Pioneer Natural Resources Usa v. W.L. Ranch
| Decision Date | 12 February 2004 |
| Docket Number | No. 13-00-617-CV.,13-00-617-CV. |
| Citation | 127 S.W.3d 900 |
| Parties | PIONEER NATURAL RESOURCES USA, INC., f/k/a Parker & Parsley Petroleum USA, Inc., Parker & Parsley Development, L.P., Appellants, v. W.L. RANCH, INC. and Carl Flentge, Appellees. |
| Court | Texas Court of Appeals |
C. Kelvin Adams, Beirne, Maynard & Parsons, Houston, Lewis Titus Leclair, Attorney At Law, Dallas, Marc L. Skeen, Irving, W. Stephen Rodgers, Rodgers, Miller & McLain, P.C., Bryan, W.M. Wilson Jr., McKool Smith, P.C., Dallas, for Appellants.
Donald G. Jones, John J. McKetta III, Erin A. Connors, Graves, Dougherty, Hearon & Moody, Austin, and Scott Williams, Attorney At Law, Houston, for Appellees.
Before Justices HINOJOSA, DORSEY1 and MAURICE AMIDEI.2
W.L. Ranch, Inc. filed suit against Pioneer Natural Resources USA, Inc., f/k/a Parker & Parsley Petroleum USA, Inc., Parker & Parsley Development, L.P. and Parsley Petroleum Co. (Pioneer), for trespass, negligence, common law fraud, and statutory fraud3 regarding a horizontal well drilled pursuant to an oil and gas lease. Pioneer appeals from a judgment favoring W.L. Ranch, Inc. which resulted from a partial summary judgment, a jury trial, and a bench trial.
Appellant presents seven issues claiming the drilling of the well did not constitute trespass because unitization kept the oil and gas lease between the parties in force and effect at all times during the drilling of the well. Appellant further argues that there is no evidence of negligence, fraud or damages to appellee. We reverse and render.
Appellant was the lessee under an oil and gas lease covering 103.75 acres of appellee's land in Burleson County, Texas. The lease provided a "primary term" of one year from August 20, 1993, and as long thereafter as "operations" were conducted upon "said land," i.e., the 103.75 acres described in the lease. The lease authorized pooling or unitization with other lands upon which "operations" could be conducted to extend the primary term in the absence of operations on appellee's land.
On June 28, 1994, appellee executed an amendment to the lease increasing the maximum size of a production unit from 320 to 380 acres. Prior to August 20, 1994, appellee's 103.75 acres was assigned to the Newberry HU No.1 production unit. Appellant pooled appellee's 103.75 acres with 274.97 acres from three other tracts to form a 378.72 acre production unit also known as the "Newberry Unit."
Pursuant to a permit appellant obtained from the Texas Railroad Commission to drill a horizontal well on the "Newberry Unit," appellant spudded in or commenced drilling on the Newberry tract of the "Newberry Unit" on August 11, 1994. The well was drilled horizontally under appellee's land 1,150 feet in the Buda formation, and 1,150 feet in the Austin Chalk formation, although the well bore did not penetrate appellee's land until after August 20, 1994. The well was completed and placed into production on October 18, 1994. The well was plugged on January 16, 1999, because the production from the well was not sufficient to repay appellant's drilling expenses. The production revenues were $644,893, whereas appellant's drilling expenses were $1,677,700 and its production expenses were $221,213. Appellee received $43,163 royalties from the well production.
Appellant and appellee filed motions for summary judgment regarding whether the lease terminated because appellee commenced operations on the Newberry tract instead of appellee's tract, and the well bore did not penetrate appellee's land until after the end of the primary term of the lease, i.e., August 20, 1994. The trial court entered a partial summary judgment holding that the lease terminated.
Thereafter, appellee's claims were submitted to the jury, which upheld all of appellee's claims and denied appellant's defenses. Then a bench trial was held as to attorney's fees, expert witness fees, and costs of copies of depositions. The trial court awarded appellee $264,000 in attorney's fees, $88,668 prejudgment interest, and $39,675 for expert witness fees and costs for copies of depositions.
We review the trial court's granting of a motion for summary judgment de novo. Acceptance Ins. Co. v. Lifecare Corp., 89 S.W.3d 773, 777 (Tex.App.-Corpus Christi 2002, no pet.). In a traditional motion for summary judgment, the movant has the burden of showing, with competent proof, that no genuine issue of material fact exists, and that it is entitled to judgment as a matter of law. Tex.R. Civ. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex.1985). If the movant's motion and summary judgment proof facially establish its right to judgment as a matter of law, the burden shifts to the non-movant to raise a material fact issue sufficient to defeat summary judgment. HBO v. Harrison, 983 S.W.2d 31, 35 (Tex.App.-Houston [14th Dist.] 1998, no pet.).
When a trial court grants a summary judgment, the losing party appeals, and an appellate court finds reversible error in the judgment, the appellate court's normal action is to reverse the trial court's judgment and remand the cause to the trial court. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex.1988). An exception may occur when both parties moved for judgment and one such motion was granted, but the other denied. Id. Then the appellate court should determine all questions presented, and may reverse the trial court judgment and render such judgment as the trial court should have rendered, including rendering judgment for the other movant. Id.
An oil and gas lease is construed in accordance with the rules of construction applicable to contracts, and the primary rule is to ascertain the true intention of the parties. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex.1997). The court will not strike down any portion of the contract unless there is an irreconcilable conflict. Ogden v. Dickinson, 662 S.W.2d 330, 332 (Tex.1984).
Appellant's first issue claims the trial court erred in denying appellant's motion for partial summary judgment and in granting appellee's motion for summary judgment, thereby finding that the oil and gas lease in question was not kept in force after August 20, 1994. In its motion for summary judgment, appellee argued that the oil and gas lease terminated when the well bore did not penetrate appellee's land until after August 20, 1994, and therefore appellant committed trespass to appellee's property. The trial court granted appellee's motion and held the lease was not kept in force after August 20, 1994, by the drilling operations commenced by appellant on the Newberry tract.
Appellee argues the primary term4 of the lease was not extended by the pooling provisions of the lease.5 According to appellee, the addendum which provides for termination at the expiration of the primary term, or any time thereafter if oil or gas is not being produced in paying quantities from the lease premises, or the lessee is not then engaged in the actual drilling operations on the lease premises,6 conflicts with lease provisions as to pooling, and controls by virtue of another addendum provision making the addendum controlling to the extent of the conflict.7 Specifically, appellee claims the language in the first sentence of paragraph 17 of the addendum conflicts with paragraph 4 of the lease and overrides the pooling provisions because it only allows production or actual drilling on appellee's 103.75 acres to maintain the lease beyond the primary term.
When the provisions of a contract appear to conflict, they should be harmonized if possible to reflect the intentions of the parties. Ogden, 662 S.W.2d at 332. Generally, the parties to a contract intend every clause to have some effect and the Court will not strike down any portion of the contract unless there is an irreconcilable conflict. Id.
If the second sentence of paragraph 17 is read with its first sentence it is clear that the parties did not intend to eliminate pooling from the lease. The second sentence includes production from any well pooled with or drilled on the 103.75 acres which will extend the primary term of the lease. (emphasis supplied). Appellee does not mention the second sentence in its argument. Appellee claims that paragraphs 2 and 4 conflict because paragraph 2 limits the term extending operations to "said land" or the appellee's 103.75 acres, whereas paragraph 4 includes operations on any part of any land unitized with the 103.75 acres. Considering all of the provisions of the lease and the addendum, no language expressly prohibits or limits pooling.
One of the legal consequences of a unitized lease as between the lessor and the lessee, in the absence of express agreement to the contrary, the life of the lease is extended as to all included tracts beyond the primary term and for as long as oil, gas or other minerals are produced from any one of the tracts included in the lease, with each lessor relinquishing his right to have his own tract separately developed. Southland Royalty Co. v. Humble Oil & Ref. Co., 151 Tex. 324, 249 S.W.2d 914, 916 (1952) (emphasis added). In short, the parties, by the execution of a unitized lease, agree that production of oil or gas from wells located on any tract included in the lease will be regarded during the life of the lease as production from each and all other tracts included therein. Id. In the instant case, the appellant and appellee agreed to a unitized lease without an express agreement that the lease could not be extended by commencement of operation or production on land other than appellee's. Even if there were a conflict as contended by appellee, it is not an irreconcilable conflict, and it is reasonable to conclude the parties intended to agree to the pooling or unitization which was effected by appellant.
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