Edmonston v. Home Stake Oil & Gas Corporation

762 P.2d 176 (1988)

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Nature of the Case

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Facts

Ds own a defeasible term mineral interest, an undivided 1/4 interest in and to all oil, gas, and other minerals in the entire three-quarters tract. Ds' interest was to continue 'for a period of the next ten years from June 11, 1956, and as long thereafter as oil and/or gas is produced from these premises or the property is being developed or operated.' The instrument was a mineral deed granting a base or determinable fee in the oil, gas, and other minerals in place. Ds' interest arising from that instrument is a defeasible term mineral interest. In 1962, the Lewis 'C' Well was drilled and completed on the SE/4. The well produced oil and/or gas in paying quantities until plugged and abandoned on April 7, 1973. The parties agree the development, production, and operation of the Lewis 'C' extended beyond the primary term Ds' term mineral interest in the entire tract, the SE/4, and the N/2 of Section 31. P purchased title to the tract in 1979, succeeding to the original grantors' reversionary rights against Ds. On May 24, 1968, the Kansas Corporation Commission (KCC) ordered the unitization of the Nichols Pool in Kiowa County. The unitized area included the SE/4, but not the N/2, of Section 31. Paragraph 3.4 of the agreed upon unitization plan provided operations or production anywhere on the unit shall be considered as operations or production in each tract within the unit, the effect being to 'continue in effect each lease, term royalty, or other agreement as to all lands covered thereby just as if such operations had been conducted and a well had been drilled on and was producing from each tract.' The KCC terminated the Nichols Unit effective November 20, 1984. After the Lewis 'C' Well on the SE/4 was plugged in 1973, no producing oil well or gas well was physically located on the N/2 of Section 31. After the Lewis 'C' Well was plugged there has never been any producing oil well or gas well located or drilled upon the SE/4 of Section 31. The district court held that the statutory unitization extended Ds' defeasible term mineral interests only as to the SE/4 which was included in the unit but not the rest of the land. P appealed and the court certified a question.