United States v. Comet Oil & Gas Co.

• Decision Date: 30 January 1911
• Docket Number: 1,471.
• Parties: UNITED STATES v. COMET OIL & GAS CO. et al.
• Court: U.S. District Court — Eastern District of Oklahoma

187 F. 674

UNITED STATES v. COMET OIL & GAS CO. et al.

No. 1,471.

United States Circuit Court, E.D. Oklahoma.

January 30, 1911

J. C Denton, Asst. U.S. Atty.

James H. Huckleberry, for Comet Oil & Gas Co.

Butte &amp Boone, for Federal Union Surety Co.

CAMPBELL District Judge.

The United States brings this action against the Comet Oil & Gas Company and the Federal Union Surety Company, principal and surety, respectively, on a bond for the faithful performance on the part of the oil company of the terms of a certain oil lease entered into between George Wolf, a full-blood Creek Indian as lessor, and the said oil company as lessee, on April 18, 1907, with the approval of the Secretary of the Interior.

Section 19 of the Act of April 26, 1906 (chapter 1876, 34 Stat. 144) which restricts the alienation of the lands of full-blood Indians of the Five Civilized Tribes for the period of 25 years, contains this provision:

'Provided, however, that such full-blood Indians of any of said tribes may lease any lands other than homesteads for more than one year under such rules and regulations as may be prescribed by the Secretary of the Interior.'

Section 20 of the same act provides that such leases shall be in writing, and subject to the approval of the Secretary of the Interior, and shall be absolutely void and of no effect without such approval. Among the rules and regulations prescribed by the Secretary of the Interior, relative to such leases, are the following:

'An oil and gas lessee shall drill at least one well on each leasehold within twelve months from the date of the approval of bond, or may further delay operations by paying within twenty-five days after the end of the year $1 per acre per annum for each leasehold. Operations may be so delayed upon making the annual payments required for a period not exceeding five years from May 22, 1906, except where bonds are approved subsequent to that date, in which event the period of delay shall run from the date of the approval of the bond. A failure to drill within one year or to make the payment required within twenty-five days after the end of the year shall subject the lease to forfeiture without further notice to the lessee.'

'The Secretary of the Interior may at any time require any lessee immediately to develop a leased tract or offset wells on adjacent tracts should he determine that the interests of the lessor demand such action.'

'Lessees must drill at least one well upon land covered by each lease within twelve months from the date of the approval of the bond; failure to so drill subjects the lease to cancellation, except the time for drilling may be extended upon the payment of an annual rental. (See section 23.) Should the interests of the lessor so demand, the Department reserves the right to require any lessee to develop a leased tract immediately.'

The lease between Wolf and the oil company was executed upon a form prescribed and prepared by the Department of the Interior, and recites that it is entered into between said Wolf and the oil company under and in pursuance of sections 19 and 20 of the said act of April 26, 1906, and the regulations prescribed by the Secretary of the Interior thereunder; that the lessor, Wolf, for and in consideration of the royalties, covenants, stipulations, and conditions therein contained and agreed to be paid, observed, and performed by the oil company, does demise, grant, and let unto the oil company, for the term of 15 years from its date, all the oil deposits and natural gas in or under the property described, with the right to prospect for oil, and use so much of the surface as may be necessary therefor. Then follows a paragraph providing that the oil company shall pay or cause to be paid to the United States Indian Agent, at Union Agency, Ind. T., for the lessor, as royalty, the sum of 10 per cent. of the gross proceeds of the oil produced, and $150 per annum on each gas-producing well. Then follows this paragraph:

'And the party of the second part further agrees and binds itself, its heirs, successors, and assigns, to pay, or cause to be paid to the said agent, for lessor, as advanced annual royalty on this lease, the sums of money as follows, to wit: Fifteen cents per acre per annum, in advance, for the first and second years; thirty cents per acre per annum, in advance, for the third and fourth years, and seventy-five cents per acre per annum, in advance, for the fifth and each succeeding year thereafter of the term for which this lease is to run; it being understood and agreed that said sums of money so paid shall be a credit on the stipulated royalties; and further, that should the party of the second part neglect or refuse to pay such advanced royalty for the period of sixty days after the same becomes due and payable, the Secretary of the Interior, after ten days' notice to the parties, may declare this lease null and void, and all royalties paid in advance shall become the money and property of the lessor. * * * '

After providing for the payment of advance royalties as above, the lease then proceeds:

'The party of the second part further covenants and agrees to exercise diligence in the sinking of wells for oil and natural gas on the lands covered by this lease, and to drill at least one well thereon within twelve months from the date of the approval of the bond by the Secretary of the Interior, and should the party of the second part fail, neglect, or refuse to drill at least one well within the time stated, this lease may, in the discretion of the Secretary, be declared null and void, after ten days' notice to the parties; provided that the lessee shall have the privilege of delaying operations for a period not exceeding five years from the date of the approval of the bond to be furnished in connection herewith, by paying to the United States Indian Agent, Union Agency, Indian Territory, for the use and benefit of the lessor, in addition to the required annual advanced royalty, the sum of one dollar per acre per annum for each leased tract remaining undeveloped, but the lessee may be required to immediately develop the tracts leased, should the Secretary of the Interior determine that the interests of the lessor demand such action.'

It is further provided in the lease that:

'It is mutually understood and agreed that this indenture of lease shall in all respects be subject to the rules and regulations heretofore or that may hereafter be lawfully prescribed by the Secretary of the Interior, relative to oil and gas leases in the Creek Nation.'

It is further provided that if a lessee makes a reasonable and bona fide effort to find and produce oil in paying quantities, and such effort is unsuccessful, it may at any time thereafter, with the approval of the Secretary of the Interior, surrender and wholly terminate the lease, upon the payment and performance of all its then accrued and payable obligations hereunder. Then follows this provision with regard to the bond:

'It is further agreed and understood that the approval of this lease shall be of no force or effect unless the party of the second part furnishes, within sixty days from the date of approval of the application filed in connection herewith, a bond to the satisfaction of the Secretary of the Interior, in accordance with the regulations of July 7, 1906, prescribed by him, which shall be deposited and remain on file in the Indian office during the life of this lease.'

The bond upon which this suit is based is in the following terms:

'Know all men by these presents, that Comet Oil & Gas Company, of Muskogee, I.T., as principal, and Federal Union Surety Company, of Indianapolis, Indiana, as surety, are held and firmly bound unto the United States of America in the sum of two thousand ($2,000.00) dollars, lawful money of the United States, for the payment of which, well and truly to be made, we bind ourselves, and each of us, our heirs, successors, executors, or administrators, jointly and severally, firmly by these presents.

'Sealed with our seals and dated this 6th day of July, 1907.

'The condition of this obligation is such that whereas the above-bounden Comet Oil & Gas Company, as principal, entered into a certain indenture of lease, dated April 18, 1907, with George Wolf, of Council Hill, I.T., for the lease of a tract of land described as follows: the S.W. 1/4 of Sec. 32, Tp. 13 N., R. 15 E., containing 160 acres more or less, and located in the Creek Nation, Indian Territory, for oil and gas mining purposes for the period of five years from the date thereof and as much longer thereafter as oil or gas is found in paying quantities on said land:

'Now, if the above-bounden, Comet Oil & Gas Company, shall faithfully carry out and observe all the obligations assumed in said indenture of lease by it and shall observe all the laws of the United States, and regulations made, or which shall be made thereunder, for the government of trade and intercourse with Indian tribes, and all the rules and regulations that have been or may be, lawfully prescribed by the Secretary of the Interior, under sections 19 and 20 of the Act app. April 26, 1906, relative to leases executed by allottees of the Five Civilized Tribes, in Oklahoma, then this obligation shall be null and void; otherwise to remain in full force and effect.'

The plaintiff, the United States, alleges that the advance royalty of 30 cents per acre for the third year, amounting to $48, is due and unpaid, and that up to the 26th day of August, 1909, the lessee oil company had failed, neglected and refused to drill a well on the leased lands, by reason of which it became indebted to the lessor in the sum of $320 as annual rentals, being $1 per acre per annum, which the lease...