Coyle v. North American Oil Consol.

• Decision Date: 02 February 1942
• Docket Number: 36205.
• Citation: 9 So.2d 473,201 La. 99
• Court: Louisiana Supreme Court
• Parties: COYLE et al. v. NORTH AMERICAN OIL CONSOLIDATED et al.

9 So.2d 473

201 La. 99

COYLE et al. v. NORTH AMERICAN OIL CONSOLIDATED et al.

No. 36205.

Supreme Court of Louisiana

February 2, 1942

Rehearing Denied June 29, 1942.

A. S. Drew, of Minden, for appellants.

Dimick & Hamilton and John B. Files, all of Shreveport, for appellees.

ODOM Justice.

Plaintiffs own 120 acres of land in one tract, situated in what is known as the Cotton Valley Oil Field in Webster Parish, the land being described as the N.E. 1/4 of the S.E. 1/4 of Section 29, and the N. 1/2 of the S.W. 1/4 of Section 28 Township 21 North, Range 10 West.

On August 26 1936, they executed an oil and gas lease in favor of M. Carl Jones, covering the N.E. 1/4 of the S.E. 1/4 of Section 29. Jones, the lessee, transferred the lease to Elva M. Austin and Austin in turn transferred it to the North American Oil Consolidated, one of the defendants.

On the same day, Robert M. Coyle, one of the plaintiffs, granted an oil and gas lease to Mrs. Sibyl York, wife of Sam York, covering the N.E. 1/4 of the S.W. 1/4 of Section 28. Mrs. York assigned the lease to Austin, and Austin assigned it to the North American Oil Consolidated.

On August 25, 1936, Robert M. Coyle leased for oil development the N.W. 1/4 of the S.W. 1/4, Section 28, to the Root Petroleum Company. The North American Oil Consolidated is the present owner of the lease convering the N.E. 1/4 of the S.E. 1/4 of Section 29 and the N.E. 1/4 of the S.W. 1/4 of Section 28, and the Root Petroleum Company is the present owner of the lease covering the N.W. 1/4 of the S.W. 1/4 of Section 28. These companies are the defendants in two suits brought by the plaintiffs to cancel the leases. The issues involved in each of the suits are identical, and for that reason the two suits were consolidated for the purpose of trial.

In the Cotton Valley Oil Field there are at least two well defined and separate strata of oil-bearing sands. One is known as the Travis Peak sand or stratum, and the other is designated as the Bodcaw or Lower Marine formation or stratum. Oil or distillate is produced from the Travis Peak sand or stratum by drilling to a depth of from 5,500 to 8,000 feet. The Bodcaw or Lower Marine sand or stratum begins at a depth of 8,000 feet and extends from that depth down.

The leases here involved contain the usual stipulation that, in case oil, distillate, or gas is discovered and produced from the land within the primary term of the leases, if they be kept alive for that time, then the leases shall remain in force and effect so long as any one of those commodities is produced. Plaintiffs alleged, and it is admitted, that the leases have been developed in so far as the Bodcaw or Lower Marine stratum is concerned. One of the defendants drilled a well on the N.E. 1/4 of the S.E. 1/4 of Section 29 to a depth of 8,200 feet, which well is now producing oil in paying quantities. The other defendant drilled a well to the same depth on the land in Section 28, which well is also producing oil in paying quantities. But no oil, distillate or gas has been produced from the Travis Peak sand or stratum.

Plaintiffs alleged in each of their suits that, while defendants had made no effort to develop the leases on their land in so far as the Travis Peak sand or stratum is concerned, yet defendants held leases on lands south of and adjacent to plaintiffs' land and had drilled two wells on those lands into the Travis Peak sand, which wells had been producing oil or distillate in paying quantities and were producing at the time these suits were filed. They alleged further that the wells on the lands south of theirs were constantly draining the oil and distillate from their lands, and for that reason it was the duty of defendants to drill offset wells on plaintiffs' land in order to protect their interest. While there is no stipulation in the leases here involved requiring the lessees to drill offset wells in case of such drainage, plaintiffs alleged, and this seems to be conceded by counsel for defendants, that there was an implied obligation resting upon the lessees to drill offset wells in order to protect the interest of the lessors. Because there had been no offset wells drilled, plaintiffs prayed that the leases be cancelled. They alleged that the failure of the lessees to drill offset wells had resulted in serious damage to them on account of the alleged drainage, and in each suit prayed for judgment against defendants in amounts exceeding $50,000.

In the alternative, plaintiffs alleged that, in case it should be held that they were not entitled to have the leases cancelled on account of the lessees' failure to drill offset wells, then, in that event, they were entitled to have the leases cancelled in so far as the Travis Peak sand or stratum was concerned, because the lessees had abandoned that sand or stratum. They alleged that the lessees' failure and refusal to develop was an abandonment.

Defendants in limine filed exceptions of no cause and no right of action. These exceptions were grounded upon the proposition that, according to plaintiffs' allegations, oil was being produced from the Bodcaw or Lower Marine formation at the time the suits were filed, and that therefore the lessees had complied with their obligation to develop as provided in the leases. These exceptions were sustained by the trial court in so far as the demand to cancel the leases in their entirety was concerned. The court's ruling seems to have been based upon the theory that the separate and distinct oil-bearing sands or strata were two separate and distinct oil fields, and, inasmuch as plaintiffs' allegations showed that the Bodcaw or Lower Marine sand or field had been developed by the production of oil therefrom, the leases could not be cancelled in so far as that field was concerned; but that plaintiffs might have a cause of action to cancel the leases in so far as the Travis Peak sand or field was concerned. Counsel for plaintiffs did not except to the ruling of the court, and plaintiffs' demand to have the leases cancelled in so far as the Lower Marine sand or field is concerned has been abandoned.

We are not called upon to decide in this case, and do not decide, the question whether, in a case of this kind where it is shown that there are two or more separate and distinct strata of oil-bearing sands in land, each stratum should be considered a separate and distinct oil field. But, for the purposes of this decision, the Travis Peak sand or stratum will be considered as one field, and the Lower Marine sand or stratum as another, or separate, field. We shall consider these as separate and distinct fields, because counsel for the respective litigants concede that they are separate fields. In oral argument and in briefs they speak of them as separate fields in the same sense as two separate and distinct tracts of land from which minerals are produced are separate fields.

There was judgment in the lower court rejecting plaintiffs' demands and ordering their suits dismissed at their costs. From this judgment plaintiffs appealed.

We take up first the question whether plaintiffs are entitled to have these leases cancelled because the lessees have failed, and now refuse, to drill offset wells.

In a case note found in 19 A.L.R. page 441, under the heading 'Oil and Gas Lease--'Protection' Wells', the general rule relating to the particular issue here involved is stated as follows:

'The burden of proof is upon the lessor of land for oil and gas production to show that the location of wells upon adjoining premises is such that, taken in connection with the character of the oil or gas stratum, they will drain a sufficient quantity of oil from his premises to justify the lessee in going to the expense of drilling offset wells in order to save the oil or gas for their mutual benefit.' This is a general statement or expression of the rulings made by this court and the courts of Kentucky, Ohio, and Oklahoma. See especially the case of Hart v. Standard Oil Co., 146 La. 885, 84 So. 169.

Counsel for plaintiffs concedes that the above is a correct statement of the general rule and is applicable here in so far as this particular point is concerned. The question, then, is whether plaintiffs have discharged the burden of showing that the location of the wells upon the adjacent premises is such that they drain from their premises a quantity of oil sufficient to justify the lessees in going to the expense of drilling offset wells in order to save the oil or distillate for the mutual benefit of the lessors and the lessees.

The trial judge in his very able and elaborate written opinion stated his conclusion on this point as follows:

'We have carefully reviewed the testimony in this case and our conclusion is that the plaintiffs have entirely failed to sustain the burden of proving that the wells on the adjacent property will drain a sufficient quantity of oil from their premises (if any at all) to justify the lessee in going to the expense of drilling offset wells. In fact, the only evidence that may tend to indicate a slight drainage is from the testimony of the experts offered by the defendants.

'In considering the operations on adjacent premises together with the extent of the oil reservoir in the Travis Peak, the established facts are all found to be against plaintiffs.'

In support of his conclusions, the judge quoted the testimony of witnesses called by plaintiffs and that of witnesses called by defendants. Among these were geologists who testified that they had been in the Cotton Valley Oil Field for a number of years and had observed conditions relating to the Travis Peak sand and had personally examined cores taken from numerous wells drilled there. They testified that it is now well known that...