LeBar v. Haynie

Decision Date13 August 1976
Citation552 P.2d 1107
PartiesGeorge N. LeBAR and Inexco Oil Company, a corporation, Appellants (Plaintiffs below), v. Robert L. HAYNIE et al., Appellees (Defendants below). No 4527.
CourtWyoming Supreme Court

Houston G. Williams of Wehrli & Williams, Casper, and Arthur S. Berner and Robert E. Gill, Jr., Huston, Tex., for appellants.

Morris R. Massey and William F. Drew of Brown, Drew, Apostolos, Barton & Massey, Casper, for appellees.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

GUTHRIE, Chief Justice.

This appeal arises from a complaint filed by appellants, seeking from the lower court a declaratory judgment holding that an oil and gas lease dated June 28, 1968, under which appellees claim, was void and of no further force or effect and that three later oil and gas leases dated September 13, 1973, under which appellants claim, were valid and in full force and effect and that the lands covered thereby were free of any claims of appellees. The trial court found adversely to appellants, finding that the first lease wsa in full force and effect and that the three later leases were invalid and gave the lessees no right thereunder.

To establish a frame for this case, we shall make a most general and summary statement of the facts, fully cognizant that in the disposal of certain specific issues it will be necessary to engage in a more detailed As in all cases upon an appeal, we shall throughout this opinion not consider or weigh conflicts in the evidence but shall recite the evidence as it appears most favorable to appellees, along with any inferences which spring therefrom, Oedekoven v. Oedekoven, Wyo., 538 P.2d 1292, 1297.

statement of the facts applicable to those propositions.

On June 28, 1968, Paul C. LeBar and his wife, Georgia C. LeBar, executed and delivered to Stoltz & Company an oil and gas lease 1 for a five-year primary term covering 2156.71 acres in Converse County, Wyoming. 2 Appellees claim under and by virtue of this lease and no question is raised that they are not the successors in interest to all rights thereunder.

On September 13, 1973, George LeBar executed and delivered to Inexco Oil Company three oil and gas leases covering the lands here in dispute. All of the leases were properly and seasonably recorded in the office of the county clerk in Converse County, Wyoming. Stoltz & Company paid the annual rental for the five-year period and Stoltz, Wagner, and Brown, successors to Stoltz & Company, made a sixth yearly rental payment to LeBar on March 9, 1973, but discovering their error wrote LeBar, asking that the rental payment be refunded and that they would supply a release of this lease. The money was refunded but no release was ever made. We are not confronted, however, with any claim that this effected the release of the Stoltz lease.

Haynie, who through some arrangement which is not clear in the record but which is not challenged, owned a substantial interest in the lease from the time Stoltz & Company obtained it. To protect his interest, on April 11, 1973, he wrote LeBar, advising him that he and Mayer had an interest in the lease and inquiring if they could obtain an extension or a new lease, and offering a bonus for some arrangement. Haynie followed this up by asking for a reply but LeBar did not respond. The record indicates that from about 90 days prior to this expiration date both Haynie and Mayer engaged in negotiations with various oil firms and individuals and made considerable search for someone to assist in some financing agreement so that a well could be drilled in this lease. These were all unsuccessful, and no definite arrangement was made until June 27, when Haynie was able to interest the Chinook Pipeline Company, which made a commitment and agreement of financial support enabling the drilling of this well. During this period of negotiation Evinger, acting as an agent for Haynie and Mayer, proceeded with certain arrangements, including the staking of a location and a discussion with LeBar and Carl Hageman, who had some right to the surface of this location; and the parties agreed upon an amount to be paid for surface damage for the location, payment for a road right-of-way, and the installation of an auto gate. They agreed that this should be reduced to writing, which was done on June 27 in Mr. Hand's office. Appellees paid the agreed sum of $800 and installed an auto gate under the terms of this agreement. On June 26 Evinger filed an application for a drilling permit with the Oil and Gas Supervisor of the State of Wyoming for drilling a well upon these premises and received verbal approval, although written approval was not issued until July 10. Evinger also made arrangements for dirt work and the digging of a pit on June 25, and apparently made arrangements to secure water for drilling from a neighbor about this time. The original drilling permit set out a plan to drill through the Parkman Formation, or 8000 feet. Evinger also hired Ruby Drilling Company to move upon this location with a so-called water-well rig, which operation was begun before noon on June The term of the Stoltz lease must govern our disposal, and the following provisions are applicabeleto this controversy:

28. Ruby was advised that this was an expiring lease and they were to set surface pipe. That rig drilled a 7 7/8-inch hole to a depth of 94 feet. On June 26 Mayer had made an arrangement with Lohmann and Johnson, who were owners of a large drilling rig, to move upon this location and to drill a well. Lohmann and Johnson moved the major component parts of this rig upon these premises by the evening of June 28. Upon the arrival of this rig the Ruby rig was removed from the hole, and after rigging up the Lohmann-Johnson rig enlarged the hole to 12 3/4 inches in diameter to a depth of 80 feet, and the following day drilled 318 feet in preparation for running the surface casing. These operations were continued with some difficulty, because of lost circulation, until the hole reached a depth of 6744 feet, and the Lohmann-Johnson rig remained on this hole until July 13, when a 5 1/2-inch casing was run to a depth of 6719 feet. When this was completed the rig was released and removed from the location. There were further discussions among the appellees, looking to the testing of this well in the Lewis Formation. They then obtained the so-called Capshaw rig, but after the testing was completed and certain other procedures were taken, the Capshaw rig was removed from the location on August 2 because this rig was not properly equipped to drill to the Teapot Formation and would have to have been modified. During the period from the time of its removal until August 27 no active work was pursued because of the difficulty of obtaining another rig. At that time a completion rig owned by Sing Well Service Company was moved upon the well and various operations were conducted thereon, including the deepening of the well to 7115 feet. Discovery of commercial production haveing been made at that depth, the well was completed as a producer on October 2.

"It is agreed that this lease shall remain in force for a term of five years from this date, referred to as primary term and as long therafter as oil, gas, casinghead gas, casinghead gasoline , or either of them is produced from said land, or from lands with which said land is pooled or operations are continued as hereinafter provided.

" * * * if the lessee shall commence to drill a well within the primary term of this lease on the land above described, * * * the lease shall have the right to drill such well to completion with reasonable diligence and force with like effect as if such well had been completed within the primary term. * * * "

Appellants urge us to reverse the trial court for the following reasons:

I. Appellees did not commence a well during the primary term.

II. Even if the well were timely commenced, it was not drilled with reasonable diligence and dispatch.

III. The LeBar Number One well was completed as a dry hole and subsequently reentered to be deepened.

COMMENCEMENT OF THE WELL

The trail court found:

"The language of the Stoltz lease, to the effect that the lease will remain in force for the five-year primary term 'and as long thereafter as oil, gas, casinghead gas, casinghead gasoline, or either of them, is produced from the land, . . . or operations are continued as hereinafter provided' refers to the situation in which drilling operations are in progress at the time at which the lease on June 28, 1973. Defendants did comply with the conditions of the Stoltz lease to extend it beyond its primary term. The commenced operations with the good faith intention to proceed diligently with the work of drilling a well to completion and that after their operations were thereafter conducted with reasonable diligence and This court has at least twice been confronted with a determination of the question whether an oil and gas lease has been extended beyond its primary term by preliminary actions or preparations of the lessee without actual drilling having been begun and has determined that under certain circumstances the lease my be extended, Fast v. Whitney, 26 Wyo. 433, 187 P. 192, 193; True Oil Company v. Gibson, Wyo., 392 P.2d 795, 596. In probable deference to these holdings, appellants assert no basic disagreement with the application of the rule that under and by terms of this leas the requirement of " commence to drill a well" may be satisfied if preliminary commencement activities are not mere pretenses or a holding device to retain possession of the lease; and if thes acts are commenced and prosecuted with a good-faith and bona fide intention to drill and complete the well, and if these acts are performed with such intent and the party proceeds thereafter with diligence to the completion of the well, it will result in the extension of the primary term of the lease.

dispatch and did result in...

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