| Opinion: | Lawson v. Citizen Energy, 2021 OK CIV APP 1 |
| Subject matter: | Quiet title; oil and gas lease cancellation. |
| Date Decided: | April 7, 2020 |
| Trial Court: | District Court of Canadian County (Hesse, J.) |
| Route to this Court: | Final Order on Summary Judgment; Assigned to COCA Division I. |
| Facts: | Operator commenced to drill a well, the McWhirther 1H-14-11, from a surface location in the southeast quarter of Section 14 (“off-unit”) intending to drill a horizontal lateral from south to north, eventually penetrating Section 11. The lateral did not penetrate the Section 11 unit until after the expiration of the Lawson Lease’s primary term, three (3) years. However, commencement operations for the drilling of the McWhirther well occurred on the Section 14 unit before the expiration of the Lawson Lease’s primary term. The parties disputed whether these operations in the Section 14 unit satisfied the commencement of drilling clause in the Lawson Lease. Sections 11 and 14 were pooled and spaced as separate 640-acre units. |
| Standard of Review: | De novo. |
| Analysis: | The parties agreed that Section 14 is not within the legal description of the “leased premises.” The real issue is whether commencement operations to drill on the Section 14 unit satisfies the commencement clause of the Lawson Lease, which contemplates drilling on “acreage pooled” with the Section 11 unit. The Corporation Commission authorized a multi-unit horizontal well for Section 11 and Section 14, two separately spaced and pooled units. The Commission’s authority to regulate horizontal drilling in Oklahoma stems from the Legislature’s enactment of the 2011 Shale Reservoir Development Act (Act). 52 O.S.2011 §87.6 et seq. The application proposes to drill a horizontal well with an extended length lateral to underlie both sections and requests the Commission allocate costs, commingled production, and proceeds based on the respective length of the interval in each section.Sections 11 and 14 are affected units. Therefore, a multi-unit horizontal well drilled in the Section 14 unit is treated as a well in the Section 11 unit. Commencement operations in the Section 14 unit during the Lease’s primary term extended the Lease as a matter of law, provided the well so commenced is completed as a producing well. |
| Outcome: | Affirmed. |
| Vote: | Goree, J (author), Bell, P.J., and Buettner, J., concur. |
| Other: | Issue of first impression in Oklahoma; Petition for Certiorari denied; adopted as precedential authority by Oklahoma Supreme Court. |
