Court Opinion

ID: 3986913
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:43:00.807694+00
Date Added: 2024-06-11T14:18:20.146651
License: Public Domain

I agree with the prevailing opinion that the appellants by complying with the drilling provisions of the lease and failing to discover oil did not thereby have their rights under the lease terminated and that they had the right to continue exploration if they so desired. I cannot agree, however, that in construing the provisions of an oil and gas lease we can do so without bearing in mind the nature of the subject matter. I am of the opinion that the terms of the lease must be interpreted in relation to that subject matter, and the intent of the parties adduced by keeping the objectives of the oil and gas leases in mind.
The leases, both the original and the modified, were given
"for the sole and only purpose of mining and operating for oil and gas and of laying of pipe lines and of building tanks, power stations and structures thereto to produce, save and take care of said products".
Although there is recited in the lease a consideration of one dollar, it is apparent that the real consideration is the exploration, discovery and production of oil and gas, as the only payments provided for are royalties, which of course depend upon discovery and production. The digging of dry wells, no matter how expensive to the lessee, could not be *Page 163 
of any benefit to the lessor. As we have stated the only way the lessor could benefit was by the actual discovery and marketing of oil and gas whereupon he would be entitled to royalties. This being so, even though lessee had fulfilled the express conditions of the lease as to the depth to which it was obligated to drill, it does not mean that he has rights which cannot be abandoned even though under the express terms of the lease notice must be given to the lessor before he is obligated to explore at a greater depth under certain conditions. That provision was no doubt included so that lessee would not be obligated to drill further unless other persons should want to do further exploration work. However, to say that one is not obligated to do certain things and therefore is not breaching a condition of a contract is not the same as saying that by failing to continue exploration for a great number of years plus the removal of all machinery from the grounds which would tend to accomplish that purpose cannot be evidence of an intent to abandon any rights the lessees may have under the lease. Because of the volatile and fugacious character of oil and gas and because of the speculative nature of oil and gas leases, especially in undeveloped territory, abandonment is more readily found in such leases than in leases pertaining to other types of property. Thornton in his "Law of Oil and Gas," Willis, Sec. 242, page 429, states it thus:
"In view of the nature of the subject matter, abandonment will be more readily found in case of oil and gas leases than in most cases."
And in Sec. 508, page 842, the same author says:
"Where the lessee has actually entered and physically abandoned the premises, the proof of such act shows his intention to abandon his rights under the lease."
The court did not make any finding as to whether there was an intent to abandon the rights to explore for oil, and as to the oil provisions of the lease, it is my opinion that this case should have been sent back to the District Court to make a finding as to what the facts were in that regard. *Page 164 
The oil and gas rights in the lease are severable. As to the gas rights, the court did find that there was an intent to abandon. Gas had actually been discovered and marketed but upon depletion of the supply no attempt was made to find more gas on the lands which were the subject of the agreement; instead, all the equipment was sold with the provision that it be promptly removed. Juhan, as the purchaser of the equipment and the assignee of whatever rights the Valley Fuel Supply Company had in the leases, not only promptly removed but immediately sold all the equipment. From these facts and from the fact that Juhan did nothing further to develop or discover new gas the court could reasonably have found Juhan's attempted explanation that he was unable to do further exploratory work because the war in which we were then engaged made it impossible for him to obtain equipment, was insufficient to overcome all the other facts and circumstances surrounding the transaction. Although Juhan under the terms of his contract with the Uintah Gas Company was obligated to remove the equipment he was not obligated to sell it. The fact that he sold it as quickly as he did clearly shows that he had no intention of using it himself and that he did not intend to do any further work on the lands which were the subject of the agreement. An intent to abandon does not depend upon express statements to that effect but can be inferred from acts and conduct. For discussion as to how much weight is to be given under varying circumstances to a cessation of operations and removal of equipment in finding an intent to abandon see Sult
v. A. Hochstetter Oil Co., 63 W. Va. 317, 61 S.E. 307, andBoatman v. Andre, 44 Wyo. 352, 12 P.2d 370. The prevailing opinion points out that in the above cases the terms of the leases ran for a specified number of years rather than as the lease in this case for
"as long and only so long as the Lessee shall fully and timely comply with all and every of his obligations."
However, as I read these cases it isn't the specific provisions of the leases which determine whether there has been *Page 165 
an abandonment but rather what facts and circumstances in oil and gas leases are sufficient to sustain a finding of an intent to abandon. In Boatman v. Andre, supra, the court in saying that abandonment will be more readily found in oil and gas leases than in leases of other kinds of property cites with approval the following from Harris v. Riggs, 63 Ind. App. 201,112 N.E. 36, 39:
"The rights granted under such leases are for exploration and development. The title or interest granted is inchoate until oil or gas is found in quantities warranting operation, and courts will not permit the lessee to fail in development and hold the leases for speculative or other purposes, except in strict compliance with his contract for a valuable and sufficientconsideration other than such development." (Italics ours.)
In the lease in question in the instant case, there is no consideration other than development and I therefore cannot agree with the prevailing opinion that there were not sufficient facts from which the court could have found as it did that there was an intent to abandon the gas rights, even though there are express provisions in the lease for forfeiture, surrender, or notice to continue working. Those provisions are to be considered in determining whether the facts are sufficient to prove an intent to abandon, but they are not conclusive. To my mind the passage of a great number of years and the physical removal of all machinery denoting possession are persuasive factors indicating that the lessee did not consider that further exploration would bring success and therefore decided to withdraw and abandon any rights under the lease.
LATIMER, J., not participating. *Page 166