Opinion ID: 6110129
Heading Depth: 3
Heading Rank: 3

Heading: The Only Reasonable Construction

Text: While the leases do not provide a formal definition of the term offset well, the phrase is nevertheless internally defined by the leases' description of where and to what depth the offset well must be drilled. 10 And these requirements qualify such a well as one that serves to counterbalance or to compensate for a triggering well on the adjacent property. Offset , WEBSTER'S THIRD INT'L DICTIONARY 1567 (2002). The fact that the leases specify exactly what is to be done once the offset provision is triggered, and do not mention proximity, is significant. The language of the provision is direct: when triggered, if Murphy elects to respond by drilling a well, it must commence drilling operations within 120 days from the triggering well's completion and must continue drilling with due diligence to a depth adequate to test the same formation from which the well or wells are producing from [sic] on the adjacent acreage. Murphy was thus required to drill a well in accordance with this specific instruction, and no more. This makes complete sense if the parties intended to require accelerated drilling when production from a well on an adjacent tract evidenced that the leased tract was also capable of production. While this would not prevent drainage, it would compensate Herbst by counterbalancing against production on the adjacent tract. And this is the only reasonable interpretation of the provision in light of the parties' recognition of the horizontal shale drilling at issue. In so holding, we recognize that leases executed in other settings-not involving shale plays and hydraulic fracturing from horizontal wellbores-may utilize similar provisions that remain silent as to proximity requirements. But in accordance with our holding in URI , we must account for the circumstances in which these leases were executed. Therefore, we limit our holding to the circumstances at hand, which involve unconventional production in tight shale formations. We express no opinion as to the proper interpretation of similar clauses outside this context.