Court Opinion

ID: 8880078
Source: CourtListenerOpinion
Date Created: 2022-11-26 20:17:58.127755+00
Date Added: 2024-06-11T17:06:35.930018
License: Public Domain

HOLLOWAY, Circuit Judge
(dissenting).
I respectfully dissent. To me the appeal turns on a pure question of law under the Chevron lease. I conclude that it gave Chevron the right to continue the lease in force by the operations it conducted and that Chevron was entitled to judgment.
The rights of the parties are decided by paragraph 5 of the lease. It is undisputed that within three months before expiration of its primary term the Ozark No. 1 Barlow well was completed as a dry hole; that within three months after this, the Chevron No. 1 Barlow well was commenced, being completed as a dry hole; and that, within three months again, the Chevron No. 2 Barlow well was commenced, being completed as a producing well. These steps complied with the conditions of paragraph 5, in my opinion. That paragraph reads as follows:
“If at any time or times after the primary term or within three (3) months before expiration of the primary term, all operations and all production hereunder shall cease for any cause, this lease shall not terminate if lessee shall commence or resume drilling or reworking operations or the production of oil or gas within three (3) months after such cessation.”
The majority opinion concludes that for paragraph 5 to come into play, both operations and production had to exist previously which was not the case. The inference is drawn from the reference to cessation of “all operations and all production.” The majority opinion further reasons that in any event the provision is ambiguous and to be construed in the light of extrinsic evidence and against Chevron. I agree that there is an uncertainty of meaning in the single phrase “all operations and all production,” but cannot concur in the conelu*694sion of the majority opinion or that the lease as a whole is ambiguous.
The majority interpretation is grounded primarily on an inference from this one isolated phrase and conflicts with plain words immediately following. There, among other things, the right is given the lessee to prevent termination of the lease if the lessee shall commence production within the three months period. An inference that production had to exist previously makes such a right meaningless. Moreover, the term “commence” appears in the phrase “commence or resume.” Thus, it appears clear that the term was used deliberately and with recognition of the distinction between circumstances that had previously existed, and those that had not. Such an inference that production had to exist previously for paragraph 5 to operate will not square with the remainder of the instrument, and violates the cardinal rule that the written instrument be so construed, if possible, as to harmonize and give effect to all its provisions. Studebaker Bros. Co. v. Mau, 13 Wyo. 358, 80 P. 151, 153 (1905); Frankfort Oil Company v. Snakard, 279 F.2d 436 (10th Cir. 1960), cert. denied, 364 U.S. 920, 81 S.Ct. 283, 5 L.Ed.2d 259 (1960).
The phrase “all operations and all production” appears to me to be an imperfect shorthand way of describing all the circumstances that would otherwise extend the lease under paragraph 2. In the single phrase there is uncertainty, but to me its ambiguity is resolved by fairly clear terms in the remainder of the lease, so that the instrument is not ambiguous as a whole and resort need not be made to extrinsic evidence. Dipo v. Ringsby Truck Lines, 282 F.2d 126 (10th Cir. 1960). Likewise the conclusion that the term “operations” in paragraph 5 means only operations in connection with actual production seems to me to clash with the recognition in several provisions in the lease of the distinction between activities related to production and other operations. Cf. Statex Petroleum v. Petroleum, Inc., 308 F.2d 815, 819, 96 A.L.R.2d 315 (10th Cir. 1962).
Concluding that Chevron complied with the terms of paragraph 5 by an interpretation that is fairly clear, I would hold that Chevron preserved its rights under the lease and is entitled to judgment.