Lee v. Goodwin
| Decision Date | 17 March 1965 |
| Docket Number | No. 10346,10346 |
| Citation | 174 So.2d 651 |
| Parties | Ralph B. LEE et al., Plaintiffs-Appellants, v. L. T. GOODWIN, Defendant-Appellee. |
| Court | Court of Appeal of Louisiana — District of US |
Phillips, Risinger & Kennedy, Shreveport, for plaintiffs-appellants.
Ford E. Stinson, Benton, for defendant-appellee.
Before HARDY, GLADNEY, and AYRES, JJ.
This is an action for a declaratory judgment wherein plaintiffs, under mesne conveyances from one S. A. Cochran, seek to have recognized as valid and subsisting a royalty interest in the oil, gas, and other minerals produced from a described 60-acre tract of land situated in Bossier Parish, Louisiana, as granted by defendant Goodwin to Cochran by an instrument dated March 2, 1945.
The defendant contends that the royalty interest has prescribed under the 10-year prescription liberandi causa. This defense is predicated upon the propositions (1) that no exploration for gas, oil, or other minerals has been undertaken on the property concerned and (2) that no production was had from a well in a unit with which the property was pooled or unitized within a period of 10 years from the creation of the royalty interest. Defendant's plea of prescription, after trial of the merits of the case, was sustained and, accordingly, plaintiffs' demands were rejected and they have appealed.
The royalty deed in dispute conveyed a 1/16 of the whole of the oil, gas, or other minerals, except sulphur, on and under, and to be produced from, the SW 1/4 of the SW 1/4 and the S 1/2 of the NW 1/4 of the SW 1/4, Sec. 29, T. 23 N., R. 12 W., and, as to sulphur, 25cents per long ton, subject, but not limited, to a lease then affecting the land. The instrument provided:
'* * * This sale and transfer, however, is not limited to royalties accruing under the lease presently affecting said lands but the rights herein granted are and shall remain a charge and burden on the land herein described and binding on any future owners or lessees of said lands and, in the event of the termination of the present lease, the said royalties shall be delivered and/or paid out of the whole of any oil, gas or other minerals produced from said land by the owner, lessee or anyone else operating thereon.
'The grantor herein reserves the right to grant future leases affecting said lands so long as there shall be included therein, for the benefit of the grantee herein, the royalty rights herein conveyed; and the grantor further reserves the right to collect and retain all bonuses and rentals paid for or in connection with any future lease or accruing under the lease now outstanding.'
A brief review of the essential facts is deemed expedient to an understanding and resolution of the issues presented. No well in search of oil, gas, or other minerals was drilled on subject property. However, the lessee, Continental Oil Company, in June, 1952, completed a well denominated Goodwin 1--A on the SW 1/4 of the NW 1/4, Sec. 29, T. 23 N., R. 12 W. This well was subsequently, in August, 1953, conveyed to one R. W. Fair, at whose instance the Department of Conservation, by order of the Commissioner dated September 1, 1954, unitized the west half of the aforesaid section for the exploration and production of gas and condensate from the Goodwin Sand of the Hosston Formation of the Redland Field in which the described lands were located.
The Goodwin Well was approved as to location and was designated the unit well. Drilled through the Pettit and the Hosston or Travis Peak formations, the well was perforated in both formations at the respective depths of approximately 6300 and 7300 feet. Under a test of July 14, 1952, it was determined that the well was capable of producing, from the Hosston or Travis Peak Formation, 1,338,000 cubic feet of gas per day and condensate at the rate of 28 barrels per million cubic feet of gas. Completion of the well as a dual producer was unauthorized. Consequently, the lessee, Continental Oil Company, placed a packer between the producing horizons and produced crude oil from the Pettit Formation as a pumper. Production of gas from the Hosston or Travis Peak Formation was thus shut off and delayed because of the lack of a market and pipeline facilities.
In the chronology of events, we may now observe that the Continental Oil Company, joined by Fair, under date of September 22, 1954, surrendered its lease covering the 60-acre tract herein involved. Fair, however, under date of April 27, 1955, acquired a new 1-year lease on this tract, to remain in force 'as long thereafter as oil, gas or other minerals is produced from said land or land with which said land is pooled hereunder.'
The Goodwin Well was only one of several acquired by Fair from Continental Oil Company. Production from these wells was insufficient to create a demand therefor or to warrant or justify the construction of a pipeline to a possible market. In order to increase production to justify the construction of a pipeline and incidental facilities, and to create a market therefor where none was then available, Fair drilled five other wells. Production was accordingly increased to an extent thought to warrant the construction of a pipeline. Therefore, a pipeline 9 1/2 miles in length was constructed at a cost of $125,000.00.
The sale of production from the Goodwin Well was begun in November, 1955, and continued until about 1960, when the well ceased to produce. Production for the period from November, 1955, to June, 1956, amounted to 197,889,000 cubic feet of gas and condensate produced at the rate of 28 barrels per million cubic feet of gas, the proceeds of the sale of which aggregated $33,631.13. Although production was never sufficient to pay the construction cost of the pipeline by which the gas was delivered to market, the well was a producer of gas in paying quantities.
For a well to be a producer in paying quantities, it is not necessary that the operator recover the cost of his development; it is only necessary that he recover the cost of his production with a profit. Thus, it was...
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