WASECO CHEMICAL & SUPPLY v. Bayou State Oil

371 So. 2d 305, 65 Oil & Gas Rep. 351, 1979 La. App. LEXIS 3471
CourtLouisiana Court of Appeal
DecidedMay 1, 1979
Docket13849
StatusPublished
Cited by12 cases

This text of 371 So. 2d 305 (WASECO CHEMICAL & SUPPLY v. Bayou State Oil) 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
WASECO CHEMICAL & SUPPLY v. Bayou State Oil, 371 So. 2d 305, 65 Oil & Gas Rep. 351, 1979 La. App. LEXIS 3471 (La. Ct. App. 1979).

Opinion

371 So.2d 305 (1979)

WASECO CHEMICAL & SUPPLY CO., Plaintiff-Appellee,
v.
BAYOU STATE OIL CORPORATION, Defendant-Appellant.

No. 13849.

Court of Appeal of Louisiana, Second Circuit.

May 1, 1979.
Rehearing Denied June 8, 1979.

*306 Blanchard, Walker, O'Quin & Roberts by Marlin Risinger, Jr., Shreveport, for defendant-appellant.

Egan & Cook by Reuben W. Egan, Shreveport, Milling, Benson, Woodard, Hillyer, Pierson & Miller by C. E. Hall, New Orleans, for plaintiff-appellee.

Before BOLIN, PRICE and MARVIN, JJ.

En Banc. Rehearing Denied June 8, 1979.

MARVIN, Judge.

Bayou State, as defendant-lessee of an oil and gas lease, appeals from a judgment cancelling the lease for its failure to diligently develop the leased premises as a reasonably prudent operator. R.S. 31:122.[1] Plaintiff answers the appeal, seeking to increase the awards made below for the fees of its experts and attorneys.

In excellently detailed written reasons for judgment, the trial court concluded that Bayou State had not diligently operated or developed the lease as a reasonably prudent operator for the mutual benefit of itself and its lessors and had not exhibited the type of "fairness" required by law in the lessor-lessee relationship.

In addition to the obvious issue as to the obligations of a reasonably prudent operator under the particular circumstances of this case, the issues include the problem of dissolution of the lease vs. allowing a time for performance by the lessee in default. Defendant contends that its lease should not be cancelled without allowing defendant an opportunity to perform the obligations which the lower court found were imposed on it as lessee. C.C. Arts. 2046, 2047.

THE LAW

In Vetter v. Morrow, 361 So.2d 898 (La.App. 2d Cir. 1978), we had occasion to state the primary consideration or cause of an oil and gas lease and the obligations *307 imposed on the lessee as derived from R.S. 31:122 and from Carter v. Arkansas Louisiana Gas Co., 213 La. 1028, 36 So.2d 26 (1948). We said the primary cause or consideration of an oil and gas lease is the development of the minerals. Development in this sense is not only the exploration for, but the exploitation of, or the capture and marketing of, the minerals which may have been discovered by the fulfillment of the lessee's obligation to explore. In Vetter, we said:

"A mineral lessee is under a duty to develop and operate the property leased as a reasonably prudent operator for the benefit of himself and his lessor. La.R.S. 31:122 . . .

"To fulfill his duty . . . a lessee has the obligation to develop [explore, exploit, capture and market] known mineral producing formations in the manner of a reasonable, prudent operator . . .

"In deciding whether development [exploration, exploitation, capturing and marketing] has been reasonable for the benefit of both the lessor and lessee, the jurisprudence has usually considered the following factors: (1) geological data; (2) number and location of the wells drilled both on leased lands and adjoining property; (3) productive capacity of producing wells; (4) costs of drilling operations as compared with profits; (5) time interval between completion of the last well and the demand for additional operations; and (6) acreage involved in the disputed lease." 361 So.2d at pp. 899-900

Applying these factors to the circumstances of this case as found by the lower court, which, we add, are fully supported by the record, compels our concluding, as did the lower court, that Bayou State failed in its obligation of diligent development of the Scanland lease for the benefit of itself and the lessors. We shall discuss some of these circumstances in the section of this opinion entitled Facts.

After judgment was signed below, Bayou State sought to present a timetable and fireflood development it proposed to perform on the Scanland lease. The proposal generally provided that Bayou State, in four consecutive six month periods of time would drill and ignite a total of 12 fireflood patterns containing not less than 38 producing wells after Bayou State had gained the approval from the State Department of Conservation for the project. Bayou State's motion to reopen and motion for a new trial were denied by the lower court with these comments:

"Of course, I have had [Bayou State's] motion before me and have gone over the plan that was submitted there. I feel like that a statement of mine in the opinion might have brought this question on. I think that statement was, this declaration by counsel does not provide a timetable, nor set forth what its operation would entail. But, before that in the opinion I commented upon the fact that the defendant's position had vacillated between an exotic and an experiment to something they were ready to do. Frankly, gentlemen, I toned down my decision in this case concerning this. I put in this one sentence concerning the timetable, but frankly it appeared to the Court that Bayou State learned as much about fireflooding in the two weeks of our trial as it had in its twenty years of operation. As I said, that was my feelings, that was my first draft and I elaborated on this proposition. I eliminated it. I don't think that this was just another statement in the Court's opinion as to the position that Bayou State had taken from the beginning of this trial to the end. The Motion for a New Trial is denied." (Emphasis supplied.)

Among the pertinent Civil Code articles on the question of dissolution are Arts. 2046 and 2047, which read:

Art. 2046 A resolutory condition is implied in all commutative contracts, to take effect, in case either of the parties do not comply with his engagements; in this case the contract is not dissolved of right; the party complaining of a breach of the contract may either sue for its dissolution with damages, or, if the circumstances of the case permit, demand a specific performance.
*308 Art. 2047 In all cases the dissolution of a contract may be demanded by suit or by exception; and when the resolutory condition is an event, not depending on the will of either party, the contract is dissolved of right; but, in other cases, it must be sued for, and the party in default may, according to circumstances, have a further time allowed for the performance of the condition.

The authorities concerning, and the basis for, dissolution are excellently and concisely explained in 7 Litvinoff, La.Civil Law Treatise, Book 2, in sections and pages hereafter cited, with footnotes omitted and emphasis supplied:

"The requirements to obtain dissolution of the contract are two: first, the other party's failure to perform; second, that the dissolution be judicially pronounced.

"The failure to perform must be sufficiently serious to justify the dissolution of the contract; it must also be imputable to the party who does not perform. The motion of a party not complying with his engagement, as expressed in article 2046 of the Louisiana Civil Code, is broad enough to cover not only a total but also a partial failure to perform, as would occur, for example, when the obligor has paid only a part of the price, or has performed the contract only for a part of its intended duration. It also covers the nonperformance of an accessory obligation, and the rendering of a defective performance.

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Bluebook (online)
371 So. 2d 305, 65 Oil & Gas Rep. 351, 1979 La. App. LEXIS 3471, Counsel Stack Legal Research, https://law.counselstack.com/opinion/waseco-chemical-supply-v-bayou-state-oil-lactapp-1979.