Opinion ID: 1674851
Heading Depth: 1
Heading Rank: 2

Heading: law i. whether the lower court erred in finding the oil, gas and mineral lease authorized disposal of salt water produced off the leasehold?

Text: The appellees note that the Farragut's lease agreement grants Massey and Barnett the authority to construct and operate facilities for disposing of salt water produced from the land covered hereby or any other land adjacent thereto. They concede that the lease requires the facilities to be necessary or useful to the lessees operations, but argue that disposing of salt water from adjoining properties is both necessary and useful: useful in that the proceeds paid by Cleveland and Graham Royalty make Massey's and Barnett's operation more profitable; necessary in that reinjecting saltwater produced by other wells extends the useful life of the oil field and thus prevents waste. The trial court below agreed. In its Findings of Fact and Conclusions of Law, the court found that the lease was without ambiguity and gave the Defendants the right to dispose of salt water, subsurface and surface from lands and adjacent lands to the lease. The trial court is superficially correct in finding that the lease agreement permits the importation of salt water from adjoining properties. Both the trial court and the appellees neglect to note, however, that the lease permits the practice only where the lessee's operations extend to the adjoining properties. The lease clearly states: [Lessee may] establish and utilize [salt water disposal facilities] necessary or useful in lessee's operations in ... producing ... minerals ... from the land covered hereby or any other land adjacent thereto. The phrase adjacent thereto unambiguously refers to properties from which the lessee extracts minerals; it is not syntactically tied to the source of the salt water. Where the language of a lease is unambiguous, it must be enforced according to its plain meaning. See Barnett v. Getty Oil Co., 266 So.2d 581, 586 (Miss. 1972) (where lease is clear and unambiguous, Court should look solely to language of instrument and give same effect as written); Wagner v. Mounger, 253 Miss. 83, 90-91, 175 So.2d 145, 147-48 (1965) (where terms of lease are clear and unambiguous, court should not enlarge terms by needless construction). Guided by this principle, an Illinois Court in Gill v. McCollum, 19 Ill. App.3d 402, 311 N.E.2d 741 (Ill. App.Ct. 1974) found that the holder of a mineral lease does not have the right to import salt water from adjacent lands absent an express grant of authority. Professor Kuntz recognizes the same rule: The right of the mineral owner to use and occupy the land is restricted to operations for exploring for and extracting minerals from that land. Thus, the land cannot be used ... to dispose of salt water from other land. 1 E. Kuntz, A Treatise on the Law of Oil and Gas, § 3.2 at 87-88 (1987). Citing Gill, Kuntz notes that [the] grant of the right to inject liquids and gas does not give the lessee the right to use a well on the leased premises for the disposal of salt water from other leases. 4 E. Kuntz, § 50.4(c) (Supp. 1989). Appellees Cleveland and Graham Royalty argue in their brief that it has been the custom in Mississippi for several operators in a field to dispose of salt water into an existing salt water disposal well whether it was on their lease hold premises or not. In the absence of ambiguity, however, industry customs must bow to the terms of the lease. See Barnett, 266 So.2d at 586 (court should not resort to extrinsic aid when construing clear and unambiguous lease); see also In re Estate of Fike, 385 Pa.Super. 627, 631, 561 A.2d 1268, 1270 (Pa. Super. Ct. 1989) (court may look to evidence of custom and usage only where terms of lease are ambiguous). The unambiguous lease agreement between Farragut and appellees Massey and Barnett does not authorize the lessees to accept salt water from third parties holding leases on adjoining lands. The trial court's findings to the contrary are erroneous.