Nature of the Case
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Facts
P was the holder of an oil and gas lease granted by the State of Nebraska. P acquired the lease on June 13, 1960, and allowed it to lapse on June 13, 1965. D is the owner of the Kenmac 'J' Sand Unit which was formed to increase the ultimate recovery of oil and to prevent waste. The field that composed the Unit had been depleted. Before P had obtained his lease, the lessees commenced studies as to the feasibility of unitizing the field. This involved the merger of all of the interests in the oil pool and the designation of an operator for the unit. D was named the operator. There would have been no recovery of secondary oil without unitization. The Nebraska Oil and Gas Conservation Commission entered an order on April 24, 1961, approving the unit agreement, which provided for the secondary recovery of the oil by waterflooding. All of the working-interest owners in the field except P signed on. This included the owners of more than 80 percent of the royalty interests, including P's lessor. When P refused to join the unit, his Section 16 was excluded from it and P's lessor withdrew its consent. Water flooding was commenced. The introduction of water into an oil reservoir caused oil and water to migrate across lease lines and it is impossible to restrict the advance of the water to lease lines. Because of this encroachment, it is necessary to unitize a field to protect the correlative rights of all those holding interests in the field. The parties stipulated that as of June 6, 1961, there were only 2,254.2 barrels of recoverable primary oil, worth $ 6,063, under P's lease. The amount of oil underlying Section 16 for recovery by secondary methods was stipulated to be 36,624.1 barrels, while the recovery from the entire reservoir was 1,658,955 barrels. It is undisputed that the cost of drilling a well to recover the primary oil on Section 16 was far in excess of $ 6,063. P's engineer stated that in the absence of Kenmac there would not have been any secondary oil recovered on Section 16. P sued D for trespass. P's manager of operations admitted that Kenmac was properly formed; that a common-assessment formula was used for all undeveloped acreages; and that the assessment formula and the amount allocated to P's tract were fair and equitable. If P had joined Kenmac and borne his share of the development and operating costs, his profit would have been $ 27,455, and the State of Nebraska would have received $ 7,377 for royalties. The evidence indicated that if P had drilled his own well, the highest estimate of his profit would be $12,224. The trial court applied the common law doctrine of willful trespass, and entered judgment against D in the amount of $89,933 for the value of the oil drained from Section 16, without the deduction of any development or operating costs necessary to produce that oil. D appealed.
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