Opinion ID: 1251241
Heading Depth: 1
Heading Rank: 3

Heading: well completed as a dry hole

Text: Appellants' last ground for reversal rests upon their assertion that they were able to demonstrate that the appellees had completed the well as a dry hole and did not intend at that time to drill further to the Teapot Formation; and that their continued operations were really a reentry and re-deepening of this once completed well after the lease had expired, contending as they do that the lease expired on July 13 when the casing was run and the Lohmann-Johnson rig was removed from the hole. They insist that the evidence is clear that appellees had no intention at that time to test the Teapot but elected to complete the well in the Lewis Horizon and release the rig, asserting in their brief that lessees had no intention to drill further. These contentions demonstrate that even the appellants consider this a question of intent and state of mind, which again raises a factual question for determination by the trier of facts and that the rules set out earlier in this opinion in connection with factual findings do apply. A completed well or a completion has many different meanings under various applications, 3 Kuntz, Oil and Gas, § 32.3, pp. 77-78 (1967), the thrust of appellants' argument being that once the well was completed as a dry hole, the primary term had expired and lessees had no further right to drill or obtain production. This position, being based upon an assumption that the facts negative the intention to drill deeper, might normally be viewed as resulting in their admission that until the well was completed within the intention of the appellees the lease would remain in force. The various applications involving the term completed well and the difficulty of applying general rules for this determination are quite well exemplified by the authorities cited by the appellants in this area and demonstrate the fact that in each case this determination is dependent upon the facts as they arise. One of the cases cited by appellants in support of their position is that of Niles v. Luitrell, D.C.Ky., 61 F. Supp. 778. That case involved a question of whether a well had been completed in such manner that it tolled the necessity of making a rental payment or the drilling of another well. The well was begun in that case in January 1941 and was drilled to a depth of 815 feet, and never drilled to any greater depth. In June it was shot three times with nitroglycerin without result. Later in the summer, in August or September, the well was acidized and during that period and until later 1943-1944 various things were done to bring the well into production with a continuing attempt to produce it. The court in that case determined that under these circumstances the well was completed when it was acidized without result, and that the lessee should have paid the delay rental or should have begun drilling another well within one year, as provided in the lease. The factual distinctions making this case inapplicable are obvious. Paramount is that the well was never drilled any deeper; nor was any intention to drill the well deeper ever asserted  unlike in this case. There was only a continuing attempt to produce from the tested horizon, as in the cited case. The appellees in this case do not rely upon a completion in the tested sand (Lewis). The court in the Niles case said that the lessee had done everything known to the art to bring the well into production, 61 F. Supp. at 780. The real question was whether this was a commercial well. The rationale of that opinion is based upon the obligation of the lessee to test and develop property in good faith and with reasonable diligence to secure production, and we find in the case of Warfield Natural Gas Co. v. Allen, 248 Ky. 646, 59 S.W.2d 534, 536, 91 A.L.R. 890, upon which reliance was made in the cited case, the following:    These implied obligations include that of exercising good faith and the sound discretion of a prudent operator to drill to a depth that is reasonably necessary to test the land.    This quotation should give the appellants little comfort as appellees did proceed to a depth which was reasonably necessary to test this land. The writer will remark that coincidentally he has been unable to find any reliance of any other court upon this case in determining what the term completed well means. Appellants further rely upon the case of Moore Oil v. Snakard, D.C.Okl., 150 F. Supp. 250, which is clearly inapplicable, being based upon a finding by the court that operations had ceased upon the well. There is no direct finding that the well was a completed well but the basis of decision was that the lessee could hold the lease beyond the primary term if he proceeded in a prudent and diligent manner until he ceased such operations. There is no such finding of cessation in this case. If there is any suggested implication that this case is authority for the proposition that this was a completed well, it is totally inapplicable to our factual situation because it was never deepened, there was then no known method by which the well could have been deepened, and there was no evidence that the well could ever have been completed as a commercial producer. Normally the writer would have dismissed these cases with the statement they were inapplicable to our factual situation in this case, but they do demonstrate the correctness of Kuntz, supra, and clearly demonstrate that such determination is dependent upon the posture of the case, and more importantly that these cases are and were to be determined as factual situations, which again brings into operation the general rule which we have repeated earlier in this opinion. The contention that this was a completed well upon the removal of the Lohmann-Johnson rig, after running the casing on July 13, would have prohibited the use of the Capshaw rig in testing the Lewis Formation and would have prevented appellees herein from a test of a potential horizon, which, had the formation been productive, would not have been in the public interest for a society that has a critical need for such energy sources; nor would it be consistent with the duty owed to the landowner to prudently develop these premises. Although 96 days elapsed between the date upon which this well was commenced and its completion as a producer, the test of diligence may be different in wildcat or unproven areas, Braun v. Mon-O-Co Oil Corporation, 133 Mont. 101, 320 P.2d 366, 369-370. This was an unproven area and there was a possibility of production from four different horizons in this area, [3] and this writer believes that he may personally opine, without serious damage to the law, that prudence would always dictate testing of all possible productive horizons in unproven areas. This writer confesses difficulty in finding any authority by way of definition which under the facts might be deemed directly applicable. However, the case of Howard v. Hughes, 294 Mich. 533, 293 N.W. 740, 743, has a helpful definition which we believe applicable hereto and which substantially defines a completed well as one drilled to such depth as to penetrate to the oil and gas sand in that community, or to such depth that the absence of oil or gas precluded the probability of finding it at a further depth. A somewhat similar definition containing the same elements appears in Smith v. Hayward, 193 F.2d 198, 201, 39 CC Pa. 748, 92 U.S.P.Q. 126, and it is observed that under both these definitions this well was not completed until October 2, 1973. No real value would lie in an extended discussion of the evidence upon which the trial court based its finding, which we view as sufficient. However, illustrative of appellants' attack are some of the uncontroverted facts from which they insist we must draw a different inference than did the lower court. Much importance is attached to the fact that on July 13 appellees secured from American Petrofino, with whom they had made an agreement to drill a well to the Parkman, or 7700 feet, an amendment of the original agreement; and Petrofino agreed that by drilling the well to the then depth of 6744 feet this would be accepted as performance of the agreement to drill to the Parkman, and that Petrofino would assign the acreage which they had agreed to contribute for such Parkman test. Standing alone, this might be strong evidence that the well was considered completed at the depth of 6744 feet. Taken upon the known factual background of the lost circulation problems, however, the necessity of running casing, and the fact there was a possibility of production in the Lewis Formation, which was still to be tested, we do not see that only one inference could be drawn, as proven production in the Lewis Formation would have tended to enhance the value of the remaining lands in this area. Contradicting this intention, which appellants consider so clear, is the physical fact that appellees did on this same date set casing 900 feet below the point necessary to test the Lewis. Although there is no evidence as to the additional value of this casing, or the expense required in running the same, it is obvious that had appellees not considered drilling the well deeper if the Lewis proved nonproductive, there was a waste of considerable time, material and effort, which should not be ignored. It is our view, then, that the finding of the trial court must stand and that the well was not completed on July 13, and that this drilling was not merely a re-deepening of a completed or plugged well. For the reasons set forth in this opinion, the judgment is affirmed.