Court Opinion

ID: 9562612
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:31:53.45835+00
Date Added: 2024-06-11T09:17:25.466893
License: Public Domain

Herd, J.,
dissenting: I respectfully dissent. This case involves the interpretation of the habendum clause in a mineral reservation which states:
“Excepting and reserving unto party of the first part, its successors and assigns, an undivided one-fourth of all oil, gas and other minerals and mineral rights in, upon and under the above described real estate for a period of twenty years from and after April 25, 1941, and so long thereafter as oil, gas and/or other minerals or any of them are produced therefrom, or the premises are being developed or operated . . .
We have had previous occasions to construe parts of such a clause. In Dewell v. Federal Land Bank, 191 Kan. 258, 380 P.2d 379 (1963), the mineral reservation was an undivided one-half interest in the minerals under the North Half (N/2) of Section Thirty-two (32), Township Thirty (30) South, Range Forty-one (41) West, Stanton County for a term of 20 years and “so long thereafter” from May 13, 1939. The Northwest Quarter thereof was unitized for gas purposes in a lease with three other quarter sections in the area. Gas was discovered in paying quantities on one of the other quarters prior to the end of the primary term and an affidavit of production was filed. The well was completed, shut-in and not connected to the pipeline for a number of years. The owner of the mineral reservation collected shut-in royalty *527payments during that time. In the meantime, the primary term expired. The question presented on appeal was whether shut-in royalty payments were the type of production contemplated in the habendum clause of the reservation which would perpetuate the mineral interest. This court held in Dewell at page 263:
“The payment of shut-in royalty is not the equivalent of ‘production’ or ‘being developed or operated.’ As the land Was not being produced, developed or operated, the mineral interest was not perpetuated or extended beyond the primary term.”
The case turned on that issue. A conclusion could be drawn that if the gas from the unit had been connected with the pipeline, rather than shut-in, prior to the end of the primary term, it would have perpetuated the mineral interest even though the actual well was off the reserved tract.
In Stratmann v. Stratmann, 204 Kan. 658, 465 P.2d 938 (1970), the surface to a 240 acre tract was partitioned leaving the mineral estate undivided. We held production from a well on the premises perpetuates the mineral interest under the entire 240 acres. In discussing the type of production needed to perpetuate a mineral interest, we cited Dewell at page 663 and stated:
“In Dewell a term mineral interest under a half section of land was reserved in a deed. The reservation ran-for a primary term of twenty years and as long thereafter as oil was produced from the premises. The interest was leased and the lease on this half section was unitized with leases on other land. Production was obtained on the other land. There were no producing wells drilled on the half section of land. The court held that production on the other land did not perpetuate the mineral interest on the half section beyond the primary term. To perpetuate the interest production had to come from the half section.”
Our summarization of Dewell went beyond the actual holding. The holding in Dewell did not establish that “production on the other land did not perpetuate the mineral interest on the half section beyond the primary term.” Nor did the court in Dewell conclude that “[t]o perpetuate the interest production had to come from the half section.” That rationale was arrived at in Stratmann, a rationale I view as dictum. The decision in Dewell turned solely on the shut-in royalty question and this court greatly expanded the holding in its summarization in Stratmann. The problem was further compounded in Smith v. Home Royalty Association, Inc., 209 Kan. 609, 612, 498 P.2d 98 (1972), when the court quoted the following passage from Dewell:
*528“The owner of a defeasance mineral interest cannot change the conditions by which the interest is to continue beyond the primary term, by any provision in an oil and gas lease to which the landowner is not a party.”
The court in Smith also quoted the passage included in Stratmann interpreting Dewell.
From those excerpts, the court drew the following erroneous conclusions in Syl. ¶ 1:
“Where owner conveys a mineral interest which was to remain in force twenty-one years and as long thereafter as minerals are produced, and subsequently, successive owner and grantee of mineral interest separately execute lease permitting unitization, gas produced from other land in the unitized area does not fulfill the requirement in the deed that minerals be produced from said lands.”
This court went on to say at page 614:
“We are fully aware that the rules of law stated in Dewell and Stratmann, and here reiterated, are contrary to the rule in Oklahoma and Texas as disclosed by Panhandle Eastern Pipeline Company v. Isaacson, 255 F.2d 669 (10th Cir. 1958), and South. Royalty Co. v. Humble Oil & Ref. Co., 151 Texas 324, 249 S.W.2d 914.
“The rationale of the Texas and Oklahoma cases is appealing; however, the holdings in Dewell and Stratmann have become a rule of property in this state. The rule should not be changed in the absence of other controlling circumstances, even though logic might be effectively presented for a difficult holding.”
There are logical reasons for reversing Smith. Conservation rules and scientific considerations dictate that only one gas well per section can be drilled. The holding in Smith and the majority in this case leaves one who owns a defeasance mineral interest on a quarter section totally without protection. It converts an habendum clause to a meaningless provision. The mineral owner can not protect himself by requiring the lessee to locate the well site on his land because his interest is a minority interest in the section. By court construction we are impairing vested property rights with our tortured definition of oil and gas production. I recommend we adopt the rule established in Oklahoma, stated in Panhandle Eastern Pipe Line Company v. Isaacson, 255 F.2d 669 (10th Cir. 1958), that is, a “so long thereafter” clause be interpreted to mean that production, development or operations attributable to the premises will perpetuate the mineral interest for the life of the production.