Court Opinion

ID: 9447587
Source: CourtListenerOpinion
Date Created: 2023-08-03 22:38:20.096175+00
Date Added: 2024-06-11T17:31:06.152789
License: Public Domain

MURRAH, Chief Judge
(concurring).
I agree that this ease is ruled by Panhandle and, being bound by the ruling of that case as this court’s expression of Oklahoma law, I must concur in the af-firmance of the judgment. If I were free, however, to forecast Oklahoma law on the precise point, I should not hesitate to hold that the drilling of the well in question operated to extend the lease beyond its primary term only as to that portion which was included in the established spacing unit on which the well was drilled.
Concededly, the lease in question expired by its own terms for failure to commence a well on some part of it within the primary term, unless modified by operation of law. In this case we are brought to the extreme point of holding that a well commenced and drilled off the leasehold premises, but within a spacing unit which includes only a portion of the lease, operates to extend the primary term of the entire lease, even though the excluded portion may be properly included in other drilling units. We are constrained to this result because of dictum in the Kune case to the effect that pooling of a portion of a leasehold does not *178operate to divide the lease into separate estates, and that a court of equity is therefore powerless to cancel the undeveloped portion not included in the drilling unit.
In Kune, the lessee obtained timely production on a 320-acre lease. Thereafter, the Corporation Commission divided the north 160 acres into drilling or spacing units, including the producing well, but excluded the south 160 acres on which there was no production. The lessor sought cancellation of the lease as to the south 160 acres on the theory that production from a drilling unit containing only a portion of the leased land did not extend the primary term of the lease as to that portion outside the drilling unit. The Oklahoma court held that the pooling, by the Corporation Commission, did not have the effect of creating two leasehold estates, as contended by the lessor; that instead, timely production on the lease operated to extend the primary term “whether production is from the portion of the unit from the lease under consideration or from another portion of the unit.” These latter words do ostensibly indicate that Oklahoma courts would hold with Panhandle, and that case was cited with apparent approval in State v. Carter, Old., 336 P.2d 1086. The important fact remains, however, that Oklahoma has never gone so far as to hold that a well drilled off a leasehold estate, but within a drilling unit containing a portion of it, operates to satisfy the contractual requirements that a well be commenced on the lease within the term. I cannot bring myself to believe that it will do so.
Neither the conservation laws nor the police power of the state are involved in this case. There is no law, rule or regulation, the operation of which would interfere with, or serve to modify, the contract which the parties have made. In the absence of the supervening effect of any such law, rule or regulation I do not believe the courts are empowered to do so by judicial fiat.
Indeed, courts of equity have always been empowered to cancel the entire lease, or any portion of it, for failure to diligently develop, and to permit the lessee to continue to operate the developed portion. Gregg v. Harper-Turner, 10 Cir., 199 F.2d 1; Donaldson v. Josey Oil Co., 106 Okl. 11, 232 P. 821. There is nothing in the Kune case to indicate that such powers are in any way affected by the hypothesis that spacing by the Corporation Commission does not operate to divide the leasehold estate. The legal effect of the Commission’s spacing order and the equity powers of the court to cancel for nondevelopment, in cases like this, are in no way inconsistent. The courts are left to give full force and effect to the regulatory body’s spacing orders, even to the point of validating a lease, or any portion of it, which is within an established drilling unit. I would sustain the traditional equity powers to cancel the undeveloped portion when, as here, the exercise of such powers are not incongruous with the Commission’s orders.