Breaux v. Pan Am. Petroleum Corp.

• Decision Date: 08 April 1964
• Docket Number: No. 1057,1057
• Parties: Alphonse L. BREAUX et al., Plaintiffs and Appellants, v. PAN AMERICAN PETROLEUM CORPORATION and Socony Mobile Oil Company, Inc., Defendants and Appellees.
• Court: Court of Appeal of Louisiana — District of US

Page 406

163 So.2d 406

Alphonse L. BREAUX et al., Plaintiffs and Appellants, v. PAN AMERICAN PETROLEUM CORPORATION and Socony Mobile Oil Company, Inc., Defendants and Appellees.

No. 1057.

Court of Appeal of Louisiana, Third Circuit.

April 8, 1964.

Rehearing Denied April 28, 1964.

Writ Refused June 26, 1964.

Charles Jaubert, Lake Charles, for plaintiffs-appellants.

Liskow & Lewis, by Cullen Liskow, Lake Charles, for defendants-appellees.

Before TATE, FRUGE and HOOD, Judges.

HOOD, Judge.

Plaintiffs in this suit are the owners of a tract of land in Cameron Parish and defendants are the joint owners of an oil, gas and mineral lease affecting that tract. Plaintiffs demand a judgment for damages alleged to have been sustained by them as the result of a breach by defendants of an implied condition in the mineral lease contract to protect plaintiffs from the drainage of oil and gas from beneath the surface of their land. Defendants filed an exception of no cause of action and an exception of res judicata. After a hearing the trial judge overruled the exception of res judicata, but he maintained the exception of no cause of action and rendered judgment dismissing the suit. Plaintiffs have appealed.

For the purpose of determining the issues raised by an exception of no cause of action, the well pleaded facts in the petition and in any annexed documents must by accepted as true. Elliott v. Dupuy, 242 La. 173, 135 So.2d 54; Harwood Oil & Mining Company v. Black, 240 La. 641, 124 So.2d 764.

The facts as alleged in plaintiffs' petition in this case are that plaintiffs own a tract of land in Cameron Parish, and defendants are joint owners of a mineral lease affecting that property. Defendants also own a mineral lease affecting another tract of land lying immediately east of and adjacent to plaintiffs' property. An oil well, designated as the Adam Doiron Well No. 2, was completed on the adjoining tract in 1945, the bottom of such well being located within 80 feet of plaintiffs' property. Substantial quantities of oil and gas have been produced from the Adam Doiron Well No. 2.

Plaintiffs allege that 'at least one-half (1/2) of the gas and oil produced from said well has been drawn from under the land of petitioners above described.' In 1954 plaintiffs demanded that defendants take steps to protect their land from drainage by the Adam Doiron Well No. 2. After that demand was made, plaintiffs filed two separate suits against defendants in the district court, in the first of which suits the district court held that defendants had been put in default in 1954, and the judgment decreed that plaintiffs' right to sue for damages because of the alleged drainage was reserved to them. According to the petition in the instant suit, 'nothing has been done to protect petitioners from said drainage despite the fact that defendants have drilled, what they call an offset well, which did not have the effect of protecting petitioners from said drainage.'

Plaintiffs then aver that they have been damaged to the extent of one-half of the royalty due on the Adam Doiron Well No. 2, and that the defendants' lease affecting plaintiffs' land provides for a royalty of one-eighth of the oil or gas produced. On these allegations plaintiffs demand judgment 'for the value of 1/16th of all gas and oil produced from Adam Doiron No. 2 Well from the time that they were placed in default.'

After a hearing on the exceptions, the trial judge concluded that in this State a landowner is not entitled to recover damages because of the drainage of oil or gas from under his land, that the sole and only remedy of the owner-lessor against the mineral lessee who fails to protect the leased property from drainage is to demand a forfeiture of the lease, that in this case it has already been determined that plaintiffs are not entitled to a forfeiture of the lease, and that consequently there is no other remedy available to plaintiffs under the facts alleged here. For these reasons the trial judge maintained the exception of no cause of action.

In urging that the trial judge erred, plaintiffs argue that under our law there is an implied obligation in every mineral lease that the lessee will prevent drainage of the leased property. They contend that defendants have violated this implied obligation by failing to prevent drainage of oil and gas from under the leased premises, and that because of their failure to do so defendants are liable to plaintiffs for damages in an amount equal to the value of a portion of the oil and gas produced from the draining well.

We agree with plaintiffs and the amicus curiae that under the jurisprudence of this State there is an implied obligation in every mineral lease that the lessee will develop the leased premises for minerals with reasonable diligence for the mutual profit and advantage of both the lessor and the lessee. We think this includes an implied obligation on the part of the lessee to exercise reasonable diligence in endeavoring to prevent drainage of oil and gas from under the leased premises. The question of whether the lessee must drill one or more offset wells in order to comply with this implied obligation should be determined, we think, according to the facts and circumstances which exist in each individual case. Some of the circumstances to be considered are whether the drainage is substantial, whether a reasonably prudent operator with knowledge of the facts would drill an offset well under the circumstances, and whether the lessee might expect to receive a reasonable profit above the cost of drilling and operating the offset well. See Sohio Petroleum Company v. Miller, 237 La. 1015, 112 So.2d 695; Carter v. Arkansas Louisiana Gas Co., 213 La. 1028, 36 So.2d 26; Reagan v. Murphy, 235 La. 529, 105 So.2d 210; Coyle v. North American Oil Consolidated, 201 La. 99, 9 So.2d 473; 2 Summers, Oil and Gas, § 399, pp. 568 et seq.; Brown, The Law of Oil and Gas Leases, § 16.02, pp. 272 et seq., and § 16.03, p. 322; Merrill, Implied Covenants in Oil & Gas Leases (2nd Ed. 1940) 255.

We think the owner-lessor clearly would have a cause of action against his mineral lessee For cancellation of the lease where the lessee has failed or refused to exercise reasonable diligence in an effort to prevent substantial damage. In the instant suit, however, the plaintiffs are not seeking a cancellation of the lease. Instead, they demand damages in an amount equal to the value of a portion of the oil and gas produced from the draining well. All parties agree that no Louisiana court, and no other court applying Louisiana law, has ever awarded a landowner damages because of the drainage of oil or gas from beneath his property by wells located on adjacent lands, where there has been no subsurface trespass of the landowner's property.

It is well settled in Louisiana that oil and gas in place are fugitive minerals which are not subject to absolute ownership as specific things apart from the soil. The owner of land does not own the fugitive oil or gas beneath it so as to have the right to follow it after it has left his land, but he does have the right to drill on his land and to become the owner of such oil and gas as he may thereby draw through the soil and bring into his possession. Rives v. Gulf Refining Co. of Louisiana, 133 La. 178, 62 So. 623; Higgins Oil & Fuel Co. v. Guaranty Oil Co., 145 La. 233, 82 So. 206, 5 A.L.R. 411; Frost-Johnson Lumber Co. v. Salling's Heirs, 150 La. 756, 91 So. 207; Louisiana Gas & Fuel Co. v. White Bros., 157 La. 728, 103 So. 23; Liles v. Texas Co., 166 La. 293, 117 So. 229; Federal Land Bank of New Orleans v. Mulhern, 180 La. 627, 157 So. 370, 95 A.L.R. 948; Gulf Refining Co. of Louisiana v Glassell, 186 La. 190, 171 So. 846; Southport Petroleum Co. of Delaware v. Fithian, 203 La. 49, 13 So.2d 382; Gliptis v. Fifteen Oil Co., 204 La. 896, 16 So.2d 471; Ware v. Baucum, 221 La. 259, 59 So.2d 182; Billeaud Planters, Inc. v. Union Oil Company of California,245 F.2d 14 (5th Cir., 1957); and Lilly v. Conservation Commissioner of Louisiana, 29 F.Supp. 892 (E.D., La.1939).

In Louisiana Gas & Fuel Co. v. White Bros., supra, plaintiff owned a mineral lease affecting one tract of land and defendant owned a mineral lease affecting an adjoining tract. A well was drilled on each of these tracts, but defendant's well blew out allowing the gas to escape, thus exhausting the common reservoir into which both parties had drilled. Plaintiff sued defendant for damages in an amount alleged to be the value of one-fourth of the gas which had been wasted from the reservoir. The trial court overruled an exception of no cause of action filed by defendant, and the case was tried on the merits resulting in a judgment rejecting plaintiff's demands. On appeal, our Supreme Court reversed that portion of the trial court's judgment which overruled the exception, and held that the exception of no cause of action should be maintained. In doing so the court said:

'But plaintiff is not the owner of the gas beneath its holdings; and one of the best evidences of that, if it were not already established authoritatively, is this very impossibility of showing damages as above said.

'But:

"It is the settled jurisprudence of this state that oil and gas in place are not subject to absolute ownership as specific things apart from the soil of which they form part.' Frost-Johnson Lumber Co. v. Salling's Heirs, 150 La. 756, 91 So. 207.

'And again:

"The owner (of the soil) has no absolute property in such oils, gases, and waters, but only the right to draw them through the soil and thereby become the owner of them.' 150 La. 863, 91 So. 245.

'And in Higgins Oil & Fuel Co. v. Guaranty Oil Co., 145 La. 233, 82 So. 206, 5 A.L.R. 411, this court held, that:

"An owner of land does not own the fugitive oil (and gas) beneath it, and cannot complain that it is being drawn off by a pump (or well) sunk by an adjoining land owner.'

'Hence it follows that, were ...