Source: https://law.justia.com/cases/federal/appellate-courts/F2/218/926/60934/
Timestamp: 2020-01-23 17:16:19
Document Index: 584181219

Matched Legal Cases: ['§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 17', '§ 389', '§ 390', '§ 3', '§ 396', '§ 396', 'arts 186']

Phillips Petroleum Company, Appellant, v. Heber A. Peterson and Astrid N. D. Peterson, Appellees.phillips Petroleum Company, Appellant, v. John H. Haslem and Rebecca H. Haslem, Appellees, 218 F.2d 926 (10th Cir. 1954) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Tenth Circuit › 1954 › Phillips Petroleum Company, Appellant, v. Heber A. Peterson and Astrid N. D. Peterson, Appellees.phi...
Phillips Petroleum Company, Appellant, v. Heber A. Peterson and Astrid N. D. Peterson, Appellees.phillips Petroleum Company, Appellant, v. John H. Haslem and Rebecca H. Haslem, Appellees, 218 F.2d 926 (10th Cir. 1954)
U.S. Court of Appeals for the Tenth Circuit - 218 F.2d 926 (10th Cir. 1954) December 21, 1954
COPYRIGHT MATERIAL OMITTED George L. Sneed, Bartlesville, Okl. (R. L. Foster, H. D. Turner, James G. Williams, Jr., Bartlesville, Okl., Clair M. Senior and Hugh C. Garver, Salt Lake City, Utah, on the brief), for appellant.
H. M. Gullickson, Billings, Mont., A. T. Smith, Denver, Colo., Macdonald & Halsted and Alexander Macdonald, Los Angeles, Cal., Harry D. Page, Hawley C. Kerr, Tulsa, Okl., Frank F. Jestrab, Bjella & Jestrab, Williston, N. D., Jack M. Campbell, Roswell, N. M., and Oliver Seth, Santa Fe, N. M., amici curiæ.
"12. Lessee shall have the right to unitize, pool, or combine all or any part of the above described lands with other lands in the same general area by entering into a cooperative or unit plan of development or operation approved by any governmental authority and, from time to time, with like approval, to modify, change or terminate any such plan or agreement and, in such event, the terms, conditions, and provisions of this lease shall be deemed modified to conform to the terms, conditions, and provisions of such approved cooperative or unit plan of development or operation and, particularly, all drilling and development requirements of this lease, express or implied, shall be satisfied by compliance with the drilling and development requirements of such plan or agreement, and this lease shall not terminate or expire during the life of such plan or agreement. In the event that said above described lands or any part thereof, shall hereafter be operated under any such cooperative or unit plan of development or operation whereby the production therefrom is allocated to different portions of the land covered by said plan, then the production allocated to any particular tract of land shall, for the purpose of computing the royalties to be paid hereunder to lessor, be regarded as having been produced from the particular tract of land to which it is allocated and not to any other tract of land; and the royalty payments to be made hereunder to lessor shall be based upon production only as so allocated. Lessor shall formally express lessor's consent to any cooperative or unit plan of development or operation adopted by lessee and approved by any governmental agency by executing the same upon request of lessee."
In the fall of 1945 lease men of Phillips Petroleum Company1 went into the community of Roosevelt, Utah, for the purpose of obtaining a block of leases. A meeting was held at Leeton, Utah, at which the leading landowners of the community were present. It lasted from 7:30 p.m. until about midnight. Phillips' representatives passed out copies of the lease form.2 It was read to the landowners section by section. Section 12, the unitization clause, was specifically explained and discussed. The landowners took the lease form home for study and one landowner consulted with an attorney with respect thereto. The lease form provided for a primary term of 10 years. The landowners asked for a 5-year term. It was finally agreed that the primary term should be 7 years and that there should be an express covenant for seismographic work on the block within 1 year. On the day following the meeting, Phillips' representatives contacted the landowners and secured the signed leases.
The Carter Oil Company3 early in 1949 submitted an application to the United States Geological Survey for the designation of a unit which embraced part of what is now known as the Roosevelt Unit Area. Carter was advised by the Geological Survey that its application was rejected until certain lands, which included those involved in this action, were included in the area and certain other lands were excluded therefrom. Phillips pooled its geological and geophysical information with that of Stanolind Oil and Gas Company and that of Carter. Thereafter, on July 20, 1950, Carter submitted a new application to the Geological Survey, incorporating the suggested changes, and on August 17, 1950, the Geological Survey approved such application by designating the unit as the Roosevelt Unit Area. All of Phillips' lessors were notified in writing that the Roosevelt Unit Area had been designated and that preliminary approval of the Roosevelt Unit Agreement had been obtained and were requested to formally express their approval of the Unit Agreement by executing a written consent. A great majority of the lessors who had executed leases to Phillips and whose lands lay within the Roosevelt Unit Area executed a consent to the Unit Agreement. The Unit contains state public lands and Indian lands. The State Land Board of Utah, pursuant to Title 86-1-48.25, Utah Code Ann.1943, as amended, U.C.A.1953, 65-1-63,4 approved the Roosevelt Unit Agreement. On May 1, 1951, Phillips, pursuant to § 12 of the leases, executed a consent and commitment. Subsequently, on October 30, 1951, pursuant to authority delegated to him by the Secretary of the Interior, Evan L. Flory, Acting Assistant Commissioner of Indian Affairs, approved the Roosevelt Unit Agreement.
The trial court found that the Phillips lease and § 12 were uncertain in that they failed "to reveal":
"(a) What is meant by `in the same general area.'
"(b) What cooperative or unit plan of development or operation may be entered into.
"(c) What the terms of such cooperative or unit plan will be.
"(d) What governmental authority is required to approve such cooperative or unit plan.
"(e) From what viewpoint such approval shall be given or withheld.
"(f) What the terms, conditions and provisions of the lease, as modified by the cooperative or unit plan, will be.
"(g) What drilling and development requirements, if any, such cooperative or unit plan will contain.
"(h) What the term of the lease, as extended by the term of the cooperative or unit plan, will be.
"(i) What the lessors' royalty will be in the event of commitment to a cooperative or unit plan."
"9. Said lease is an integrated instrument. There were no extrinsic agreements nor understandings between the lessors and the lessee in said lease as to any meaning to be attached to any of the terms used in said paragraph 12. There were no extrinsic agreements nor understandings between the lessors and the lessee in said lease as to any method or means for resolving any of the uncertainties set forth above in Finding No. 8.
"10. At no time was there in existence any usage or custom with reference to which the lessors and lessee in said lease contracted, which would explain the meaning of any terms used in paragraph 12 or which would resolve any of the uncertainties set forth in Finding No. 8.
"11. At no time was there in existence any usage or custom of which any of the lessors in said lease had knowledge, or of which any of said lessors could be charged with knowledge, which would explain the meaning of any terms used in said paragraph 12 or which would resolve any of the uncertainties set forth in Finding No. 8."
The trial court concluded that the approvals by the Assistant Commissioner of Indian Affairs and by the State Land Board of the State of Utah did not satisfy the § 12 requirement of approval by "any governmental authority"; that § 12 was invalid and unenforceable because of uncertainty and indefiniteness, and that no valid exercise of the power given by § 12 could be made, because of the rule against perpetuities. Accordingly, the trial court concluded that the leases involved in these actions had expired by their terms and entered judgment in favor of the defendants. Phillips has appealed. Two representative cases are presented and it has been stipulated that the decision in those cases will be binding as to the remaining cases.
"* * * In the event that said above described lands or any part thereof, shall hereafter be operated under any such cooperative or unit plan of development or operation whereby the production therefrom is allocated to different portions of the land covered by said plan, then the production allocated to any particular tract of land shall, for the purpose of computing the royalties to be paid hereunder to lessor, be regarded as having been produced from the particular tract of land to which it is allocated and not to any other tract of land; and the royalty payments to be made hereunder to lessor shall be based upon production only as so allocated. * * * "
Moreover, an intent that there shall be no cross-transfers of royalty interests may be derived from a provision that proportions of the unit production shall be allocated to the respective tracts and that the portion so allocated to each tract shall be treated as if it had actually been produced from such tract. By such an allocation method of participation in unit production the parties clearly demonstrate their intention that the royalty and working interest ownership within each tract immediately prior to utilization shall continue in effect, since the static ownership within the respective tracts comprising the unit is the basis and the only basis upon which the allocation method of participation functions.6
The first regulations as to procedures for unitization were issued by the Secretary of the Interior, June 4, 1931, 53 I.D. 386, and as early as August 7, 1934, the Secretary approved a form of unit agreement as standard for permittees, lessees and others. In January, 1936, the Department of the Interior published a unit agreement, "Form A," which represented the standard form of unit agreement from that time until 1943. In 1943, the Department of the Interior published a new standard form which made minor modifications in the 1936 Form A.
The provision in § 12 that "this lease shall be deemed modified to conform to the terms, conditions, and provisions of such approved cooperative or unit plan of development or operation and, particularly, all drilling and development requirements of this lease, express or implied, shall be satisfied by compliance with the drilling and development requirements of such plan or agreement, and this lease shall not terminate or expire during the life of such plan or agreement," is purely contractual between the lessor and the lessee. In other respects, the provisions of § 12 are a grant of power to the lessee in its own behalf with respect to its working interest and the lessor's behalf with respect to his reserved interests to unitize all or part of the lands described in the lease, under a cooperative or unit plan of development and operation and to enter into a unitization agreement that will effectuate such unit plan. The relationship between the lessor and lessee under § 12 is, at least, analogous to that of principal and agent.9 It is in the nature of a power coupled with an interest, and is, therefore, irrevocable. Hence, our problem is not whether § 12 is sufficiently definite and certain to bind the lessor and lessee to enter into a future agreement between the lessor, lessee and other lessors or lessees or landowners, but whether its provisions are sufficient to grant authority to the lessee, as the lessor's agent, to enter into a unit plan for development and operation and to make a future contract to effectuate such plan.
Where there is also a lessor-lessee relationship the agent-lessee is also obligated to keep and perform the implied covenants of his lease.
We are of the opinion that the State Land Board of Utah, which was authorized to join in unit plans of development of oil and gas pools with the United States, its lessees or permittees and others, and to approve contracts to effectuate such unit plans of development, was a governmental authority within the meaning of § 12. We are likewise of the opinion that the Secretary of the Interior, who is authorized to require and approve unit plans for development and operation for oil and gas of allotted Indian lands and of unallotted Indian lands within any Indian reservation, or any lands owned by any tribe, group, or band of Indians under Federal jurisdiction17 and to approve contracts to effectuate such unit plans of development and operation, is also a governmental authority within the meaning of that term, as used in § 12. Both such state and Federal agencies were authorized to enter into such unit plans of development and to approve contracts effectuating such plans at the time the leases involved herein were entered into. We know of no other state or Federal governmental authority so authorized. We think it must therefore be concluded that in using the term "governmental authority" the parties had in mind such state and Federal agencies.
The form is known as Bradford-Robinson Form 950-C
Title 86-1-48.25, which was approved in March, 1945, in part reads:
"The state land board is authorized to join on behalf of the state of Utah in cooperative or unit plans of development or operation of oil and gas pools with the United States government and its lessees or permittees and others in such form as may be acceptable to it, to modify or amend the same from time to time as in its judgment it may deem advisable, to consent to and approve the designated participating area and any extension or contraction thereof and to do all acts and things which it considers necessary or advisable to make operative such unit plan or plans; and for such purposes it is hereby authorized with the consent of its lessees or permittees to modify and change any and all terms of leases issued by it to facilitate the efficient and economic production of oil or gas from the lands under its jurisdiction: * * *."
The Unitization Agreement in part reads:
"8. * * * Nothing herein, however, shall be construed to transfer title to any land or to any lease or operating agreement, it being understood that under this agreement the Unit Operator, in its capacity as Unit Operator, shall exercise the rights of possession and use vested in the parties hereto only for the purposes herein specified.
"11. * * * All unitized substances produced from each participating area established under this agreement, * * * shall, * * * be deemed to be produced equally on an acreage basis from the several tracts of unitized land of the participating area * * * and, for the purpose of determining any benefits accruing under this agreement, * * * each tract of unitized land shall have allocated to it such percentage of said production as the number of acres in such tract bears to the total acres of unitized land in said participating area. * * *"
Hoffman, Voluntary Pooling and Unitization, p. 168
Kenoyer v. Magnolia Petroleum Co., 173 Kan. 183, 245 P.2d 176, 179; Coolbaugh v. Lehigh & Wilkes-Barre Coal Co., 218 Pa. 320, 67 A. 615; Shell Petroleum Corp. v. Calcasieu Real Estate & Oil Co., 185 La. 751, 170 So. 785, 791; Lynch v. Davis, 79 W.Va. 437, 92 S.E. 427, 430, L.R.A.1917F, 566; Arkansas Louisiana Gas Co. v. Southwest Natural Production Co., 221 La. 608, 60 So. 2d 9. Contra: See Veal v. Thomason, 138 Tex. 341, 159 S.W.2d 472, 476; Tanner v. Title Insurance & Trust Co., 20 Cal. 2d 814, 129 P.2d 383, 386; Hudson v. Newell, 5 Cir., 172 F.2d 848, 852; Whelan v. Placid Oil Co., 5 Cir., 198 F.2d 39, 41-42
Imes v. Globe Oil & Refining Co., 184 Okl. 79, 84 P.2d 1106
Imes v. Globe Oil & Refining Co., 184 Okl. 79, 84 P.2d 1106, 1109
Edwards v. Heralds of Liberty, 263 Pa. 548, 107 A. 324, 325; Adams Mining Co. v. Senter, 26 Mich. 73, 76; McClung's Ex'rs v. Spotswood, 19 Ala. 165, 171-172; Link, Petter & Co. v. Pollie, 241 Mich. 356, 217 N.W. 60, 61; Restatement, Agency, Vol. 1. § 17
Tatsuno v. Kasai, 70 Utah 203, 259 P. 318, 321, 62 A.L.R. 54; Robertson v. Chapman, 152 U.S. 673, 681, 682, 14 S. Ct. 741, 38 L. Ed. 592; Restatement, Agency, Vol. 2, §§ 389, 390
Adams Mining Co. v. Senter, 26 Mich. 73, 76, 77; Pauly v. Pauly, 107 Cal. 8, 40 P. 29, 32, 33; Alexander v. The North-Western Christian University, 57 Ind. 466, 476; Tudesco v. Wilson, 163 Pa. Super. 352, 60 A.2d 388, 391; Thompson-Starrett Co. v. Mason's Adm'rs, 304 Ky. 764, 201 S.W.2d 876, 880
Cassidy Fork Boom & Lumber Co. v. Terry, 69 W.Va. 572, 73 S.E. 278, 287; Restatement, Agency, Vol. 2 § 390
Phillips v. Hamilton, 17 Wyo. 41, 95 P. 846, 848; Brewster v. Lanyon Zinc Co., 8 Cir., 140 F. 801, 811, 814; Pohlemann v. Stephens Petroleum Co., 10 Cir., 197 F.2d 134, 136; Wolfe v. Texas Co., 10 Cir., 83 F.2d 425, 432, certiorari denied 299 U.S. 553, 57 S. Ct. 15, 81 L. Ed. 407; Merrill, Covenants Implied in Oil and Gas Leases, 2d Ed., §§ 3, 4
Imes v. Globe Oil & Refining Co., 184 Okl. 79, 84 P.2d 1106; Gillham v. Jenkins, 206 Okl. 440, 244 P.2d 291, 294; Toomey v. State Board of Land Commissioners, 106 Mont. 547, 81 P.2d 407, 422; Merrill, Covenants Implied in Oil and Gas Leases, 2d Ed., 1953 Supp. p. 157. Boone v. Kerr-McGee Oil Industries, 10 Cir., 1954, 217 F.2d 63
Toomey v. State Board of Land Commissioners, 106 Mont. 547, 81 P.2d 407, 422
Act of May 11, 1938, 52 Stat. 347, 348, 25 U.S.C.A. § 396a et seq.; Act of March 3, 1909, 35 Stat. 781, 783, 25 U.S.C.A. § 396; 25 C.F.R., parts 186 and 189