United States v. North American Oil Consolidated
| Decision Date | 08 June 1917 |
| Docket Number | A-48. |
| Citation | 242 F. 723 |
| Court | U.S. District Court — Southern District of California |
| Parties | UNITED STATES v. NORTH AMERICAN OIL CONSOLIDATED et al. |
Frank Hall, Sp. Asst. Atty. Gen., of San Francisco, Cal., for the United States.
Chas S. Wheeler and A.L. Weil, both of San Francisco, Cal., for defendants North American Oil Consolidated and others.
D.S Ewing, of Fresno, Cal., for defendant Frick.
Andrews Toland & Andrews, of Los Angeles, Cal., for defendant Union Oil Co. of California and Producers' Transp. Co.
J Delmore Lederman, of San Francisco, Cal., for defendant Pioneer Midway Oil Co.
BEAN District Judge (sitting by special assignment).
This is a suit by the government to oust the defendants from the possession of section 2, township 32 south, range 23 east, M.D.M., oil-bearing lands in the state of California, and require them to account for and pay over to it the value of oil taken therefrom. The legal title to the land is in the United States. It is included within the area described in the presidential withdrawal order of September 27, 1909. No discovery of oil had been made on any part of the premises at the date of such order. The Pioneer Midway Oil Company was in possession thereof at the time, and it is claimed was in diligent prosecution of work leading to discovery of oil; hence it is said that the land was, by the terms of the order, excluded therefrom because it was "a location or claim existing and valid" at its date; but, if this is not so, the oil company and its successors in interest have a right to retain possession and extract the oil under the proviso of the act of Congress of June, 1910, commonly known as the Pickett Act, which reads:
"That the rights of any person who, at the date of any withdrawal order heretofore or hereafter made, is a bona fide occupant or claimant of oil or gas bearing lands, and, who at such date is in diligent prosecution of work leading to discovery of oil or gas, shall not be affected or impaired by such order so long as such occupant or claimant shall continue in diligent prosecution of said work." 36 Stat. 847.
In view of the conclusions I have reached on the second question, it is not necessary to consider the first. That the Pioneer Midway Oil Company was an actual bona fide occupant and claimant of the property at the date of the withdrawal order, for the purpose of acquiring title under the mining laws, is clear; but the position of the government is that it was not then in diligent prosecution of work leading to discovery, within the meaning of the Pickett Act.
There is but little if any dispute about the material facts. In January 1907, while the land in controversy was public land of the United States, subject to entry under the mining laws, Mr. Strasberger and his associates, all of whom were qualified entrymen, acting in good faith, posted notices on each quarter section thereof and had such notices recorded in the proper county, claiming the same under the placer mining laws. In August of that year they conveyed or transferred their interests to the Pioneer Midway Oil Company, and late in 1908 or early in 1909 the oil company, intending to explore the property for the discovery of oil as soon as practicable, went into possession of the four claims. It thereupon purchased the necessary material and caused to be constructed on each claim a derrick and a building or buildings for the housing and accommodation of its employés. The buildings so erected were designed and intended for use in the development and operation of the entire section, and were such as were common in the oil fields, and necessary and proper for that purpose. The derricks were substantial structures, designed and subsequently actually used for drilling.
By the end of June, 1909, these improvements were practically completed, except the hanging of the tools and setting the boilers. Two boilers (all that were available in the community) had been purchased and transported to the property, but not set up. Thereafter up to and at the time of the withdrawal order employés of the oil company were on each quarter section as keepers digging cellars, clearing up sage brush, and doing other preparatory work. Tools had not been hung in the derricks or the boilers set up because the oil company had been unable to obtain assurance of an adequate supply of water for boiler and drilling purposes. The land in controversy is in a semiarid section of the country and at the time of the withdrawal order water was secured with great difficulty. Large quantities of water are required to drill an oil well and a dependable supply is necessary not only for use in the boilers, but in the well itself for drilling, and to prevent the walls from caving and the casing freezing. It costs from $25,000 to $50,000 on an average to sink a well in the territory in question, and it would be imprudent to begin drilling without an adequate supply of water to enable the work to proceed continuously; otherwise the well would probably be lost and the expenditures be for naught.
Attempts had been made without success to develop water on the land in question, and it had to be brought from a distance. The only available sources were the Stratton Water Company, and a plant belonging to the Santa Fé, semipublic service concerns, and transportation by rail from Bakersfield, a distance of 50 or 60 miles. None of these sources was dependable, and none had any surplus to sell, or would guarantee any definite supply of water to its customers. Neither the Stratton Water Company nor the Santa Fé had piped water to a point nearer than several miles to the land in question. The Stratton Company had more customers connected with its plant than it could supply, the Santa Fé Company was not then selling water for drilling purposes, and transportation by rail from Bakersfield was irregular, uncertain, and inadequate. The Stratton Water Company and the Santa Fé people, however, were engaged in enlarging their plants by sinking new wells, laying additional mains, and installing new machinery, and held out the reasonable hope and promise that they would soon be able to furnish an adequate supply of water. For these reasons, the oil company did not commence drilling, although intending to do so as soon as water could be secured, but remained in possession of each quarter section with keepers or watchmen in charge, and employés doing more or less work, until March, 1910, when it disposed of its interests to Laymance and his associates, referred to as "No. 2 Syndicate."
About this time, the Stratton Water Company had enlarged its plant and increased its facilities by installing additional machinery and bringing in another well, and soon after the purchase by No. 2 Syndicate a water line was laid from its plant to the property, the derricks previously built by the oil company rigged up, and drilling actually begun on the southeast quarter on May 4, 1910, the southwest quarter June 20, 1910, the northwest quarter July 25, 1910, and the northeast quarter September 5, 1910, since which time and prior to the commencement of this suit numerous wells have been drilled and oil in commercial quantities discovered on each quarter section.
The Pioneer Midway Oil Company expended while in the possession of the property, in the erection of buildings, derricks, and the like, about $10,000, and there has been expended by its successors in interest, in sinking wells and developing the property, more than half a million dollars. The question for decision is whether these facts show the oil company to have been in diligent prosecution of work leading to discovery on the several claims at the date of the withdrawal order, within the meaning of the Pickett Act.
A statement in general terms of the conditions applicable to all cases arising under this act, and which should govern in determining whether the requisite diligence existed, is difficult, if not impossible. What constitutes diligent prosecution of work does not lend itself to exact definition. Diligence is a relative term, and what is due diligence in a given case must be determined by the circumstances. Chief Justice Lewis, in Mining Co. v. Carpenter, 4 Nev. 546, 97 Am.Dec. 550, says:
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