Court Opinion

ID: 3084941
Source: CourtListenerOpinion
Date Created: 2015-10-16 02:34:25.687149+00
Date Added: 2024-06-11T11:50:44.520954
License: Public Domain

Opinion filed July 12, 2012

                                                      In The

    Eleventh Court of Appeals
                                                   __________

                                            No. 11-10-00186-CV
                                                __________

                           EDDIE E. GODFREY ET AL., Appellants

                                                          V.

             CHESAPEAKE EXPLORATION, L.L.C. ET AL., Appellees

                                 On Appeal from the 413th District Court

                                             Johnson County, Texas

                                    Trial Court Cause No. C2005 00551

                                  MEMORANDUM OPINION

         This appeal involves the construction of an oil and gas lease and three documents
involving pooling under that lease. The issue is whether the lease has terminated as to 84.07
acres or whether that acreage remains bound by the lease pursuant to the pooling designations.
Alleging that the lease had terminated as to the disputed acreage, the lessors: Eddie E. Godfrey,
individually, and Eddie E. Godfrey and Jay Ranley Godfrey, co-trustees of the Emmitt I.
Godfrey Marital Trust (Godfrey), sued various defendants. Appellees1 were the only defendants

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           Appellees are Chesapeake Exploration, L.L.C.; Chesapeake Energy Corporation; TLW Investments, Inc.; Chesapeake
Investments, L.P.; Chesapeake Sigma, L.P.; Chesapeake Energy Marketing, Inc.; and EnCana Oil & Gas (USA) Inc.
remaining in the suit at the time of the trial court’s judgment. By agreement of the parties, the
trial court conducted “a trial on stipulated facts” to resolve the issues relating to the expiration of
the lease. The trial court determined that the lease remained in full force and effect and that the
pooled units were properly created under the terms of the lease. The trial court subsequently
held a bench trial, found that the disputed acreage had not been pooled in bad faith, and entered a
final take-nothing judgment against Godfrey. In a single issue on appeal, Godfrey asserts that
the lease has expired as to the disputed 84.07 acres and that the trial court erred in concluding as
a matter of law that the Kasal-Godfrey Unit, which includes the disputed acreage, was properly
formed. We affirm.
         The relevant facts from the parties’ agreed stipulation of facts and the exhibits attached
thereto show that Godfrey and the original lessees entered into an oil and gas lease in 1997. The
primary term of the lease, with extensions, expired on October 17, 2004. The lease contained
provisions for partial termination—terminating as to any acreage that was not allocated to a well
in connection with the formation of a unit under the lease. Godfrey retained all surface rights,
denying ingress and egress to the lessee, but Godfrey bestowed upon the lessee the right to drill
and operate subsurface directional wells. Thus, pooling was required under the terms of the
lease.   The lease provided that “the leased premises are to be utilized solely for pooling
purposes.” With respect to pooling, the lease provided that, to exercise its pooling rights, the
lessee must “file of record a written declaration describing the unit and stating the effective date
of pooling.” The lease further provided:
         Pooling in one or more instances shall not exhaust Lessee’s pooling rights
         hereunder, and Lessees shall have the recurring right but not the obligation to
         revise any unit formed hereunder by expansion or contraction or both, either
         before or after commencement of production . . . . To revise a unit hereunder,
         Lessee shall file of record a written declaration describing the revised unit and
         stating the effective date of revision.
         A Designation of Pooled Unit (DPU) creating the Abbott Unit was executed prior to the
expiration of the primary term of the Godfrey lease and, on October 1, 2004, was filed for record
in the county clerk’s office. The Abbott DPU, with a stated effective date of September 28,
2004, pooled all of the 269.184 acres that were subject to the Godfrey lease with 52.71 acres
adjacent to and generally south of the Godfrey lease. Operations on the Abbott Unit were
promptly commenced and continued until a horizontal gas well began producing in paying
quantities on February 11, 2005.

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       The second DPU at issue in this case created the Kasal-Godfrey Unit; it was executed on
March 1, 2005, had a stated effective date of February 23, 2005, and was filed for record on
March 10, 2005. The Kasal-Godfrey DPU purported to create a pooled unit consisting of 84.07
acres of the Godfrey lease and 84.07 acres of adjacent property to the north of the Godfrey lease.
Operations on the Kasal-Godfrey Unit were promptly commenced and continued until a
horizontal gas well began producing in paying quantities on June 17, 2005.
       The third DPU, an amended DPU for the Abbott Unit, was executed on March 11, 2005,
and filed for record on March 21, 2005. The amended Abbott DPU removed from the Abbott
Unit the 84.07 acres of the Godfrey lease that had been included in the Kasal-Godfrey Unit by
the Kasal-Godfrey DPU. Like the original Abbott DPU, the amended Abbott DPU had a stated
effective date of “September 28, 2004.”
       Godfrey’s argument centers on the effective date of the amended Abbott DPU. Godfrey
argues that, because the amended DPU had a retroactive effective date of September 28, 2004,
the 84.07 acres were not included in the Abbott Unit when the primary term of the lease expired
on October 17, 2004. Godfrey argues that the lease had, therefore, terminated as to the 84.07
acres prior to the execution and filing of the Kasal-Godfrey DPU. We cannot agree with
Godfrey’s contention.
       An oil and gas lease is a contract, and its terms are interpreted as such. Tittizer v. Union
Gas Corp., 171 S.W.3d 857, 860 (Tex. 2005). The construction of an unambiguous lease is a
question of law for the court, whose primary duty is to ascertain the parties’ intent as expressed
within the lease’s four corners. Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550, 554
(Tex. 2002); Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991). Although the lease at issue in
this case provides that the lessee shall file of record a designation stating the effective date of the
pooling or of the revision, the lease contains no provision authorizing the effective date of any
such designation to be retroactive.
       The amended Abbott DPU cannot be read to retroactively remove the 84.07 acres from
the Kasal-Godfrey Unit, nor can the stated effective date of the amended Abbott DPU change
history. On the actual date of October 17, 2004, the Godfrey lease, including the 84.07 acres,
was held in effect by the Abbott Unit pursuant to the original Abbott DPU. Later, but prior to
the execution and filing of the amended Abbott DPU, the 84.07 acres were pooled into the Kasal-
Godfrey Unit pursuant to the Kasal-Godfrey DPU. The trial court did not err in construing the

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lease or the DPUs, in concluding that the lease did not terminate as to the 84.07 acres on
October 17, 2004, or in concluding that the lease remains in full force and effect. Godfrey’s sole
issue is overruled.
       The judgment of the trial court is affirmed.

                                                            JIM R. WRIGHT
                                                            CHIEF JUSTICE

July 12, 2012
Panel consists of: Wright, C.J.,
McCall, J., and Kalenak, J.

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