Court Opinion

ID: 8914715
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:32:16.728272+00
Date Added: 2024-06-11T17:08:52.246687
License: Public Domain

BARRETT, Circuit Judge,
concurring:
I concur in the opinion based on the specific facts of this case. In doing so, I do not believe that in considering the broad discretion issue, we can permit the Superintendent, simply in light of his trust responsibilities to the Indians, to refuse approval of communitization agreements if he concludes that the Indian lands within the proposed unit will fare better economically “outside”.
The Secretary does, of course, owe a fiduciary duty to the Indians to secure the best possible lease-operating terms for them. In the case at bar, the lessee waited until the “last minute”, so to speak, before submitting the communitization agreement to the Superintendent for review. Superintendent Collier was not provided with geologic data or any development plans by the lessee. He had only two days (over a weekend) to review the agreement. He spoke by phone with his realty office, the Interior’s solicitor’s office and the Interior’s energy and minerals department in Denver. It is unfortunate that the “fuse” with which he was confronted apparently did not permit him to consult with the U.S.G.S., the federal agency with the specific expertise to *389evaluate the feasibility of a communitization agreement in terms of orderly development for the benefit of all lessors, or the Utah State Division of Oil, Gas and Mining, whose expertise is likewise utilized in determining the feasibility of a communitization agreement.
Pooling or communitization of leases is often necessary and advisable to properly explore, develop and operate leased premises in order to promote the conservation of oil and gas. Royalty payments from production are pro-rated among the owners of lands pooled. While initial production will often support pooling, the lessee is under an obligation to reasonably develop all oil and gas underlying the communitized acreage. The respective federal and state agencies have jurisdiction, power and authority to enforce the obligation of reasonable development as dictated by geologic and petroleum engineering expertise. Thus, if action is taken by a lessee in adequate time to afford hearings establishing expert justification of the conservation-development aspects of a specific communitization plan, the fact that the Superintendent foresees the likelihood of realizing a substantial bonus payment with possible enhanced reserved royalty coupled with a drilling commitment from another lessee operating company if he refuses to commit an Indian lease to the unit involved would, in my view, be contrary to the public interest. When a lessee-operator has expended usually large sums in drilling and completing an initial producing well, the lessee is entitled to rely on the pooling covenant in the leases if it is determined that further development is feasible. If a communitization of leases is effected, the lessee-operator is subject to implied covenants to reasonably develop the pooled leases, to protect against drainage, to expeditiously and with reasonable care operate, produce and market and exercise reasonable diligence in the exploration and production of oil and gas underlying the pooled acreage.