Stanolind Oil & Gas Co. v. Barnhill

107 S.W.2d 746 (1937)

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Nature of the Case

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Facts

A lease was executed by Ds, J. R. Barnhill and wife and O. B. Carver, to Batson, and the interest claimed by P. t was dated February 4, 1930, and was to continue for a term of five years and as much longer as oil or gas or either of them should be produced from the land by P. The sum of $ 10,000 was paid as cash consideration for the lease, and it contained further provisions for the payment of rentals in the sum of $1 per acre if no well were commenced on the land before February 4, 1931, and like payments annually in the absence of drilling operations. Ps commenced drilling on December 23, 1930, discovered gas, and completed the drilling on March 31, 1931, at a depth of 3,370 feet after plugging back from the total depth drilled of 3,498 feet. There was a potential production of more than 7,000,000 feet of sour gas per day and a pressure of 410 pounds. The well was gauged at intervals of about a month continuously from the date it was completed up to December 5, 1935, when the last test was made and the supply and pressure continued equally as good or better, with a slight increase toward the last portion of the period. No delay rentals were paid. Ps expended about $25,000 in drilling the well, in addition to the $10,000 paid to Ds for the lease. There was no demand for sour gas. Ps made every reasonable effort to market the product but was unable to do so until about October 1935. On the 9th of that month, P made a contract with Phillips Petroleum Company to begin the delivery of gas from the well on December 31, 1935. Ds notified the Phillips Petroleum Company and Ps that the lease had terminated and the Phillips Petroleum Company then declined to take the product of the well until the status of the lease was definitely determined. P sued D. The court ruled for Ds canceling the oil and gas lease and removing the cloud cast upon Ds’ title to the land and vesting the title in them. Ps appealed. Ps contend that they hold a determinable fee in the oil and gas conveyed by the same, which is not terminated by failure to sell the product on account of a non-existing market, there being no abandonment of the lease and, if Ds have a remedy, it is one for damages and not for a cancellation of the lease.