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Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

SAM H. BENNION, 

Plaintiff-Appellant, 

v. 

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OTEX OIL COMPANY, a Utah corporation, ) 

Defendant, 

and 

SHELL WESTERN E & P, INC., a Delaware corporation; SHELL OIL co., a 

Delaware corporation, 

Defendants-Appellees. 

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FILED 

United States Court of Appeals 

Tenth cirnuit 

JUNO 8 1990 

ROBERT L. HOECKER 

Clerk 

No. 87-2206 

Appeal from the United States District Court 

for the District of Utah 

(D.C. No. 86-C-173-J) 

Scott C. Pierce (Peter Stirba with him on the briefs) of McKay, 

Burton & Thurman, Salt Lake City, Utah, for Plaintiff-Appellant. 

David M. Swope (Duane D. Guy also of Shell Oil Company, Houston, 

Texas, and H. Michael Keller of Van Cott, Bagley, Cornwall & 

McCarthy, Salt Lake City, Utah, with him on the brief) for 

Defendants-Appellees. 

Before LOGAN and EBEL, Circuit Judges, and WEST, District Judge.* 

LOGAN, Circuit Judge. 

* The Honorable Lee R. West, United States District Judge for the 

Western District of Oklahoma, sitting by designation. 

Appellate Case: 87-2206 Document: 01019857902 Date Filed: 06/08/1990 Page: 1 
Plaintiff Sam H. Bennion, a nonconsenting mineral owner under 

the Utah Oil and Gas Conservation Act, Utah Code Ann. §§ 40-6-1 to 

40-6-18, brought this diversity suit seeking to compel defendants 

Shell Western E & P, Inc. and Shell Oil Company (collectively 

"Shell") to pay him his share of the production proceeds from oil 

and gas wells in which he had an interest. Plaintiff also sought 

punitive damages for Shell's alleged willful and malicious failure 

to pay his proportionate share of production. The district court 

held that plaintiff was not entitled to punitive damages as a 

matter of law and excluded all evidence on the issue. Plaintiff 

appeals this ruling. 1 We affirm. 

Plaintiff has mineral interests in several oil and gas wells 

in Duchesne County, Utah, which are now under a forced pooling 

order. Shell was the operator of one of these wells and processed 

the oil and gas from the other wells under an agreement with the 

operator to pay plaintiff his share of the proceeds. Plaintiff 

never entered a lease, operating agreement, division order, gas 

processing contract, or any other agreement with respect to the 

operation of any of the wells. His right to production from the 

wells, therefore, is governed by the "nonconsenting owner" 

provisions of Utah Code Ann. § 40-6-6(6) to -6(8). 

One of the wells at issue was the subject of an order of the 

Utah Board of Oil, Gas and Mining (Board) which gave plaintiff a 

full accounting of his share of production as of July 26, 1979, 

1 Before trial, the parties settled on all disputed amounts, 

except certain operating expenses which Shell sought to charge to 

plaintiff. The jury rendered a verdict for Shell on this issue, 

and plaintiff has not appealed anything other than the punitive 

damages issue. 

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Appellate Case: 87-2206 Document: 01019857902 Date Filed: 06/08/1990 Page: 2 
and gave him a right to receive his share in kind thereafter. The 

Utah Supreme Court affirmed that order in Bennion v. Utah State 

Bd. of Oil, Gas & Mining, 675 P,2d 1135 (Utah 1983). Thereafter, 

plaintiff received his in kind share until October 15, 1981, but 

he stopped paying his proportionate share of operating expenses 

for the well on February 29, 1980, and he received no other 

production or proceeds from that well. Shell held plaintiff's 

share of the proceeds from the other wells pending receipt from 

plaintiff of a signed division order. These withholdings give 

rise to plaintiff's claim to punitive damages. 

Shell contends that failure to pay a nonconsenting owner his 

proportionate share of production is akin to breach of a contract, 

and the settled rule in Utah is that breach of a contract, even if 

willful and malicious, will not support punitive 

the breach also constitutes an independent tort. 

John Clay & Co., 660 P.2d 229, 232-33 (Utah 1983). 

damages unless 

See Jorgensen v. 

Plaintiff, on 

the other hand, argues that the rights of a nonconsenting owner 

are more in the nature of property rights, and willful and 

malicious failure to pay that owner's share constitutes the tort 

of conversion, which will support punitive damages. 

In reality, the rights of a nonconsenting owner are sui 

generis. See generally Kramer, Compulsory Pooling and 

Unitization: State Options in Dealing with Uncooperative Owners, 

7 J. Energy L. & Pol'y 255 (1986). The expressed purpose of the 

Utah Oil and Gas Conservation Act was to displace the common law 

capture rule, which allowed each owner to remove oil and gas 

without regard to the effect on a common source of supply 

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Appellate Case: 87-2206 Document: 01019857902 Date Filed: 06/08/1990 Page: 3 
underlying surrounding tracts, and replace it with a more 

cooperative and less wasteful system of production. Utah Code 

Ann. § 40-6-1; see generally Bennion, 675 P.2d at 1137; Dragoo & 

Storey, Utah's Oil & Gas Conservation Act of 1983, 5 J. Energy L. 

& Pol'y 49, 52-53 (1983); Note, Bennion v. Utah State Board of 

Oil, Gas & Mining: Interpreting the Pooling Provisions of Utah's 

Oil and Gas Conservation Act, 6 J. Energy L. & Pol'y 219, 219-20 

(1985). 

The rights of all owners, and especially nonconsenting 

owners, are defined largely by statute, but the statute does not 

set forth all of the remedies available to a nonconsenting owner. 

See Utah Code Ann. § 40-6-11(7); Bennion, 675 P.2d at 1143-44 

(Board can add prejudgment interest to its payment orders). One 

commentator believes that common law punitive damages for 

nonpayment shoμld be available to a nonconsenting owner in an 

appropriate case. See Naumann, The Utah Law of Oil and Gas, 7 J. 

Energy L. & Pol'y 191, 226 & n.205 (1986). Nevertheless, we 

believe the Utah Supreme Court would not approve punitive damages 

in this context, absent express legislative approval. Forced to 

choose between an analogy to tort or contract, we think the Utah 

Court would analogize to the contract model in part because, in 

the interest of conservation, the nonconsenting landowner must 

participate essentially as if he had consented to and fully 

participated in the drilling operation. See Utah Code Ann. § 40-

6-6(8). Additionally, the statutory scheme contemplates that most 

controversies are to be resolved by the Board, which has the power 

to order payments between the parties. See Bennion, 675 P.2d at 

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Appellate Case: 87-2206 Document: 01019857902 Date Filed: 06/08/1990 Page: 4 
1140-41. We note that since 1983 the Board has the power to 

assess "a penalty of up to 25% of the proceeds and interest at the 

rate of 11⁄2% per month," presumably payable to the owner, "upon 

finding that the delay in payment of proceeds was known and 

intentional." Utah Code Ann. § 40-6-9(7). Although this penalty 

provision was not in effect throughout the period covered by the 

current controversy, we believe the Utah Supreme Court would treat 

it as exclusive in a situation like that before us. 

AFFIRMED. 

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Appellate Case: 87-2206 Document: 01019857902 Date Filed: 06/08/1990 Page: 5