Opinion ID: 1428878
Heading Depth: 1
Heading Rank: 2

Heading: attribution of off-site production on pooled acreage

Text: With this court's refusal to recognize the significance of the original deletion of the lease pooling clause, the remaining major issue of this appeal is whether a legal presumption is applied to the contractual effect as a principle of administration and interpretation. Two lines of authority on the issue have developed. What could be characterized as the Louisiana rule, more recently found in Colorado in Clovis v. Pacific Northwest Pipeline Corp., 140 Colo. 552, 345 P.2d 729 (1959), holds that pooled or unitized production, where only a portion of a lease is committed, will serve under the lease terminology to hold the entire lease beyond term. [4] The other rule, which can be described as the Mississippi principle, although clearly a minority position, is contrary in denying retention of noncommitted acreage beyond term unless compliance with the production or development requirements of the lease actually occur on-premises. Texas Gulf Producing Co. v. Griffith, 218 Miss. 109, 65 So.2d 447 (1953). See Rebman, Continuation of the Oil and Gas Lease on Production Within the Unit, 35 Texas L.Rev. 833 (1957). Many text writers support this rule with persuasive logic. See Comment, Production From Compulsory Pooled Unit Extends Lease on Outside Acreage?, 33 Rocky Mt.L.Rev. 184 (1960); See also 30 U.S.C. 226J, reflecting congressional attitude on federal leases. If only a portion of the leasehold is included in the unit, the lease is extended as to the segregated portion included in the unit by unit production and the lease as to the segregated nonunitized portion will continue in effect for the term of the base or parent lease but for not less than two years from the date of segregation. 6 H. Williams and C. Meyers, Oil and Gas Law, § 953 at 726.11 See also Williams and Meyers, The Effect of Pooling and Unitization Upon Oil and Gas Leases, 45 Calif.L.Rev. 411 (1957). In this case of federal leases which segregate the lands into separate leases when only a portion of the land is included within a unit, production or the nonunitized portion does not attribute to the unit as production or to the unitized lands. 6 H. Williams and C. Meyers, supra. Our position is based on the fact that    the lessor realizes no benefit from the lease on the excluded acreage by virtue of production from the unit; his share of production is limited to a pro rata distribution based on the amount of the acreage included within the unit or upon some other participation formula which gives no weight to the excluded acreage. The lessee, on the other hand, is able to retain the excluded acreage for speculative purposes without operations thereon and without making any payment for retaining the excluded land. 6 H. Williams and C. Meyers, supra, at 725. Oklahoma has adopted a modified Pugh clause by statute. Siniard v. Davis, Okla. App., 678 P.2d 1197 (1984). Lacking legislative attention in Wyoming, I would follow the logic, economic justification, and reasoned persuasion of the Mississippi rule so that uninformed landowners, in absence of Pugh-clause knowledge, are properly protected.