under Section 10(a) of Chapter 256, the State Oil and Gras Board was given power to require integration of drilling' units “of forty acres in area or less, but as to no drilling unit of greater area ...” Since the various acts relative to the creation of Unit No. 50 occurred between the time Chapter 256, [873]*873Laws of 1948, became effective, and the effective date of Chapter 220, Laws of 1950, which was April 18, 1950, appellees contend that the nnit in question was formed in violation of the statute, and that therefore the chancery court was correct in holding that it was an invalid unit which did not have the effect of extending the primary term of the lease by production from lands on another part of the alleged unit. "Where a unit has been properly established, it is settled that production from any of the land in the unit extends the leases upon all lands in the unit insofar as such leases cover the unitized tracts. Superior Oil Company v. Beery, supra.

Appellees’ position on this point was considered and decided against them in Humble Oil and Refining Company v. Hutchins, 217 Miss. 636, 644, 64 So. 2d 773 (1953). Unit No. 52 in the Gwinville Field was established almost simultaneously with Unit No. 50 here in controversy. The dates are substantially the same with reference to the execution by lessees of operating agreements, applications for permits to drill, completion of the wells, and expiration of primary term of the lease, the latter dates in both instances being after the effective dates of Chapter 220, Laws of 1950, which contained no restriction upon the acreage of units created by administrative orders of the State Oil and Gas Board under Section 10. In both cases the production in the unit was from lands other than the tracts in controversy. And in both the procedures in creating the units were in accord with rules of the State Oil and Gas Board of October 29, 1948, with reference to spacing and the requirement that a gas unit must be located upon 320 contiguous surface acres. In the Hutchins case it was held that Unit No. 52 was validly created and established as a drilling unit by the various actions of the lessees in locating and fixing the unit on the ground, obtaining permits to drill, filing of plats, well completion reports, and allowable production orders of the Board, under [874]*874the authority of Superior Oil Company v. Foote and Superior Oil Company v. Beery. The Court then said: “In the case at bar, the various steps leading up to the establishment of the units took place after the spacing rules of October 29, 1948, were adopted under the authority of Chap. 256, Laws of 1948. But these rules were substantially the same as those of August 11, 1947, and September 11, 1947. It follows, therefore, that under the facts of this case Unit No. 52 and Unit No. 55 were legally established. In fact, this Court has heretofore so held in the case of Unit No. 55. Hutchins v. Humble Oil & Refining Co., Miss., 59 So. 2d 103. If it be said that the act of 1948 expressly denied to the board the power to compel integration of units exceeding forty acres in area, the answer is that this Court has already held that, nevertheless, a 320 acre unit could be established, and that, the unit having been established, the result was the same, when there was production from such a 320 acre unit, as if the board had possessed and exercised the power to force integration.”

In other words, under the 1948 rules a lessee was required by the Board and statutes to establish a gas drilling unit of 320 acres, and when the unit was established there was a de facto unitization of all production from the unit. The result under Superior Oil Company v. Beery, supra, was that production from such a unit had the same effect as if the Board “had possessed and exercised the power to force integration.” Section 9(b) of the 1948 law required the Board to establish drilling units for each pool, and Section 4(1) required that a drilling unit must contain the maximum area which could be drained efficiently by one well. The manifest inconsistency between these several provisions and Section 10(a) resulted in the Hutchins case in a holding that a 320-acre unit was established under the 1948 law by the acts of lessess and the Board, and that the result of such establishment was the same .as if the Board had [875]*875possessed and exercised the power to force integration. The establishment of drilling units of itself pooled all of the interests in the unit, it was held in Hutchins, without the necessity of following the alternative administrative procedure provided for in Section 10(a) of the 1948 Act. So Humble Oil and Refining Company v. Hutchins considered and passed upon the exact issue raised by appellees in this case, and decided it contrary to their contention. Moreover, this issue was thoroughly considered prior to the decision in Hutchins, as is indicated by the majority opinion of Justice Lotterhos and the specially concurring opinion of Justice Hall.

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87 So. 2d 280, 227 Miss. 868, 5 Oil & Gas Rep. 1194, 1956 Miss. LEXIS 766, Counsel Stack Legal Research, https://law.counselstack.com/opinion/the-superior-oil-co-v-magee-miss-1956.