Case Title: Devon Corp. v. Miller

Citation: 280 S.E.2d 108

Docket Number: 

State: west-virginia

Court: West Virginia Supreme Court

Date: 1981-07-09T00:00:00Z

Document:
280 S.E.2d 108 (1981) DEVON CORPORATION, Eason Oil Company, and P & O Oil Corporation v. Walter N. MILLER, Director, West Virginia Department of Mines, Robert L. Dodd, Deputy Director, West Virginia Department of Mines, Oil and Gas Division, and Thomas E. Huzzey, Commissioner, West Virginia Oil and Gas Conservation Commission. No. 14488. Supreme Court of Appeals of West Virginia. July 9, 1981. Rehearing Denied October 8, 1981. *109 Bowles, McDavid, Graff & Love, Paul N. Bowles and Ricklin Brown, Charleston, for: P. E. Snyder & Segal and Benjamin N. Snyder, Clendenin, David B. McMahon, Charleston, Lorie Blackman Howley, Chloe, Tobias J. Hirshman, Charleston, amicus curiae: Oil and Gas Reform, Hallie Mae Johnson, Timothy P. Higgins. Chauncey H. Browning, Jr., Atty. Gen., Richard L. Earles and James F. Wallington, Asst. Attys. Gen., Charleston, for: D. E. McHUGH, Justice: This action is before this Court upon the petition of Devon Corporation, Eason Oil Company and P & O Oil Company (hereinafter "petitioners") for an appeal and supersedeas from a final order of the Circuit Court of Kanawha County, West Virginia, upon all stipulations, exhibits and other *110 matters of record, upon the briefs and argument of counsel and upon the brief on behalf of amici curiae. The petitioners seek review of a final order entered January 16, 1979, of the Circuit Court of Kanawha County by which the petitioners' application for a writ of mandamus was denied. This order further made a part of the record the December 21, 1978, letter memorandum of opinion of the circuit court. The petitioners are foreign corporations licensed to do business in West Virginia. They are engaged in the exploration, production and sale of oil and natural gas. During the period in question, the petitioners obtained a leasehold interest in a certain 96 acre tract of land located in Jackson County, West Virginia. On August 21, 1978, the petitioners, through Devon Corporation, applied to the Oil and Gas Conservation Commission of the West Virginia Department of Mines for a permit to drill a "deep well" upon the 96 acre tract.[1] However, by letters dated August 21, 1978, and September 1, 1978, the Commission denied the petitioners' permit application. The basis of this denial was the failure by the petitioners to obtain a written consent and easement for the drilling of a deep well from the surface owners of the tract as required by W.Va.Code, 22-4A-7(b)(4) and Rule 3.04 of the Operational Rules of the West Virginia Oil and Gas Conservation Commission. Consequently, on September 15, 1978, the petitioners filed in the Circuit Court of Kanawha County a petition for a writ of mandamus seeking to compel the respondents to grant the necessary permit to drill a deep well upon the 96 acre tract. As indicated above, it is from the final order of the circuit court denying relief to the petitioners that the petitioners appeal to this Court. In its final order, the Circuit Court of Kanawha County set forth the following findings of fact: As their petition filed in this Court states, the petitioners do not dispute the above findings of fact of the circuit court. W.Va.Code, 22-4A-7(b)(4) provides as follows: Furthermore, Rule 3.04 of the Operational Rules of the West Virginia Oil and Gas Conservation Commission provides in part as follows: "All applications submitted to deputy director for oil and gas for a permit to drill * * * any deep well * * * shall be reviewed by the commission [of the oil and gas conservation commission] or by an authorized agent to ascertain compliance with these rules and regulations." The Circuit Court of Kanawha County concluded that, without the written consent for the drilling of a well from the surface owners, the petitioners had not complied with the provisions of W.Va.Code, 22-4A-7(b)(4), and were thus not entitled to the permit. Specifically, the circuit court noted that W.Va.Code, 22-4A-7(b)(4) was enacted in 1972 and therefore, the statute was effective prior to the time in 1978 when the petitioners acquired the remaining undivided one-half interest in the oil and gas underlying the 96 acre tract. It was upon this basis that the circuit court held that the petitioners were subject to the surface owners consent requirement.[2] In their petition filed in this Court, the petitioners assert that the requirements imposed *112 by W.Va.Code, 22-4A-7(b)(4) and Rule 3.04 of the Operational Rules of the Oil and Gas Conservation Commission violate the United States and West Virginia Constitutions. Specifically, the petitioners assert that the statutory consent and easement to be acquired from the surface owners prior to drilling a deep well (1) impairs the obligation of a contract existing prior to the 1972 enactment of W.Va.Code, 22-4A-7, and (2) constitutes a taking of the property of the petitioners without due process of law.[3] Furthermore, the petitioners contend that the requirements of W.Va.Code, 22-4A-7(b)(4) and Rule 3.04, if constitutional, do not apply in this particular case. The circuit court in its decision relied upon Levy Leasing Co. v. Siegel, 258 U.S. 242, 42 S. Ct. 289, 66 L. Ed. 595 (1922), in which the Supreme Court of the United States upheld the constitutionality of certain emergency housing statutes of the State of New York. These statutes limited the power of landlords with respect to the eviction of tenants and the amount charged for rent. The Court concluded that under existing housing conditions the statutes were a reasonable exercise of the police power of the government. In its decision, the Court in Levy Leasing Co., noted that "... a lease made subsequent to the enactment of a statute can not be impaired by it." 258 U.S. at 249, 42 S. Ct. at 292. The Supreme Court of the United States in Levy Leasing Co. cited the case of Oshkosh Waterworks Co. v. Oshkosh, 187 U.S. 437, 23 S. Ct. 234, 47 L. Ed. 249 (1903), in which the Court held in Syl. pt. 2, in part, that "[t]he contract clause of the Constitution of the United States has reference only to a statute of a State enacted after the making of the contract whose obligation is alleged to have been impaired."[4] The Levy Leasing Co. case is consistent with the general rule that the obligation of a contract is measured by the standard of the laws in force at the time it was entered into, and the performance of the contract is to be regulated by the terms and rules which such laws prescribe.[5] This Court concludes contrary to the assertion of the petitioners, that the petitioners did not acquire the drilling rights in question in the 96 acre tract until 1978, subsequent to the effective date of W.Va. Code, 22-4A-7. Specifically, this Court has carefully reviewed the title as reflected in the record to the oil and gas rights underlying the 96 acre tract and is of the opinion that the Circuit Court of Kanawha County was correct in concluding that the petitioners acquired a one-half interest in the oil and gas prior to the enactment of W.Va. Code, 22-4A-7, and the remaining one half oil and gas interest subsequent to the enactment of W.Va.Code, 22-4A-7.[6] *113 In Freeman v. Egnor, 72 W.Va. 830, 834, 79 S.E. 824, 826 (1913), this Court stated that all cotenants must join in agreement before a lessee may enter upon and operate the premises for the production of oil and gas. Specifically, as this Court stated: 72 W.Va. at 834,[7] 79 S.E. 824. Although the petitioners may have acquired rights in the surface to the 96 acre *114 tract prior to the enactment of W.Va.Code, 22-4A-7(b)(4), the language of this section is specifically directed to drilling in that this section provides that without the written consent and easement of the surface owners "no drilling or operation of a deep well for the production of oil and gas shall be permitted." The petitioners do not argue that their surface rights acquired from Lottie Barnette through the Commonwealth Gas Corporation are equivalent to the consent requirements of W.Va.Code, 22-4A-7(b)(4). Nor did the petitioners acquire full rights in the oil and gas interests underlying the 96 acre tract until after the enactment of W.Va.Code, 22-4A-7(b)(4). This Court in Syl. pt. 3, Sizemore v. State Workmen's Compensation Commissioner, 219 S.E.2d 912 (W.Va.1975), and Syl. pt. 6, Lester v. State Workmen's Compensation Commissioner, 242 S.E.2d 443 (W.Va.1978), held as follows: Upon the facts presented to us, this Court concludes that W.Va.Code, 22-4A-7(b)(4), and Rule 3.04 of the Operational Rules of the West Virginia Oil and Gas Conservation Commission do not unconstitutionally impair the obligation of contract or constitute the taking of the petitioners' property without due process of law. Nor can this Court say that the surface owners' consent requirement does not apply in this case. The language of W.Va.Code, 22-4A-7(b)(4), is clear that "all owners of the surface" must consent in writing to the drilling or operation of a deep well for the production of oil or gas. This Court is of the opinion that "owners of the surface" means that a prospective driller, to satisfy the requirements of W.Va.Code, 22-4A-7(b)(4), must obtain the written consent and easement of all those who were surface owners at the time application to drill a deep well is made to the Oil and Gas Conservation Commission of the West Virginia Department of Mines and if such surface owners subsequently convey their surface interest to another prior to the time the actual drilling or operation of a deep well is commenced, no further written consent and easement pursuant to W.Va.Code, 22-4A-7(b)(4) shall be required. For these reasons the final order of the Circuit Court of Kanawha County is affirmed. Affirmed. [1] W.Va.Code, 22-4A-2(a)(13) provides that a deep well "... means any well drilled and completed in a formation at or below the top of the uppermost member of the `Onondaga Group' or at a depth of or greater than six thousand feet, whichever is shallower." [2] In its December 21, 1978, letter memorandum of opinion, the circuit court stated in part as follows: From the facts, which are stipulated, petitioners do not have the written consent as aforesaid. By various agreements and assignments they possess a lease hold interest in one-half the oil and gas in certain land in Jackson County, West Virginia.... The estate they possess was created and, therefore, existed before the effective date of the statute they challenge. They acquired the remaining one-half interest in the oil and gas to said land by a lease from the owners thereof after the effective date of the statute.... In Paxton v. Benedum-Trees Oil Co., 80 W.Va. 87, [sic] 94 S.E. 472 (1917), it was held that the owner of an undivided one-half interest in oil and gas cannot grant a valid lease in all of the oil and gas. A lease made after the enactment of a statute is not impaired by the statute. Edgar A. Levy Leasing Co. v. Siegel, 258 U.S. 242, 42 S. Ct. 289, 66 L. Ed. 595 (1921). [3] U.S.Const., Art. I, § 10, provides in part as follows: "No State shall ... pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility." W.Va.Const., Art. III, § 4, provides in part as follows: "No bill of attainder, ex post facto law, or law impairing the obligation of a contract, shall be passed." U.S.Const., Amend. XIV, provides in part as follows: "... nor shall any State deprive any person of life, liberty, or property, without due process of law...." W.Va.Const., Art. III, § 10, provides as follows: "No person shall be deprived of life, liberty, or property, without due process of law, and the judgment of his peers." See, also, W.Va.Const., Art. 3, § 1. [4] This Court cited Levy Leasing Co., supra, in State v. Flinn, 208 S.E.2d 538, 544 (W.Va.1974) and Brown v. Arnold, 125 W.Va. 824, 833, 26 S.E.2d 238, 242 (1943). [5] W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56, 60, 55 S. Ct. 555, 556, 79 L. Ed. 1298, 1301 (1935); Home Building & Loan Association v. Blaisdell, 290 U.S. 398, 429, 54 S. Ct. 231, 236, 78 L. Ed. 413, 424 (1934); Hendrickson v. Apperson, 245 U.S. 105, 112, 38 S. Ct. 44, 45, 62 L. Ed. 178, 184 (1917); Northwestern Mutual Life Insurance Co. v. McCue, 223 U.S. 234, 246, 32 S. Ct. 220, 222, 56 L. Ed. 419, 423 (1912); Trader v. Jester, 1 Terry 66, 76, 40 Del. 66, 76, 1 A.2d 609, 613 (1938); Morris v. Interstate Bond Co., 180 Ga. 689, 692, 180 S.E. 819, 821 (1935); Hubbard v. Hubbard, 264 S.W. 422, 423 (Mo. App.1924); Gagnon v. Butte, 75 Mont. 279, 289, 243 P. 1085, 1088 (1926); Clark v. Philadelphia, 328 Pa. 521, 528, 196 A. 384, 387 (1938); Bettman v. Cowley, 19 Wash. 207, 214, 53 P. 53, 56 (1898). [6] Lottie Barnette on October 9, 1968, leased to Commonwealth Gas Corporation her interest in the surface and an undivided one-half interest in the oil and gas of the 96 acre tract in Jackson County, West Virginia. This lease from Lottie Barnette to Commonwealth was a 10 year lease. As the learned trial judge indicated in his findings of fact, the petitioners were, by assignment, successors in title of Commonwealth in such lease. The remaining one-half interest in the oil and gas of the 96 acre tract has a separate history. This one-half interest was first obtained by J. A. Friese from John and Edna Kay by deed dated August 23, 1924. J. A. Friese and Belle Friese, his wife, by agreement dated June 26, 1963, leased this one-half interest to the Union Carbide Corporation. Five years later, J. A. and Belle Friese, by agreement dated July 30, 1968, leased the one-half interest to the Commonwealth Gas Corporation. J. A. and Belle Friese, by agreement dated July 30, 1973, again leased the one-half interest to the Commonwealth Gas Corporation. These leases by J. A. and Belle Friese in 1963, 1968 and 1973 were essentially five year leases. As the July 30, 1973, lease to Commonwealth states: "It is agreed that this lease shall remain in force for the term of five years from this date and as long thereafter as the Lessee is engaged in the production of or search for oil and gas, or either of them, on the leased premises." Before the Circuit Court of Kanawha County, the parties stipulated "[t]hat in June of 1973 Devon Corporation and its successors acquired from Commonwealth Gas Corporation by various agreements and assignments the working interest in the 96-acre Barnette-Friese Tract." However, with respect to the one-half interest in oil and gas underlying the 96 acre tract derived from J. A. Friese, the record indicates that the interest of the petitioners must have terminated in 1978 (approximately five years subsequent to the 1973 lease) inasmuch as on August 2, 1978, the petitioners again acquired a lease of the one-half interest from the devisees of J. A. Friese. [7] Donley, The Law of Coal, Oil and Gas in West Virginia and Virginia § 48 (Michie, 1951) states as follows: While a cotenant may not lease for oil and gas purposes the interests of his cotenants, he may lease his own interest. If a cotenant takes exclusive possession of the land and leases it for oil purposes on a royalty basis the excluded cotenant may permit the lessee to continue operations and require an accounting of his proportionate share of the royalties. And, a cotenant of coal lands is not bound by a lease made by the other cotenants, which he did not sign, where reduction to writing and signature was a condition precedent to the existence of such lease. For this proposition Professor Donley cites the following cases: Blair v. Dickinson, 133 W.Va. 38, 54 S.E.2d 828 (1949); Paxton v. Benedum-Trees Oil Co., 80 W.Va. 187, 94 S.E. 472 (1917); and Freeman v. Egnor, supra.