Oil and Gas Lease: Continuous Operations Clause; Pooling Clause Pooling and Unitization: Off-Lease Operations Trespass: Damages

摘要

Pioneer is the lessee of a one-year primary term lease that allows for the lease to be extended so long as operations are being conducted. The lease contains a pooling clause so that operations within the pooled unit but off of the leasehold acreage would maintain the lease. During the primary term the lease is amended to allow for the maximum size of a unit to be increased from 320 to 380 acres. Prior to me end of the primary term, the 103.75 acre lease is pooled to form a 378.72 acre unit. A horizontal well permit is issued by the Railroad Commission and 9 days prior to the primary term a well is spudded. The well produces for 5 years and is plugged and abandoned. The lessor then brings this action asserting various causes of action including trespass based on the theory that me pooling is ineffective to extend the primary term. The trial court rules in favor of the lessor. Held: reversed and rendered. The lessor argues that the savings provisions relating to operations require the operations to be on the "land" or the leasehold and are in conflict with the pooling clause. In interpreting the various lease provisions, the court applies the harmonizing canon that attempts to give effect to each and every provision in the lease. In so doing both the pooling clause and the savings provisions can be given effect by allowing the pooling clause to operate in the event of a pooling while requiring operations on the land or lease only when there is not a pooling. Because the trial court issued a summary judgment that the lease had expired, that portion of the judgment must be reversed and the trespass claim dismissed since the lessee is entitled to be on the leasehold premises because of its continuing operations. The lessor also claimed that the lessee is negligent in the drilling of the horizontal well. The sole evidence presented by the lessor is me testimony of a single individual who admitted that he had never drilled a horizontal well. The court finds that the expert's testimony should have been excluded because he was not a qualified expert. In looking at the testimony proffered by the lessee on the issue of negligence, the court finds no admissions that the well had been negligently drilled. The jury verdict finding negligent behavior by the lessee is not supported by any admissible evidence. Therefore that verdict is also set aside. The court also finds that there is no evidence to show that the lessor had been damaged by any actions undertaken by the lessee. The only evidence shows that the well produced all of the recoverable reserves under the lease. Finally, the court finds that the damage award for fraud must also be reversed because there is no evidence to show that the lessor lost any royalties which was the measure of damages it alleged at trial. Since the evidence shows no damage to the reservoir and no further recoverable reserves there can be no lost royalty damages recovery. Without any compensatory damages shown there can be no award of punitive damages.