House v. Tidewater Oil Co.

• Decision Date: 29 January 1969
• Docket Number: No. 2503,2503
• Citation: 219 So.2d 616
• Parties: Mildred Moreau Ledoux HOUSE et al., Plaintiffs and Appellants, v. TIDEWATER OIL COMPANY et al., Defendants and Appellees.
• Court: Court of Appeal of Louisiana — District of US

Page 616

219 So.2d 616

Mildred Moreau Ledoux HOUSE et al., Plaintiffs and Appellants, v. TIDEWATER OIL COMPANY et al., Defendants and Appellees.

No. 2503.

Court of Appeal of Louisiana, Third Circuit.

Jan. 29, 1969.

Rehearing Denied Feb. 20, 1969.

Writ Refused April 25, 1969.

Davidson, Meaux, Onebane & Donohoe, by Joseph Onebane and Duncan M. Smith, Jr., Lafayette, for plaintiffs-appellants.

Henican, James & Cleveland, by Murray F. Cleveland, New Orleans, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, by Lucius F. Suthon, New Orleans, for defendants-appellees.

Liskow & Lewis, by James L. Pelletier, Lake Charles, for plaintiff-appellee.

Before FRUGE , HOOD, and CULPEPPER, JJ.

CULPEPPER, Judge.

This is a suit to cancel two oil, gas and mineral leases. Plaintiffs are the owners of the land. Defendants are the owners of the leases. From an adverse judgment, the plaintiffs appeal.

The principal issue is whether the defendants complied with the lease provisions requiring that they commence 'reworking operations' within 90 days after the cessation of production in order to continue the leases in effect beyond their primary terms.

The two leases in question were granted in July of 1954, for primary terms of five years, to Mr. F. J. Muller, covering a total of about 310 acres in St. Landry Parish. They were assigned by Muller to Tidewater Oil Company. During the primary terms of the leases, portions of the leased premises were included within a unit from which gas was being produced by Tidewater from a well located on lands owned by Robert L. Waterbury. The well produced gas and condensate in paying quantities until August 6, 1960, at which time Tidewater abondoned it due to excessive amounts of salt water.

Robert L. Waterbury, on whose lands the well was located, was an experienced independent oil operator. He decided that he could restore the well to production. Accordingly, he acquired the leases and on September 5, 1960, he commenced operations to restore production. From September 5 through October 1, 1960, he and a crew of men repaired approximately one mile of board road across a swampy area to the well site. They replaced some boards, repaired others and reset the necessary cattle gaps. Then he built completely new triple matting around the well head to support heavy equipment which he planned to use.

On October 30, 1960, a 'wire line service unit', mounted on a three ton truck, was moved to the well site. This equipment consists of a wire rope, about the size of an ordinary clothes line, to which are attached sinker bars, jars and a paraffin scraper. This was lowered into the tubing of the well to a depth of about 10,300 feet. After about 8 1/2 hours of work, pulling the paraffin scraper in and out of the hole, an accumulation of paraffin and debris was removed and the well began to flow gas and condensate. This was on October 30, 1960, which was the 85th day after the cessation of production on August 6, 1960.

Production was periodically flared to the pit, to keep the well clean, until new flow lines and a tank battery could be installed. These were completed on November 25, 1960, from which date gas and condensate have been produced and saved in paying quantities. This was the 111th day after cessation of production.

Waterbury testified he spent about $65,000 to restore the well to production.

The lease provisions in question are contained in paragraph 6, which reads as follows:

'After the discovery and production of oil, gas or any other minerals in paying quantities, either on the leased premises or on lands pooled therewith, the rights granted shall be maintained in effect during and after the primary term and without the payment of the rentals herein above provided for so long as oil, gas or some other mineral is being produced in paying quantities, or Lessee is carrying on operations with reasonable diligence looking to the production thereof. It is provided, however, that if, after the discovery and production of oil, gas or other minerals in paying quantities, the production thereof should cease from any cause, this lease shall terminate unless Lessee resumes or restores such production, or commences additional drilling, reworking or mining operations within ninety (90) days thereafter and continues such operations without the lapse of more than ninety (90) days between abandonment of work on one well and commencement of reworking operations or operations for the drilling of another, in an effort to restore production of oil, gas or other minerals. * * *'

It is not disputed that there was a cessation of production, within the intendment of the above quoted lease provisions. Plaintiffs' principal contention is that within the ensuing period of 90 days there was neither (1) restoration of production in paying quantities nor (2) commencement of reworking operations in an effort to restore production. Plaintiffs argue that the things done by Mr. Waterbury amounted to nothing more that routine maintenance, as distinguished from reworking operations.

I. WAS PRODUCTION IN PAYING QUANTITIES RESTORED WITHIN 90 DAYS?

We pretermit the question of whether production in paying quantities was restored within the 90 days. For, regardless of this question, we find hereinafter that reworking operations were commenced within this period.

II. FAILURE OF LESSORS TO GIVE NOTICE THAT THE WORK BEING DONE BY WATERBURY DID NOT CONSTITUTE REWORKING

Defendants contend that the following notice provisions of the lease are applicable here:

'In the event that lessor at any time considers that the operations are not being conducted in compliance with this lease, Lessor shall notify Lessee in writing of the facts relied upon as constituting a breach hereof, and Lessee, if legally required to conduct operations in order to maintain the lease in force, shall have sixty (60) days after receipt of such notice in which to commence the necessary operations to comply with the requirements hereof.'

Under this lease provision, defendants argue that plaintiffs were required to notify Mr. Waterbury of any dissatisfaction with the reworking operations.

This argument has been answered by the jurisprudence. See Taylor v. Buttram, 111 So.2d 576 (La.App.2d Cir. 1959) where the court held, with citation of previous cases:

'As to the appellants' contention that Section (8) of the lease contract required lessors to give lessee sixty days notice of any alleged failures to rework before any suit could be filed, this provision obviously applies only to operations during the primary term of the said lease, while Section (2) thereof applies after the primary term has expired. This exact point was squarely decided adversely to the contentions of the appellants here in the following cases: Logan v. Blaxton, La.App. 2 Cir., 1954, 71 So.2d 675; Taylor v. Kimbell, 1951, 219 La. 731, 54 So.2d 1; Sitting v. Dalton, 1940, 195 La. 765, 197 So. 423; Producers Oil & Gas Co. v. Continental Securities Corp., 1937, 188 La. 564, 177 So. 668.'

III. COMMENCEMENT OF REWORKING OPERATIONS

Plaintiffs contend the work done by Mr. Waterbury constituted routine maintenance and not 'reworking'. They introduced the testimony of three expert witnesses who stated, in essence, that 'reworking operations' are limited to those which affect the ability of the producing formation to feed into the well bore. These witnesses stated further that paraffin frequently accumulates in gas wells and the removal thereof with a wire line service unit is rountine maintenance. They concluded that in the present case the combined operations conducted by Waterbury constituted maintenance and not 'reworking'. ¹

Defendants called two expert witnesses who testified that although the use of a wire line service unit alone is maintenance, the wire line operations performed here were a part of an overall work-over operation. These experts were of the opinion that work-over operations cannot be limited, under all circumstances, to those which affect the ability of the formation to feed into the well bore. They gave a much broader definition to the term 'reworking operations' and concluded that the work done by Mr. Waterbury in this case fell within that category.

The first of defendants' experts is Mr. Fred L. Bates, who has very impressive qualifications. He graduated in mining engineering from Princeton University in 1933 and is a member of the Advisory Council of the School of Geological Engineering of that institution as well as being a member of the faculty of the University of Southwestern Louisiana as a lecturer in petroleum geology and petroleum engineering. Mr. Bates also has an impressive background of practical experience as a consulting petroleum engineer. He testified as follows:

'Q. Mr. Bates, I think you stated that using a paraffin scraper was a work over or reworking operation?

'A. No, sir, I did not. I stated that wire line operations such as were performed here were a part of a work over operation.

'Q. Because it restored production?

'A. No, sir, because it was a logical step in proceeding with a work over. As Mr. Montgomery stated, the repair of the board road and the entering of the well with wire line tools were the first steps that a reasonable and a prudent operator would have taken.

'Q. Mr. Bates, what do you mean work over, what does that mean, what are you working over?

'A. Mr. Montgomery was asked to define the term, and I think he defined it rather well. With the exception that he said it was an operation to affect the production from a well. My definition would take exception with the work affect, and say that a work over is an operation to improve or restore production, not merely to affect, but an attempt to improve and restore production.

I believe that the physical operations which are performed in this case and as admitted by Mr. Montgomery did have the effect of restoring production for whatever reason, and believing that and seeing the...