Case Name: Mildred Moreau Ledoux HOUSE et al., Plaintiffs and Appellants, v. TIDEWATER OIL COMPANY et al., Defendants and Appellees
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 1969-01-29
Citations: 219 So. 2d 616
Docket Number: No. 2503
Parties: Mildred Moreau Ledoux HOUSE et al., Plaintiffs and Appellants, v. TIDEWATER OIL COMPANY et al., Defendants and Appellees.
Judges: Before FRUGÉ, HOOD, and CUL-PEPPER, JJ.
Reporter: Southern Reporter, Second Series
Volume: 219
Pages: 616–628

Head Matter:
Mildred Moreau Ledoux HOUSE et al., Plaintiffs and Appellants, v. TIDEWATER OIL COMPANY et al., Defendants and Appellees.
No. 2503.
Court of Appeal of Louisiana. Third Circuit.
Jan. 29, 1969.
Rehearing Denied Feb. 20, 1969.
Writ Refused April 25, 1969.
Davidson, Meaux, Onebane & Donohoe, by Joseph Onebane and Duncan M. Smith, Jr., Lafayette, for plaintiffs-appellants.
Henican, James & Cleveland, by Murray F. Cleveland, New Orleans, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, by Lucius F. Suthon, New Orleans, for defendants-appellees.
Liskow & Lewis, by James L. Pelletier, Lake Charles, for plaintiff-appellee.
Before FRUGÉ, HOOD, and CUL-PEPPER, JJ.

Opinion:
CULPEPPER, Judge.
This is a suit to cancel two oil, gas and mineral leases. Plaintiffs are the owners of the land. Defendants are the owners of the leases. From an adverse judgment, the plaintiffs appeal.
The principal issue is whether the defendants complied with the lease provisions requiring that they commence "reworking operations" within 90 days after the cessation of production in order to continue the leases in effect beyond their primary terms.
The two leases in question were granted in July of 1954, for primary terms of five years, to Mr. F. J. Muller, covering a total of about 310 acres in St. Landry Parish. They were assigned by Muller to Tidewater Oil Company. During the primary terms of the leases, portions of the leased premises were included within a unit from which gas was being produced by Tidewater from a well located on lands owned by Robert L. Waterbury. The well produced gas and condensate in paying quantities until August 6, 1960, at which time Tidewater abondoned it due to excessive amounts of salt water.
Robert L. Waterbury, on whose lands the well was located, was an experienced independent oil operator. He decided that he could restore the well to production. Accordingly, he acquired the leases and on September 5, 1960, he commenced operations to restore production. From September 5 through October 1, 1960, he and a crew of men repaired approximately one mile of board road across a swampy area to the well site. They replaced some boards, repaired others and reset the necessary cattle gaps. Then he built completely new triple matting around the well head to support heavy equipment which he planned to use.
On October 30, 1960, a "wire line service unit", mounted on a three ton truck, was moved to the well site. This equipment consists of a wire rope, about the size of an ordinary clothes line, to which are attached sinker bars, jars and a paraffin scraper. This was lowered into the tubing of the well to a depth of about 10,300 feet. After about 8 /: hours of work, pulling the paraffin scraper in and out of the hole, an accumulation of paraffin and debris was removed and the well began to flow gas and condensate. This was on October 30, 1960, which was the 85th day after the cessation of production on August 6, 1960.
Production was periodically flared to the pit, to keep the well clean, until new flow lines and a tank battery could be installed. These were completed on November 25, 1960, from which date gas and condensate have been produced and saved in paying quantities. This was the 111th day after cessation of production.
Waterbury testified he spent about $65,-000 to restore 'the well to production.
The lease provisions in question are contained in paragraph 6, which reads as follows :
"After the discovery and production of oil, gas or any other minerals in paying quantities, either on the leased premises or on lands pooled therewith, the rights granted shall be maintained in effect during and after the primary term and without the payment of the rentals herein above provided for so long as oil, gas or some other mineral is being produced in paying quantities, or Lessee is carrying on operations with reasonable diligence looking to the production thereof. It is provided, however, that if, after the discovery and production of oil, gas or other minerals in paying quantities, the production thereof should cease from any cause, this lease shall terminate unless Lessee resumes or restores such production, or commences additional drilling, reworking or mining operations within ninety (90) days thereafter and continues such operations without the lapse of more than ninety (90) days between abandonment of work on one well and commencement of reworking operations or operations for the drilling of another, in an effort to restore production of oil, gas or other minerals.
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It is not disputed that there was a cessation of production, within the intendment of the above quoted lease provisions. Plaintiffs' principal contention is that within the ensuing period of 90 days there was neither (1) restoration of production in paying quantities nor (2) commencement of reworking operations in an effort to restore production. Plaintiffs argue that the things done by Mr. Waterbury amounted to nothing more that routine maintenance, as distinguished from reworking operations.
I. WAS PRODUCTION IN PAYING QUANTITIES RESTORED WITHIN 90 DAYS?
We pretermit the question of whether production in paying quantities was restored within the 90 days. For, regardless of this question, we find hereinafter that reworking operations were commenced within this period.
II. FAILURE OF LESSORS TO GIVE NOTICE THAT THE WORK BEING DONE BY WATERBURY DID NOT CONSTITUTE REWORKING
Defendants contend that the following notice provisions of the lease are applicable here:
"In the event that lessor at any time considers that the operations are not being conducted in compliance with this lease, Lessor shall notify Lessee in writing of the facts relied upon as constituting a breach hereof, and Lessee, if legally required to conduct operations in order to maintain the lease in force, shall have sixty (60) days after receipt of such notice in which to commence the necessary operations to comply with the requirements hereof."
Under this lease provision, defendants argue that plaintiffs were required to notify Mr. Waterbury of any dissatisfaction with the reworking operations.
This argument has been answered by the jurisprudence. See Taylor v. Buttram, 111 So.2d S76 (La.App.2d Cir. 1959) where the court held, with citation of previous cases:
"As to the appellants' contention that Section (8) of the lease contract required lessors to give lessee sixty days notice of any alleged failures to rework before any suit could be filed, this provision obviously applies only to operations during the primary term of the said lease, while Section (2) thereof applies after the primary term has expired. This exact point was squarely decided adversely to the contentions of the appellants here in the following cases: Logan v. Blaxton, La.App. 2 Cir., 1954, 71 So.2d 675; Taylor v. Kimbell, 1951, 219 La. 731, 54 So.2d 1; Sittig v. Dalton, 1940, 195 La. 765, 197 So. 423; Producers Oil & Gas Co. v. Continental Securities Corp., 1937, 188 La. 564, 177 So. 668."
III. COMMENCEMENT OF REWORKING OPERATIONS
Plaintiffs contend the work done by Mr. Waterbury constituted routine maintenance and not "reworking". They introduced the testimony of three expert witnesses who stated, in essence, that "reworking operations" are limited to those which affect the ability of the producing formation to feed into the well bore. These witnesses stated further that paraffin frequently accumulates in gas wells and the removal thereof with a wire line service unit is rountine maintenance. They concluded that in the present case the combined operations conducted by Waterbury constituted maintenance and not "reworking".
Defendants called two expert witnesses who testified that although the use of a wire line service unit alone is maintenance, the wire line operations performed here were a part of an overall work-over operation. These experts were of the opinion that work-over operations cannot be limited, under all circumstances, to those which affect the ability of the formation to feed into the well bore. They gave a much broader definition to the term "reworking operations" and concluded that the work done by Mr. Waterbury in this case fell within that category.
The first of defendants' experts is Mr. Fred L. Bates, who has very impressive qualifications. He graduated in mining engineering from Princeton University in 1933 and is a member of the Advisory Council of the School of Geological Engineering of that institution as well as being a member of the faculty of the University of Southwestern Louisiana as a lecturer in petroleum geology and petroleum engineering. Mr. Bates also has an impressive background of practical experience as a consulting petroleum engineer. He testified as follows:
"Q. Mr. Bates, I think you stated that using a paraffin scraper was a work over or reworking operation?
"A. No, sir, I did not. I stated that wire line operations such as were performed here were a part of a work over operation.
"Q. Because it restored production?
"A. No, sir, because it was a logical step in proceeding with a work over. As Mr. Montgomery stated, the repair of the board road and the entering of the well with wire line tools were the first steps that a reasonable and a prudent operator would have taken.
"Q. Mr. Bates, what do you mean work over, what does that mean, what are you working over?
"A. Mr. Montgomery was asked to define the term, and I think he defined it rather well. With the exception that he said it was an operation to affect the production from a well. My definition would take exception with the work affect, and say that a work over is an operation to improve or restore production, not merely to affect, but an attempt to improve and restore production.
I believe that the physical operations which are performed in this case and as admitted by Mr. Montgomery did have the effect of restoring production for whatever reason, and believing that and seeing the evidence, I would consider this as a part of a work over operation."
Mr. William G. Blackwell, the other expert witness called by defendants, has a degree in geological engineering from the Colorado School of Mines in 1939 and extensive practical experience. He testified as follows:
"Q. Now, what is the principal purpose of a reworking or work over operation?
"A. The principal purpose of a work over is to ultimately restore' oil or gas production.
"Q. If you had been in Mr. Waterbury's place and you had a farm out agreement under which you had undertaken to re-work this well or to engage in reworking or work over operations, would you have proceeded the way Mr. Waterbury did?
"A. Exactly.
"Q. And after you had gotten the production that Mr. Waterbury got, would you have discontinued the reworking operations as he did?
"A. Yes.
"Q. Would you state whether you believe that these activities of his in restoring the board road and in engaging in the wire line operations were conducted with reasonable diligence looking toward the production of minerals?
"A. I think so."
There are at least three Louisiana cases which have considered the question of "reworking". Most important of these is Texas Company v. Leach, 219 La. 613, 53 So.2d 786 (1951). The facts showed that the well gradually decreased in production to five barrels of oil per day. Finally, the tubing burst. The operators closed the well down and contracted with a drilling company to work the well over. During the 60-day delay, provided by the habendum clause, the following operations were conducted in preparation to restore production: Relegged derrick; pulled tubing; stength-ened and reinforced bridge; doped tubing and rods; repaired gas lines; racked and doped tubing; repaired roads and bridges; prepared for cable tooling. After the 60-day period, the operations continued until the well was brought back into production.
In holding that the operations conducted by the Texas Company constituted reworking operations sufficient to maintain the lease beyond its primary term, the court held:
"We believe that the operations conducted by the Texas Company between September 10 and November 26, 1947, were sufficient to conform with the provisions of their contract. Operations of a similar nature under a lease which obligated the lessee to 'commence operations' within a certain period of time 'by drilling, boring or mining for oil' have been held to be the commencement of work 'which satisfied the condition of the lease'. See Hudspeth et al. v. Producers' Oil Co., et al., 134 La. 1013, 64 So. 891, 893."
In Johnson v. Houston Oil Company of Texas, 229 La. 446, 86 So.2d 97 (1956), the lease provided for termination unless oil or gas was being produced in paying quantities or "drilling or reworking operations" were being conducted on June 27, 1954. A well drilled during the latter part of 1953 showed the presence of oil, but it was plugged with concrete. On the crucial day, June 27, 1954, the operator moved a drilling rig, pump, rotary and kelly joint to the well site, assembled them, and commenced to drill out the cement plug. Production was actually obtained. The court held:
"Under these circumstances we would not be warranted in disturbing such findings of fact; and we hold, as did the trial judge, that plaintiff was actually engaged in reworking operations on June 27. See Texas Co. v. Leach, 219 La. 613, 53 So.2d 786."
In Harry Bourg Corporation v. Union Producing Company, 197 So.2d 172 (La. App. 1st Cir. 1967, writ refused), the lease provided for the periodic commencement of operations to drill a new well or "rework" an existing well. The operations in question consisted of placing a cement plug at the 14,800 feet depth in an existing well and moving up in the hole and making new perforations at 14,500 feet. Three experts testified this was "reworking" and defined the term. Mr. Drew Cornell, a petroleum engineer of 22 years experience, defined "reworking" as: "It is to restore or increase production of a well that has been drilled, usually the second attempt." Mr. L. C. Aycock, a petroleum geologist, testified: "The word means to work again on a well. It is used in reference to work on wells that have never produced or work on wells that have produced, used in connection with a well that has never produced. In a well that has produced it would be an operation when the well came off of production or ceased production, and it would be an operation to maintain, restore, improve production. " Mr. Donald Mast, a geologist, stated: "My understanding of the term is any process or procedure which you may undertake to either regain, increase or create new production in a well."
In the Harry Bourg Corporation case, the court held:
"We find from the testimony of the three experts, quoted supra, that the word 'rework' has a definite, even though multiple, meaning in the oil and gas industry, and accordingly we are bound to accept this meaning in the sense in which it w.as used on this compromise agreement, the subject matter of which was an oil, gas and mineral operation."
We note particularly that not one of the three cited cases, nor any of the experts mentioned therein, limits the term "reworking" to operations which affect the ability of the formation to feed into the well bore. In the Harry Bourg Corporation case, which quotes the expert testimony, the definition of "reworking" given by these witnesses is substantially the same as that given by defendants' experts in the present case, i. e., it is an operation to obtain production in a well which was completed but never produced or to maintain, restore or improve production in a well which ceased to produce and has been abandoned.
Plaintiffs cite several cases from other states which discuss "reworking". Not one of them restricts the term to operations which "affect the ability of the formation to feed into the well bore", as contended by plaintiffs' experts. Furthermore, we find no such restricted definition suggested in either the text or the citations in Summers, Oil and Gas, Vol. 2, Sections 305 and 349. In short, plaintiffs have not cited, nor have we been able to find, any authority which supports their definition.
Like the courts in the three cited Louisiana cases, we also will not attempt to give a comprehensive definition of "reworking operations" applicable in every case. Each case must depend upon its own facts, in the light of the opinions of the expert witnesses who testify. In our view, the operations conducted by Mr. Waterbury in the present case clearly constituted reworking. We attach particular significance to the following facts: The well had actually ceased to produce and had been abandoned by the original operator, Tidewater. Mr. Waterbury purchased the leases from Tidewater and, as a new operator, commenced efforts to restore the well to production. He and a crew of men repaired one mile of board road and built completely new triple matting around the well to support heavy equipment which might be needed. After the wire line service unit was successful in removing paraffin and debris from the well, it actually returned to production. Waterbury then had to install new flow lines and a new tank battery. These operations were all conducted reasonably, diligently and in good faith, and were actually successful in restoring production. Certainly the operations conducted by Waterbury were more than routine maintenance by an operator to maintain production.
IV. THE UNIT WELL DID NOT PRODUCE AS A GAS WELL
Plaintiffs contend that since the unit was created by the Conservation Commission for the production of gas, and the records show that during the period from January 1, 1961 through October 1, 1961, the well primarily produced liquid condensate, such production did not maintain the non-drilled leases at issue here. Plaintiffs contend that condensate is oil, not gas, and they cite Auzenne v. Lawrence Oil Company, Inc., 179 So.2d 533 (La.App. 3rd Cir. 1965) to support their position.
Without discussing the Auzenne case, the short answer to plaintiff's argument in the present matter is that Department of Conservation Order No. 257-A-l effective November 15, 1956, created this unit for the production of "gas and liquid hydrocarbons" from the sand in question. Liquid condensate is certainly liquid hydrocarbon. See LSA-R.S. 30:3(4, 5). Hence, the unit was created for its production, as well as gas.
V. DELAY IN PAYMENT OF ROYALTIES
After the Waterbury well was restored to production on November 25, 1961, the unit was revised by the Department of Conservation by order dated March 9, 1962. No royalties were paid to plaintiffs until October of 1962. Mr. Waterbury explained that the creation of the new unit caused delays to secure the necessary surveys and accomplish the required title work, execution of division orders, etc.
The trial court held under the circumstances that this delay in the payment of royalties was not unreasonable. There was a delay of between six and seven months between the time the unit was revised and the time the payment of royalties commenced. For the reasons set forth in Faw-vor v. United States Oil of Louisiana, Inc., 162 So.2d 602 (La.App. 3rd Cir. 1962), we do not think this was an unreasonable delay under the circumstances.
VI. TERMINATION OF LEASES UPON DISSOLUTION OF ORIGINAL UNIT
The 1954 leases were maintained beyond their primary terms by being included within a unit created by Department of Conservation Order No. 257-A-l, effective November 15, 1959, establishing Unit No. 21-2, for which the Waterbury well was subsequently designated as the unit well. Order 257-A-4, effective January 1, 1962, dissolved said Unit 21-2. Hence, plaintiffs contend their leases terminated because they were beyond their primary terms and the unit which had served to maintain them was dissolved.
However, the defendant points out that when Unit No. 21-2 was dissolved by Order No. 257-A-4, a revised unit was simultaneously established, which existed until Order No. 257-A-5, effective March 9, 1962, created Revised Unit 21-2, for which the Waterbury well is the unit well and which unit includes portions of the leases at issue here. The result is that there was uninterrupted production in which plaintiffs' leases shared. Hence, plaintiffs' leases were not terminated.
For the reasons assigned, the judgment appealed is affirmed. All costs of this appeal are assessed against the plaintiffs appellants.
Affirmed.
. More detail as to the testimony of plaintiffs' expert witnesses is as follows: Mr. Ben H. Freeman, a petroleum engineer with experience in the industry since 1940, testified:
Q. Mr. Freeman, in your opinion, what constitutes a re-working or work over operation?
A. As I understand it, a work over operation is doing work on a well that has produced, which work affects the reservoir from which your production comes or from moving in work over equipment to do mechanical work on the well.
Q. Mr. Freeman, you have heard the testimony of Mr. Waterbury, and Mr. Thistle-thwaite relating to the operations that were conducted with reference to the Waterbury well which is now in controversy, and I ask you, in your opinion, would you consider those operations as a work over or re-work operation?
A. No.
Q. To be more specific, do you consider the running of a paraffin scraper on a wire line unit into a well as a work over or re-working operation?
A. No, sir, I feel that any thing that can be handled by the pumper in the field who is at the well each day is production maintenance. That would include changing charts, changing chokes on wells, keeping his production records, keeping the tubing clean, tanks clean, anything minor that the pumper can take care of without supervision other than the pumper is simply production maintenance, you are maintaining production on those wells.
Q. In other words, in your opinion, the mere running of a scraper on a wire line unit is something that can be supervised by a gauger and therefore is a maintenance operation ?
A. Yes.
Mr. Richard Steinhorst, Jr., also a petroleum engineer with practical experience since 1942, testified:
Q. Now, Mr. Steinhorst, would you please define for the Court your understanding of a work over or re-working operations, if you find those two words synonymous?
A. They are synonymous. We consider those types of operations — any operation which affects the ability of the producing formation to feed into the well bore.
Q. Now, what type of operations may become necessary to affect the producing horizon?
A. Well, first and basically of course, if the well is cased, would be perforating or putting holes in the casing.
Q. That's your initial?
A. That would be initial, yes, sir.
Q. And you would consider that initial perforation at the producing horizon to be a re-working operation or work over operation?
A. A re-perforation of the same area would be a work over operation.
Q. And what else, that would be number one?
A. There would be acidizing, squeeze cementing, various types of well stimulation, operations to control water production, or to control excessive gas oil ratio, and any other operation which actually affects tiie ability of the well to feed in.
Mr. Paul Montgomery, a petroleum engineer with experience since 1941, stated:
Q. Now, Mr. Montgomery, would you define for the Court your understanding of what a re-working operation or work over is?
A. I would say that a work over operation is an operation that is planned to affect the producing characteristics of the well, the ability of the well to produce hydrocarbons.
Q. What type of activities or operations are there in the petroleum industry which could affect the production ability of a well?
A. Perforating, squeeze cementing, sand consolidation, fracing, various squeeze operations other than cement, that is squeezing oil for instance, all of these could affect the producing characteristics of the formation.
Q. Now, after hearing all of the facts of this case as testified to by Mr. Waterbury and Mr. Thestlethwaite, yesterday, do you consider the operations performed by them on the Robert L. Waterbury well a work over or a re-working operation?
A. No, sir.
Q. Why, Mr. Montgomery?
A. What they did actually was to go into the hole with a paraffin scraper and remove what in my opinion was an obstruction in the tubing. They did not do anything that had any bearing on the productive capacity of the well, that is the ability of the well to produce into the well bore hydrocarbons, salt water or whatever. Actually what they did was a mechanical operation, that is, a part of normal housekeeping in a well that does have a paraffin problem.
. Williams and Meyers, Oil and Gas Law-Manual of Oil & Gas Terms, at page 338, defines "reworking operations" in a manner very similar to the testimony of the three experts in the Harry Bourg Corporation v. Union Producing Company case, supra, as follows:
"Work performed on a well after its completion, in an effort to secure production where there has been none, restore pro- duetion that has ceased or increase production. Cleaning out a hole that has silted up is a typical reworking operation. In Rogers v. Osborn, 152 Tex. 540, 261 S.W. 2d 311, 2 O & G. R. 304, 1439 (1953), the trial court defined reworking operations as follows: ' "re-working operations" means actual work as operations which have theretofore been done, being done over, and being done in good faith endeavor to cause a well to produce oil and gas or oil or gas in paying quantities as an ordinarily competent operation would do in the same or similar circumstances.' The appellate court neither approved nor disapproved of this definition. In the same case, the court held that periodic flowing (q.v.) or bleeding a well could amount to reworking operations, where the jury so found. See also Johnson v. Houston Oil Co. [229 La. 446], 86 So.2d 97, 5 O. & G. R. 1169 (La.1956). "The legal definition of the term is important because many leases contain clauses such as or similar to the following:
'If prior to discovery of oil or gas on the land lessee should drill a dry hole thereon, or if after discovery of oil or gas the production thereof should cease, this lease shall not terminate if lessee commences additional drillirg or reworking operations within sixty days thereafter If at the expiration of the primary term, oil, gas or other mineral is not being produced on the last but lessee is then engaged in drilling or reworking operations thereon, this lease shall' remain in force so long as such operations are prosecuted with no cessation of more than thirty days '
"The term 'reworking' is defined in one agreement form as 'all operations designed to secure, restore or improve production through some use of a hole previously drilled, including, but not limited to, mechanical or chemical treatment of any horizon, deepening to test deeper strata, plugging back to test higher strata, etc.' Myers, The Law of Pooling and Unitization 475 (1957). See Cleaning a well, Redrilling, Workovers."
. The production reports show, for instance, that during' January, 1961, the well produced 991,000 cubic feet of gas and 920 barrels of oil, for a gas-oil ratio of 1077 cubic feet of gas to each barrel of oil, which is less than the 2,000 to
ratio established by general orders of the Conservation Department for a gas well. Each of the nine months in question the ratio fell below 2,000 to 1.