Court Opinion

ID: 9665626
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:53:21.807524+00
Date Added: 2024-06-11T18:15:17.141609
License: Public Domain

*14Jones, J.
This case was originally filed in the Circuit Court of Simpson County but transferred to the- Chancery Court. It was a suit for damages filed by Andreae against Monsanto. On the final hearing a judgment was rendered in favor of ' Andreae for $1,581.93 as compensation for drainage of certain oil alleged to have been drained from lands in which Andreae owned an interest.
The basis of the suit was- that Monsanto was the owner of a lease executed by Andreae on lands in one forty-acre tract. Monsanto, as lessee, had drilled-a well in the adjacent north forty, which well it was claimed was draining oil from under the forty in which Andreae had given his lease. All the lands involved were in Simp*15son. County in Township 1 North, Range 4 Bast. In order to avoid describing further the said forties in land numbers, we here designate them: The forty on which Monsanto drilled a well known as the Ainsworth well, and about which this suit arose, .is the SW1^ of SE]4 of Section 17. Andreae owned a one-half interest in the minerals under the NW]4 of NE]4 less the west 9 acres in Section 20. The dry hole hereinafter mentioned was drilled in the NE% of NW^ of Section'20. The Monsanto forty will. hereafter be referred, to as the Ains-worth well. The NE^ of NW^ri of Section 20 will hereafter be referred to as the Grantham well or forty. The lands under which Andreae held his one-half of thirty-one acre lease will hereafter be described as the Andreae lands.
The suit arises from these facts: Monsanto had a one-half lease on Andreae’s lands and it also had a lease on the Ainsworth forty, as well as on the Grantham forty. In the fall of 1959, Monsanto drilled the Ains-worth well, and a short while afterwards Andreae wrote Monsanto demanding that it drill on his lands, this letter being written after the completion of the Ainsworth well.
On receipt of this letter Monsanto wrote Andreae that while under the words of its lease it had no obligation to drill on Andreae’s land, they were very carefully studying the feasibility of doing so and were hopeful that it would be in a position to advise him shortly as to the plans. Andreae’s letter to Monsanto, was dated February 24, 1960, and the Lion Oil .Company, a division of Monsanto, answered his letter on March 2. On April 15, Lion Oil. Company wrote Andreae that it was of opinion, after a careful study of the matter, that it could not justify a well on any of the acreage covered by Andreae’s lease, but that it had instructed the land department to try-to “farm out” the lease for a. well, but so far its efforts had mot been successful. .However, *16they were continuing an endeavor to secure a farm out. They also advised that the Arkansas Fuel Oil Company, which held a lease on the other undivided one-half interest in said land, was attempting- to farm out its lease.
On May 13, 1960, a farm out letter agreement was made with R. H. Reeves, under the terms of which Monsanto promised and agreed to transfer to Reeves six leases, reserving an override, provided that Reeves, on or before May 15, commenced operations for the drilling of a well in search of oil and gas in the Grantham forty. Said well was to he drilled to a depth of 13,000 feet sub-surface, or to a depth of twenty-five feet in the anhydrite, whichever was shallower. It was agreed that if Reeves complied with such request by drilling said well it would- become the owner of six leases listed in exhibit attached to said letter agreement, which list included the Andreae lease. All of these leases covered lands in and around the Andreae lands.
The testimony showed that Monsanto or its subdivision, Lion, had been trying sincerely to find somebody to take a farm out on this lease but had been unsuccessful.' There is no evidence of bad faith. One of the men, in talking with Andreae himself, suggested that Andreae take it, but he just smiled. The testimony showed that they tried a number of people but found no one that would take the well and drill it until they finally came in contact with Reeves. Reeves did drill the well, and it was a dry hole.
On the trial of the case, there was introduced in evidence by the complainant Andreae an isopach map made by his engineer in which it was shown that in the northwest corner of Andreae’s forty there was indication of oil. In the Andreae forty this indication crossed the said northwest corner of the forty and included a north portion of the nine acres on which Andreae had no interest. On the Grantham forty this map indicated that there were twelve feet of oil sand *17across a considerable part of the north portion. There was only a small part of this twelve foot strip that crossed the northwest comer of Andreae’s land. The Grantham forty, nnder this map made by complainant’s engineer, had the potential for a much better well and for mnch more production than the Andreae forty, and would disclose information as to the probability of recovery on the Andreae lease. The evidence showed there were only abont 25,000' barrels of recoverable oil on the entire forty in which Andreae was interested. Andreae’s proof was to the effect that the Ainsworth well drained abont seventy-five percent of this recoverable oil from the Andreae forty and that another well in which Monsanto was not interested drained approximately twenty-five percent. The proof farther showed that oil at that time had a net valne of $2.70 per barrel, so that the total valne of all the oil that might have been recovered nnder the complainant’s own testimony was less than $70,000. Plaintiff’s testimony farther showed that to drill a well on the Andreae lease wonld cost from $100,000 to $150,000. Other wells in the area had cost mnch more.
The chancellor fonnd that the complainant was entitled to recover $1,581.93 by the following computation: While the Andreae forty had 25,000 recoverable barrels, there were only 12,500 barrels that could be allotted to drainage from Andreae’s lease; that seventy-five percent of the 12,500 barrels, or 9,375 barrels, were drained by the Ainsworth well; that Andreae’s royalty, being one-sixteenth, was equivalent to 585.9 barrels, which at $2.70 per barrel totaled $1,581.93.
Both Andreae and his engineer testified that a reasonably prudent man wonld not have drilled a well on the Andreae forty to recover 25,000 barrels of oil because the expense of drilling and recovery wonld amount to more than the valne of the oil.
Recovery was sought on the strength of Phillips Petroleum Company v. Millette, 221 Miss. 1, 72 So. 2d 176. *18It was contended that because the chancellor found drainage occurred from Andreae’s lease through the Ains-worth well owned by Andreae’s lessee, the said lessee was liable to Andreae regardless of every other fact. It is insisted here that was the holding in the. Millette case. We do not agree that such was the holding. It is true that in Millette the Court said that neither the rule of capture nor the prudent operator rule was applicable to that case under the facts there. That was, however, a very different case from the case we have here. As stated by Judge Hall, the appellant’s position in that case was entitled to scant consideration in a .court of equity because Phillips had refused to drill a well on appellee’s land, contending that no oil could be produced from it, and had also refused to cancel the lease so that the lessor might undertake to find some other operator. to drill, and after refusing this, had further declined to accept a substantial consideration for cancellation of the lease. Phillips refused to do anything* and refused to let anybody else do anything to ascertain whether there was any oil on Millette’s land. We do not have such a case here. Also, in the Millette case, the chancellor found that Phillips had drained $Í00,000 worth of' oil from Millette’s land, and this Court held such was a substantial amount. It also found.,that a well could have been drilled for $70,000 which would have left Phillips a profit after drilling and after paying Millette his royalty.
 Here we have no such situation. It is claimed in this case that the amount of oil under . Andreae’s entire forty was only 25,000 barrels, worth probably half the cost of drilling a well. The Millette case did. not maké .the prudent operator rulé inapplicable to any case except one with analogous. faets to .it, .which is not this cáse. There was no evidence of .bad faith on Monsanto’s part. It tried to have exploration made in the southern area to discover whether there, yas oil *19there, and in order to do so gave np six of its leases and thereby induced the drilling of a well offsetting Andreae’s property to the west. In the oil business, and in determining the rights of people, there must he some guide by which to go. The guide developed through the decades is the prudent operator rule. It is essential as a standard, just as the conduct of a reasonably prudent man is essential in negligence cases. It is shown without doubt that a prudent operator would not have drilled on Andreae’s forty.
 There is another question involved. As shown by the Millette case, the drainage must be substantial, and the question is, what is a substantial drainage? Substantial is a relative term and the meaning of it is to be determined with regard to all of the surrounding facts and circumstances.  In this case, it is shown beyond question that to recover the oil under Andreae’s lease would have cost more than it was worth. Suppose Monsanto had surrendered the lease to Andreae on first contact. Andreae could not have done anything with it. If he had drilled to recover the amount of oil there he would have lost money. Under this circumstance, we do not think there was any substantial drainage.
For the reasons aforesaid, this case is reversed and judgment entered here for’appellant.
Eeversed and judgment here for appellant.
McGehee, G. J., and Lee, Kyle, Gillespie and Rodgers, JJ., concur. Arrington and Ethridge, JJ., took no part. McElroy, J., dissents.