Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-02675/USCOURTS-ca10-87-02675-0/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

87-2675 

CELSIUS ENERGY COMPANY, ) 

a Nevada corporation, ) 

JOSEPH K. MORFORD II, a ) 

California resident, ) 

PAUL M. SHAVER and JACK L. ) 

STANFORD, Okla.tmma residents, ) 

Plaintiffs-Appellants, 

v. 

MID AMERICA PETROLEUM, INC., 

a Colorado corporation, 

MAP 1981-3 DRILLING 

PARTNERSHIP, a Texas Limited 

Partnership, MAP 1982-3 

DRILLING PARTNERSHIP, a 

Texas Limited Partnership, 

MAP 1983-1 DRILLING 

PARTNERSHIP, a Texas Limited 

Partnership, MAP 1983-2 

DRILLING PARTNERSHIP, a Texas 

Limited Partnership, MAP 

1983-3 DRILLING PARTNERSHIP, 

a Texas Limited Partnership, 

KNOX INDUSTRIES, INC., a 

Texas corporation, CARODYNE 

ENERGY 1981 B LTD., a Texas 

Limited Partnership, 

CARODYNE ENERGY 1982 B LTD., 

a Texas Limited Partnership, 

DYNASTY 1981-1 LTD., a Texas 

Limited Partnership, DYNASTY 

OIL CORPORATION, a Delaware 

corporation, KAZTEX JOINT 

VENTURE, a division of Kaztex 

Financial Inc., a Wisconsin 

corporation, TED WOODS, JESS 

EDWARDS, GORDON KNOX and 

R. CHARLES NORTHINGTON, 

Texas residents, 

Defendants-Appellees. 

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FILED 

Uniced Scates Court of Appeals 

Tenth Cir::ui~ 

JAN 31 1990 

ROBERT L. HOECKFR 

Clerk 

On Appeal From The 

United States District Court 

For The Western District 

Of Oklahoma 

(D.C. Civil No. 85-1919-R) 

Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 1 
Submitted on the briefs: 

Robert J. Emery, Oklahoma City, Oklahoma, for PlaintiffsAppellants. 

Andrew J. Moore, Oklahoma City, Oklahoma, for DefendantsAppellees. 

Before ANDERSON, SETH and BRORBY, Circuit Judges. 

SETH, Circuit Judge. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); Tenth Cir. R. 34.1.9. The cause is therefore ordered 

submitted without oral argument. 

This is a diversity action in which the appellants, Celsius, 

et al., seek to cancel oil and gas leases of appellees, 

Mid America Petroleum, et al., located in Alfalfa County, 

Oklahoma. The trial court denied summary judgment for the 

plaintiffs and granted judgment for defendants. The case was 

presented on stipulated facts. 

On appeal the issue is whether the trial court erred in 

finding that the appellees' declaration of pooling was authorized 

under pooling clauses contained in the oil and gas leases to 

thereby extend the leases. We affirm the trial court and hold 

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Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 2 
that the appellees' exercise of the pooling power was authorized, 

effective, and did extend the primary terms of the oil and gas 

leases in question. 

We review an order granting summary judgment under the same 

standard employed by the trial court under Rule 56(c) of the 

Federal Rules of Civil Procedure. Osgood v. State Farm Mut. Auto. 

Ins. Co., 848 F.2d 141, 143 (lOth Cir.). Summary judgment should 

be affirmed if the record before the court shows that there is no 

genuine issue of material fact and that the moving party is 

entitled to a judgment as a matter of law. Celotex Corp. v. 

Catrett, 477 u.s. 317. 

As mentioned, the parties stipulated to all the underlying 

facts giving rise to this action. On February 26, 1981, the 

appellants' predecessor in interest executed two oil and gas 

leases with appellee, Mid America Petroleum, Inc., for a primary 

term of three years. The leases covered an 80-acre tract 

comprising of the South half of the Southeast quarter of Section 

22, Township 28 North, Range 9 West, Alfalfa County, Oklahoma (the 

subject premises). Subsequently, the appellants were assigned the 

lessor's interest in the lease. Mid America Petroleum, Inc., as 

lessee, assigned its entire working interest in the lease to the 

appellees. MAP 1981-2 Drilling Partnership acquired a 62.5% 

interest in the total leasehold and later assigned this interest 

to MAP 1981-3 Drilling Partnership. 

On February 24, 1984, the original assignees executed and 

filed the declaration of pooling here in issue in which MAP 1981-3 

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Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 3 
Drilling Partnership was not a party. The declaration thus pooled 

a part interest of the subject premises with leases on an 

adjoining tract on which production had been effected. No 

production had been obtained on the subject premises. The 

declaration of pooling resulted in a pooling of 37.5% of the total 

mineral leasehold estate in the subject premises with the outside 

acreage. 

The appellees contend that the pooling was authorized and 

thus, the production on the adjoining tract is attributable to the 

subject premises and operates to extend their leases beyond the 

primary terms. Appellants dispute this urging that the pooling 

was unauthorized and invalid when filed. Therefore, since no 

production was attributable to the subject premises before the 

primary terms of lessees' lease expired, appellees' leases should 

be canceled and title should be quieted in appellants' favor. 

The appellants urge that in determining whether a lease 

grants pooling authority, we should consider the lessor's interest 

in developing the mineral estate and whether there is a valid 

legal or scientific reason for pooling. The appellants assert 

that the pooling had the effect of diluting the lessor's interest. 

Thus the appellants' position is that, when so examined, the 

pooling was not in their interests, the declaration of pooling was 

unauthorized and was invalid. 

Effective March 26, 1984, the Oklahoma Corporation Commission 

in response to an application by Mid America filed February 24, 

1984, established a 160-acre spacing for a common source of supply 

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Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 4 
of gas under Section 22 and held that one well would efficiently 

drain 160 acres. The parties had stipulated that "good faith" was 

not an issue since the pooling was done in good faith. So, with a 

geological basis for the pooling shown to exist, and no good faith 

issue, there remains only a consideration of the bare language of 

the pooling clause. 

Whether the pooling was authorized is determined by the 

provisions of the lease as a whole and, of course, by the pooling 

clause. Heath v. Fellows, 526 F. Supp. 723, 725 (W.D. Okla.} 

(citing 5 Summers, Oil and Gas§ 967 at 104-105 (1966}; 4 Williams 

& Meyer, Oil and Gas Law§ 668 at 1 (1981}}. The language governs 

if it is clear and explicit, and does not involve an absurdity. 

Okla. Stat. tit. 15, § 154 (1966}; Martens v. Kaiser-Francis Oil 

Co., 768 P.2d 383, 385 (Okla. App.}. 

The pooling clause in the appellees' oil and gas leases 

states as follows: 

"Lessee is hereby granted the right at 

any time and from time to time to unitize 

the leased premises or any portion or 

portions thereof, ... with any other 

lands .. ~ for the production primarily 

of oil or primarily of gas with or 

without distillate." 

We agree with the trial court that the language of the 

pooling clause grants the appellees broad authority to unitize the 

leased premises with "any other lands." This language is 

effective to grant the lessee power to unitize the tracts in 

question. Moreover, there is nothing in the clause which 

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Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 5 
restricts the lessees' power to unitize with less than 100% of the 

leasehold interest. 

In these circumstances where the good faith of the action and 

a geological basis has been established, we find no authority to 

support the appellants' argument that we must look beyond the 

language of the lease to the lessors' interests to determine 

whether the lessees' pooling power was authorized. Under Oklahoma 

law, although the lessor's interests and whether the lessee's 

pooling has resulted in a fair apportionment are relevant 

inquiries with respect to the ''good faith" requirement, Boone v. 

Kerr-McGee Oil Industries, 217 F.2d 63 (lOth Cir.), there is no 

indication that these are relevant factors with respect to 

authorization under the lease terms. See Douglass, Powers and 

Problems of Lessee Pooling, 34 Oil and Gas Institute 238-247 

(1983). The requirement that the lessee's pooling power be 

exercised with good faith and due regard for the lessor's 

interests was imposed precisely to limit the lessee's broad 

pooling authority under pooling clauses similar to the one in this 

case. See Amoco Production Co. v. Jacobs, 746 F.2d 1394, 1397-

1402 (lOth Cir.); Hoffman, Pooling and Unitization: Current 

Status and Developments, 33 Oil & Gas Institute 250-53 (1982). 

See also, Heath, 526 F. Supp. at 725-26. 

The cases and authority which appellants urge as supportive 

of their position are inapposite. The court in Amoco Production 

Co. v. Underwood, 558 S.W.2d 509 (Tex. Civ. App.), disallowed 

partial pooling as appellants contend; however, the court's 

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Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 6 
reasoning turned on the "good faith" requirement. The Amoco court 

upheld a jury's finding of bad faith because the geology did not 

fit the configuration of the pooling unit formed. Similarly, the 

question of whether a lessee should consider scientific data in 

the exercise of its pooling power is relevant with respect to the 

good faith inquiry. Douglass, Powers and Problems of Lessee 

Pooling, 34 Oil and Gas Institute 245-47 (1983); Diggs v. Cities 

Service Oil Co., 241 F.2d 425 (lOth Cir.) (construing Oklahoma 

law). 

The appellants' argument that the declaration of pooling is 

unauthorized because it was signed by 37.5% of the working 

interests is without merit. In Heath the lessor alleged that to 

have a voluntary unitization, 100% of the interests in the 

property must agree to the unitization. The court stated that 

Oklahoma law on this issue was best expressed in 5 Summers, Oil 

and Gas§ 967 at 104-105 (1966), where the authors stated: 

"Is pooling permitted when the pooling 

parties control less than the total 

interest in the pooled unit involved and, 

therefore, cannot create a unit in which 

all interests are pooled? 

"Insofar as these problems are 

specifically covered by the pooling 

clause itself, the agreement controls. 

"Cases dealing within [sic] this problem 

are few. The better view would seem to 

be that, absent negative language in the 

clause, any pooling combination is 

permissible, subject only to the test of 

good faith." (Emphasis omitted.) 

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Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 7 
Heath v. Fellows, 526 F. Supp. at 725-26. We find Heath 

persuasive authority that the lessees' pooling of a 37.5% 

interest, although subject to the test of good faith, is 

authorized under the broad authority of the pooling clause. 

Appellants have presented no affidavits or other evidence to 

controvert the language of the lease. We cannot write a contract 

for the parties. 

The trial court correctly entered summary judgment in favor 

of appellees. Given the broad language of the pooling clause, in 

the absence of specific limitations on the lessees' pooling power, 

the trial court did not err in finding that the lessees' 

declaration of pooling was authorized. 

AFFIRMED. 

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Appellate Case: 87-2675 Document: 01019297236 Date Filed: 01/31/1990 Page: 8