Livingston Oil Corporation v. Waggoner

• Decision Date: 06 May 1925
• Docket Number: (No. 2470.)
• Citation: 273 S.W. 903
• Parties: LIVINGSTON OIL CORPORATION v. WAGGONER.
• Court: Texas Court of Appeals

273 S.W. 903

LIVINGSTON OIL CORPORATION v. WAGGONER.

(No. 2470.)

Court of Civil Appeals of Texas. Amarillo.

May 6, 1925.

Rehearing Denied June 3, 1925.

Appeal from District Court, Wichita County; P. A. Martin, Judge.

Action by R. M. Waggoner against the Livingston Oil Corporation. Judgment for plaintiff, and defendant appeals. Affirmed.

Bonner, Bonner & Sanford and Albert G. Walker, all of Wichita Falls, and Albert T. Patrick, of Tulsa, Okl., for appellant.

Weeks, Morrow, Francis & Hankerson, of Wichita Falls, for appellee.

RANDOLPH, J.

This suit was brought in the district court of Wichita county, by R. M. Waggoner against the Livingston Oil Corporation to recover $5,000 alleged to be due him from defendant by reason of the sale of casing-head gas by said company, which gas was alleged to have been produced from land belonging to Waggoner. The appellant was operating a lease which was originally executed by Waggoner to A. R. Calloway in 1917, for the purpose of drilling, mining, and operating for oil, gas, or other minerals, which leasehold estate had by various conveyances been vested in the defendant oil company. The consideration expressed in the lease was $1 and the expense incurred and labor performed in the drilling of a well or wells; also, that the lessee should deliver to the credit of lessor one-eighth of all oil produced and saved, and that the lessee should pay to the lessor $300 each year in advance for the gas from each well where gas only was found. Producing oil wells were brought in, from which, in addition to oil, a substance known as "casing-head gas" was produced. On July 19, 1921, the Livingston Company made a contract with the Skelly Oil Company, in virtue of which the Skelly Company was to maintain a good vacuum on the wells for the life of the lease, and pay to the appellant 10 cents per thousand cubic feet for the casing-head gas sucked to its plant through its vacuum lines.

On trial of the case, which was had before the court without the intervention of a jury, judgment was rendered decreeing recovery by plaintiff Waggoner, and appellant brings the case to this court for review.

Appellant, by its first and second propositions, asserts, substantially, that the lease contract not providing for the payment of any royalty to the lessor by the lessee, except the equal one-eighth part of the oil produced, such contract did not require the payment of any royalty on the casing-head gas, for the reason that the payment being required to be made upon the "oil" does not include a requirement that it be paid upon "casing-head gas," and that the appellant was entitled to the casing-head gas without accounting to plaintiff for its value. Further, the contention is made in the second proposition that where the lessee has been able to save by-products (such as casing-head gas), which usually goes to waste, he is not required to pay any royalty thereon, and that the trial court erred in holding that appellant was obligated so to do.

Under these propositions, appellant claims that the established rule of practice in Texas recognizes that the granting clause of the lease vests the title to the minerals described in the lease in the lessee immediately upon the delivery of the instrument to the lessee, and that such title is not dependent upon the royalty obligation, citing many decisions to support these contentions; further, that as the title to the gas had vested in the lessee, he had, in virtue of his ownership, the right to do with it as he pleased.

These various propositions all revolve around the question as to whether the term "oil" includes casing-head gas. Taking up the consideration of that question, we find that the decisions are conflicting, and for the purpose of ascertaining whether the evidence and the law justified the trial court in the finding that casing-head gas was included as a constituent of oil, we will first discuss the evidence upon which he based his judgment.

Our conclusion from the evidence is, when speaking of a gas well, reference is had to a well producing commercial or dry gas. Vacuum is a suction carried on an oil well to remove the casing-head gas and to pull the oil through the sand. The first stage of an oil well is that of flowing, the second, pumping, and the third the application of the vacuum which sucks the gas remaining in the well. This process of applying a vacuum increases the oil production.

J. M. Stone, an expert witness for appellant, who states that he helped construct the first absorption plant in Oklahoma, testifying as to the nature of extracting casing-head gas, testifies:

"There are two methods of production. And the method of getting the oil into the flow line and flow tanks is the same. The next method of producing is right from the bottom of the well. In some instances they reduce the `armiter' of the casing by two inches. Pipe that we call tubing, below, so that the gas that has been reduced in volume and pressure would be still strong enough to leave an oil on the two inch tubing, the same method as it is done before its flowing period, but that will not tell at all definite whether there is enough gas to do that. If there isn't enough gas to do it, then you have to go in with your tubing and rods and cups and pump it. Whether you pump it to the surface, or whether you flow it to the surface, it is a fact that you use the flow lines in all cases and deliver the oil into the flow tanks. * * * It is possible to turn this gas and crude oil through together direct from the pipe line purchasers' tanks or pipe line. It would be a bad pressure on the well; you would have to make the pipe air-tight, cased up, his casing being connected with flow tanks, with the stock tanks. You would maintain a constant pressure. The pipe line purchasers will take oil and light ends of the gas together. * * * There are two lighter ends, what we call — one is `integereal' with the oil. The other is a volatile constituent; that is, the dry gas that cannot be held.

"The next process in the production of oil is to apply a vacuum. It isn't only in some fields. The vacuum and that is—in fields where they haven't got the rock, pressure, we have two fields. We have the old formation, what we call the Pennsylvania. That is a very retentive formation, and in the first place presses all the gas into semifluid, compressing it just like a tight bale of hay. * * * It is compressed by natural way, all the formations to a semifluid, not mentioning the dry gases. That is very hard to compress, and one inch of that fluid turns into 900 inches of vapor when it is released from pressure.

"When you go down and open up the earth, that is when it escapes, that is the old formation. In the newer formation, in the Burk-burnett, what we call the permean, that is different. We get most of the gases in volume instead of pressure. When that is spent, the gases are spent, and all there is left there is the fluid gases, that is the saturated gases that you can turn into a fluid, and that is saturated thoroughly from the very top of the sand clear to the oil.

"The process of applying a vacuum to an oil well requires what is called a casing-head, to be placed on the casing or pipe that goes down an oil well, and then the suction is applied, takes it out, removes the air pressure, and the effect of that is to suck out, by means of such vacuum, the volatile gases. When a vacuum of that character is applied in a field or a particular lease, the general effect is to increase the production of that lease or that well, at the expense of the nearby wells, so that the well upon which the vacuum is applied will produce a greater quantity of oil than the nearby wells. * * * The second feature of the vacuum, that is the main thing, is in the open sand, that formerly had oil; now it hasn't. The open sand, we must not forget, is not dry. The records of the government shows that the saturation of the sand after the oil has been taken out in some instances is even over 50 per cent. of the former amount of oil; also the volatile gases are still separated in that open sand that formerly was oil, and it has lots of gasoline content. This vacuum gets into this open sand above the shallow oil that we have left now, and thereby produces an awful high content of gas, of gasoline, in other words, the old sand gas, the less volatile gas, that is that the vacuum can pull out, and the new saturated gas is making which is nothing but gasoline. That accounts for the great increase of gasoline, increases the first gas, until it gets altogether depleted. The increase of the volume of the gasoline in the gas until the entire field is altogether depleted.

"And there is a gradual decrease in the volume of the gas, there must be. When I say sand on which oil and gas is found in the earth is really sandstone. Sometimes it is a hard sandstone, and sometimes it is semi. It is more porous. And according to its pores, the oil and gas is apt to be collected in proportions. In the ordinary production of oil without a vacuum, the water pressure on the gravity tends to run the oil down the hole or at the bottom of the well, which is not its nature, slow form, very slow, then has to go trickling down. Sometimes you don't get as much as 50 per cent. of it. In some instances not recoverable at all, owing to many factors; among others, the difficulty of the oil moving through the rock by reason of the various obstructions. It has got to go through millions of little channels before it goes into the shot hole. * * * The common flow, the vacuum just gets — the vacuum converts a saturated gas, that is really a gasoline, that is separated in the formation that formerly the oil was, and it converts into a gas and an awful rich gas. It cannot take oil; it cannot take out the constituents of the oil; the vacuum cannot be going clear through the formation and take all the little elements of the oil on the surface of the...