Holbrook v. Continental Oil Co.

• Decision Date: 04 January 1955
• Docket Number: No. 2641,2641
• Citation: 278 P.2d 798,73 Wyo. 321
• Parties: Henry B. HOLBROOK and Hattie B. Holbrook, Plaintiffs and Appellants, v. CONTINENTAL OIL COMPANY, a Corporation, Buck Creek Oil Company, a Corporation, Clarence A. Black, David Armstrong, and Carl Ticknor, Defendants and Respondents.
• Court: Wyoming Supreme Court

Page 798

278 P.2d 798

73 Wyo. 321

Henry B. HOLBROOK and Hattie B. Holbrook, Plaintiffs and Appellants, v. CONTINENTAL OIL COMPANY, a Corporation, Buck Creek Oil Company, a Corporation, Clarence A. Black, David Armstrong, and Carl Ticknor, Defendants and Respondents.

No. 2641.

Supreme Court of Wyoming.

Jan. 4, 1955.

William G. Watt, Wheatland, J. J. Hickey, Cheyenne, for appellants.

William J. Wehrli, Casper, Robert C. Hawley, Denver, Colo., for respondents.

RINER, Chief Justice.

The controversy in this case involves a portion of the ranch holdings of the plaintiffs which total about 5,200 acres; specifically, the west half of Section 25 and the south half of the northeast quarter of Section 26, Township 36 North, Range 64 West of the sixth principal meridian, are the lands to be considered in the litigations before us. The portion of Section 25 above- mentioned is located at the northwest corner of plaintiffs' property and does not appear to be adjacent to any other land held by plaintiffs under lease or in fee. The defendant corporations will frequently be designated as the 'oil companies' or by their respective names, as may be convenient, and for the purpose of clarity.

The record shows that a patent was issued from the United States Government to one Ralph E. Marshall on March 26, 1923, for the west half of Section 25 aforesaid; and that instrument contained a mineral reservation reading:

'Excepting and reserving, also, to the United States all the oil and gas in the lands so patented and to it or persons authorized by it, the right to prospect for, mine, and remove such deposits from the same upon compliance with the conditions and subject to the provisions and limitations of the Act of July 17, 1914 (38 Stat. 509).'

The Act of July 17, 1914, so far as here pertinent (see Section 122 of Title 30, U.S.C.A.) provides that any patent covering lands withdrawn or classified as mineral should contain a reservation to the United States of the mineral deposits on account of which the lands thus patented were withdrawn or classified as valuable for mineral development and that 'Any person who has acquired from the United States the title to or the right to mine and remove the reserved deposits' in the event the United States should dispose of such mineral deposits in the lands, 'may reenter and occupy so much of the surface thereof as may be required for all purposes reasonably incident to the mining and removal of the minerals therefrom, and mine and remove such minerals, upon payment of damages caused thereby to the owner of the land, or upon giving a good and sufficient bond or undertaking therefor in an action instituted in any competent court to ascertain and fix said damages.' (Italics supplied.) The damages the statute intended to cover are previously mentioned in the statute as 'damages to the crops and improvements on such lands,' and the measure thereof was to be fixed by 'agreement of parties or by a court of competent jurisdiction.'

There appears also to have been issued by the United States on July 1, 1943, to Albert N. Rundquist and W. W. Wright 'subject to any unit agreement heretofore or hereafter approved by the Secretary of the Interior' an oil and gas lease covering the west half of Section 25 aforesaid which, it is conceded, is now in force and effect and is owned by the defendant oil companies.

A United States patent was also issued by the Government to Ralph E. Marshall on March 26, 1923, covering the south half of the northeast quarter of Section 26, Township 36 North, Range 64 West of the sixth principal meridian. This patent contained a mineral reservation, to wit:

'Excepting and reserving, however, to the United States all the coal and other minerals in the lands so entered and patented, together with the right to prospect for, mine and remove the same pursuant to the provisions and limitations of the Act of December 29, 1916 (39 Stat. 862).'

The provisions of the Act of Congress of December 29, 1916, material here are found in Chapter 9 thereof (see Section 299 of Title 43, U.S.C.A.) which provides that all patents issued shall 'contain a reservation to the United States of all the coal and other minerals in the lands so entered and patented, together with the right to prospect for, mine, and remove the same.' The statute also provides that:

'Any person who has acquired from the United States the coal or other mineral deposits in any such land, or the right to mine and remove the same, may reenter and occupy so much of the surface thereof as may be required for all purposes reasonably incident to the mining or removal of the coal or other minerals * * * upon the execution of a good and sufficient bond or undertaking to the United States for the use and benefit of the entryman or owner of the land, to secure the payment of such damages to the crops or tangible improvements of the entryman or owner, as may be determined and fixed in an action brought upon the bond or undertaking in a court of competent jurisdiction against the principal and sureties thereon, such bond or undertaking to be in form and in accordance with rules and regulations prescribed by the Secretary of the Interior and to be filed with and approved by the register of the local land office of the district wherein the land is situate, subject to appeal to the Commissioner of the General Land Office * * *.' (Italics supplied.)

Another oil and gas lease embracing the south half of the northeast quarter of Section 26 aforesaid and other lands was issued by the United States to Frank Cordell under date of July 10, 1939, it being conceded by the parties to this action that this lease is now owned and held by the defendant oil companies. Of the entire ranch holdings of the plaintiffs, the west half of Section 25 and the south half of the northeast quarter of Section 26 aforesaid, including 400 acres, are the only lands upon which the defendant oil companies are engaged in operating as oil and gas lessees. The individual defendants in this case are employees of the Continental Oil Company living in the dwellings subsequently mentioned and are without interest in these leases.

Plaintiffs purchased all of the deeded lands in their ranch except the 400 acres mentioned above as located in Section 25 and Section 26 aforesaid and on January 25, 1947, obtained a deed thereto from one Frank W. Chambers. From September, 1938, until the land was bought from Chambers, the land was held by plaintiffs under lease from him. Only the surface of the land was involved in this lease.

The defendant oil companies entered upon the lands leased by them, as stated above, and drilled their first well in 1943. Nine wells have been drilled on the west half of Section 25, six of which are producing, the remaining wells being dry holes. When the plaintiffs purchased the lands in January, 1947, five wells had been completed. Six wells have been drilled on the south half of the northeast quarter of Section 26; half of these are producing, but the others are dry. Four of these wells were drilled prior to 1947 and two thereafter. Wells 1, 8, 3, 9, and 5 are about 330 feet from the west line of Section 25; wells 6, 4, and 7 are about 990 feet from that line. A tank battery was constructed located on the west line of the west half of Section 25 about 162 feet south of its northeast corner. This battery covers about one and a half acres and is used to separate oil from water; large quantities of the latter mixed with the oil come from the wells. This water has to be separated from the oil before the oil can be transported away from the lease.

In June, 1953, the average daily production on the Wright lease on the west half of Section 25 was 257 barrels of oil and 1344 barrels of water. The same month on the Cordell 'A' lease on the south half of the northeast quarter of Section 26, the average daily production was 92 barrels of oil and 962 barrels of water. During the same month, the oil production from the Cordell 'B' lease, covering the north half of the north half of Section 26, which was processed through the tank battery was 2 barrels of oil and 231 barrels of water; the Cordell 'B' lease embracing the north half of the north half of Section 26 aforesaid covers lands included in the lease with the south half of the northeast quarter of Section 26.

Three dwelling houses were constructed by the oil companies on the west half of Section 25 aforesaid, along the north line of the west half of Section 25 and occupying one and a half acres. One of the houses was constructed in April, 1943, and the other two in February, 1949; only the employees of the defendant Continental Company live in these houses. These men have always been employed upon the Wright or Cordell 'A' leases, or both of them, or in connection with the operation of the tank battery already mentioned. There has to be three eight-hour shifts or tours for these employees on the tank battery because it is necessary to have men on the lease at all times to take care of emergencies, e. g., fires, production loss, and maintenance of producing equipment, especially during the winter months. From these leases to the town of Lusk, it is about forty-two miles, and about six or eight miles to the town of Lance Creek. These houses were erected because of the situation outlined above. This 400-acre tract was purchased by plaintiffs for $2,500 ($6.25 per acre).

Findings of fact and conclusions of law favorable to the defendants and against the plaintiffs were made by the court. In the findings of fact is set forth that:

'* * * each and all of the allegations set forth in the Defendants' Answer are true.'

Also, it was found that:

'* * * the said defendants have not done anything that is not reasonably incident to the production, removal, transportation and marketing of the oil from said lands, and that the said defendants in their operations have not done anything that should not be...