Court Opinion

ID: 9685238
Source: CourtListenerOpinion
Date Created: 2023-08-24 14:26:52.106752+00
Date Added: 2024-06-11T18:18:03.578126
License: Public Domain

Lotterhos, J.,
Dissenting.
It is my opinion that the suggestion of error should be sustained.
*722The gist of the holding of the Court in the original decision and in the majority opinion on the suggestion of error is that when Unit No. 39 was established under the authority of Chap. 117, Laws of 1932 and Chap. 305, Laws of 1936, it necessarily followed that there was a forced pooling of all mineral interests therein for production in and from said unit, and that, therefore, the lease on Beery’s mineral interest was extended beyond the primary term, in spite of the refusal of Beery to agree to pooling, upon the theory that, because of said forced pooling of his interest, there was production-under the lease from the land in which he owns an interest.
The fallacy in that holding lies in the fact that the establishment of a drilling unit is not the same thing as the creation of a pooling arrangement with respect to the several mineral interests. It appears clear that when a drilling unit is established, the particular acreage is set aside as the area upon which one well may be drilled by those having the right to drill under leases; and that the establishment of such unit does not in and of itself change the property rights of the interested parties nor force integration of mineral interests within the unit. The difference and distinction between the establishment of a drilling unit on the one hand and forced pooling of mineral interests on the other, is well illustrated by the provisions of Chap. 256, Laws of 1948. Of course, that statute does not apply in substance to the case at bar, because it was enacted after the pertinent events in this case had occurred. However, it is convincing upon the distinction between the terms referred to.
Sec. 4(g) of said Chap. 256 defines the word “owner” as “the person who has the right to drill into and produce from any pool, and to appropriate the production either for himself or for himself and another or others.” In other words, the lessee is the owner. Sec. 6(c) grants to the board authority to make rules, regulations, and orders for several purposes, including “(11) To regulate the spacing of wells and to establish drilling units.” *723Sec. 9(a) authorizes the board to regulate the drilling and location of wells in any pool and the production therefrom so that “each owner” shall have the right to recover his fair share of the oil and gas in the pool. Sec. 9(b) directs the board to “establish a drilling unit or units for each pool,” for the prevention of waste and to protect and enforce the correlative rights of “the owners” in the pool. The sections referred to up to this point concern the establishment of drilling units, and it will be noted that they concern and affect “the owners”, that is, the lessees having the right to drill. This statute contemplates and provides for the creation of drilling units, in so far as the above mentioned sections apply, without regard to whether there is or shall be a pooling or integration of mineral interests.
We now come to Sec. 10(a) of this statute, which has to do with pooling. It is there provided that when separately owned tracts of land are embraced “within an established drilling unit”, the “person owning the drilling rights therein” (the lessee), and the “rights to share in the production therefrom” (the royalty owners), may validly agree to integrate their interests and develop their lands as a drilling unit. It will be noted that, as a condition precedent to the right of the persons having the drilling rights and the persons, having the right to share in production to validly agree to integrate their interests, there must be an established drilling unit. This is recognized in the decisions of this Court which have upheld forced pooling under said Chap. 256, Laws of 1948, as amended by Chap. 220, Laws of 1950. Said Sec. 10(a) of the 1948 statute further provides that if “such persons” have not agreed to integrate their interests the board may, as to a drilling unit of 40 acres in area or less, require “such persons” to integrate their interests and to develop their lands as a drilling unit. It is to be observed that Sec. 10(a), in dealing with integration of interests or pooling of interests, either by voluntary agreement or by directive of the hoard, deals with *724and affects both the lessee, as the person owning the drilling rights, and the royalty or mineral owners, as those having the right to share in the production from the drilling unit. Sec. 10(c) of the act provides that if “the persons owning the drilling or other rights in separate tracts embraced within a drilling unit fail to agree upon the integration of the tracts and the drilling of a well on the unit,” and it develops that the board is without authority to require integration, then “the owner” (that is, the lessee), of each tract embraced within the drilling unit may drill on his tract, but the allowable production from such tract shall be reduced in proportion to the acreage of such tract.
If, under the 1948 act, forced integration can be provided only upon a showing that precedently a drilling unit has been established, it then follows that the establishment of the drilling unit is something separate and distinct from the pooling and integration of mineral interests. This Court has held in The Superior Oil Company v. Foote, 214 Miss. 857, 59 So. 2d 85, and in other cases cited in the original opinion and in the majority opinion on the suggestion of error, that under the 1932 and 1936 statutes the board had authority to establish drilling units and that it did establish drilling units. This proposition is now settled and, it appears, correctly, since these statutes authorized the board to regulate drilling, development, etc., in order to prevent waste and protect the common source of supply. However, in each of these cases concerning gas units in the Grwinville field, the Court expressly excluded from the decision any consideration and any action with respect to property rights as between lessors and lessees, or with respect to the .extension of primary terms of leases. In other words, the Court declined at that time to determine whether those acts and transactions which served to establish drilling units under the statutes of 1932 and 1936, also served to enforce integration and pooling of mineral interests within such units. That question is squarely *725presented to the Court in the case now under consideration and other pending cases.
The 1932 and 1936 statutes granted to the board general power only with respect to the regulation of drilling and development, without specifying details. This Court has held that in the exercise of that power the hoard established certain drilling units based on spacing regulations. In my opinion, those statutes of 1932 and 1936 did not empower the hoard to force integration and pooling of interests. Furthermore, the hoard did not consider that it possessed that power, nor did it attempt to exercise such power. The effect of the original opinion in the case at bar is to hold that those statutes of 1932 and 1936 empowered the hoard to force integration, and that the board did in fact force integration, even though it entered no order nor took any action which purported to exercise such power. That holding is, in my view, erroneous.
It is recognized that when Unit No. 39 was established, Superior was confronted with a difficult situation, in that only one well could be drilled on the 320 acres, and there was no pooling provision in its • lease. It appears that Superior was in danger of not being able to extend its lease beyond the primary term, because the spacing regulations and the establishment of the unit prevented it from drilling a well upon the land included within its lease. That situation in which Superior found itself seems to have had great weight with the Court, as shown by the original opinion.
It is to be kept in mind that although the board had promulgated spacing regulations requiring drilling units of 320 acres, yet that the actual establishment of the drilling unit was the result of voluntary action of Superior and other interested lessees in taking appropriate steps to designate and establish the unit and obtain hoard approval thereof. When the unit was so established and when it appeared that only one well could he drilled upon the unit, it seems that Superior had several courses of *726action open to it. It might obtain pooling agreements from its lessors and royalty owners. It attempted to do so but was unable to obtain such agreement from Beery. Another recourse was to apply to the board for an exception to the established unit. It appears that this effort was not made. The board’s spacing order contained in the regulation of August 11, 1947, provided for exceptions, “in order to prevent waste or to prevent the confiscation of property”; and that upon the granting of an exception the board would limit production or use other means to offset any advantage which the person securing the exception might have over other producers by reason of the drilling of the well as an exception, and so that the producer of the well drilled as an exception would be allowed to produce no more than his just and equitable share. For aught that appears, Superior might have obtained an exception in order to drill upon the tract in which Beery is interested, to prevent the confiscation of its property by loss of the right to extend the primary term of the lease by drilling.
The other course of action which was open to Superior was to proceed to pool or integrate its interest as lessee with similar interests of. other parties, and proceed to develop the unit as established, receiving its proper portion of the production, whatever that might be. That was the course which Superior followed when it was unable to come to an agreement with Beery with respect to integration of his mineral interest.
Great weight has been given in the original opinion to the fact that Beery is and will be entitled to receive the same material benefits from royalties from the well drilled on the adjoining tract in the unit, as he would have received if a well had been-drilled on the tract in which he owns a mineral interest. The argument based thereon is very persuasive, when this case is viewed upon a practical basis. However, it seems to me that Beery owned and owns a definite title to fifteen mineral acres, which was subject to a lease, expiring on a fixed day, *727unless prior to that date there was production from a well drilled thereon. The property right, including the full mineral interest in said fifteen acres from and after the date of expiration of the primary term, could not be taken away from him and such taking justified upon the ground that the party taking his property was prepared to pay to him an amount of money equal to what he would have received if the lessee had drilled upon the land in which he was interested. In this connection, reference is made to the dissenting opinion of Justice Lee on the original decision of this case. (21 Adv. S. 88, 63 So. 2d 131).
June 8, 1953
There are other propositions involved in this ease, but it is not deemed necessary to set forth my views thereon, since, in my opinion, the suggestion of error should be sustained for the reasons stated.
Lee, J., joins in this dissent.
ON MOTION TO RETAX COSTS
34 Adv. S. 180
65 So. 2d 455
Arrington, J.
 This motion is controlled by the decision in the case of The Superior Oil Company v. Alfred Foote, et al., No. 38562, this day decided.
Motion to retax costs of transcript on basis of 25$ per 100 words sustained, on condition that the Chancery Clerk furnish a correct, amended statement of costs.
All Justices concur, except Hall, J., who took no part.