CHAPTER 27 HARD TO FIND SOLICITOR'S OPINIONS AND CASES
| Jurisdiction | United States |
(Oct 2014)
HARD TO FIND SOLICITOR'S OPINIONS AND CASES
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SYLLABUS - Extensions - Production - Unit and Cooperative Agreements
Where the non-producing and producing portions of a leasehold are separated into segregated leases upon unitization of only the nonproducing lands at a time when the parent lease is in its extended term because of production, the term of the segregated, unitized, non-producing lease does not expire as long as production continues on the non-unitized portion of the lease.
Preprint
68 I.D. 180
UNITED STATES
DEPARTMENT OF THE INTERIOR
Office of the Solicitor
Washington 25, D. C.
| A-28540 | Decided July 3, 1961 |
Ann Guyer Lewis et al.
Appeal from the Bureau of Land Management
Ann Guyer Lewis has appealed to the Secretary of the Interior from a decision of May 5, 1960, by the Director of the Bureau of Land Management which reversed a decision by the Denver land office holding that oil and gas lease Denver 053302 terminated by operation of law on June 29, 1959. Mountain Fuel Supply Company, the appellant in the proceeding before the Director and lessee under Denver 053302, submitted a brief in this proceeding in support of the Director's decision. Mrs. Lewis filed an application, Colorado 030587, on September 1, 1959, for the lands covered by Denver 053302.
Lease Denver 053302, issued November 1, 1946, was extended under section 17 of the Mineral Leasing Act, as amended, for a period of 5 years ending October 31, 1956 (30 U.S.C., 1958 ed., sec. 226). On March 11, 1956, a producing well was completed and the lease was continued by production beyond its statutory term of years. By land office decision of July 8, 1959, the lands in Denver 053302 were segregated into two separate leases, a portion of the lands having been committed to the Shell Creek Unit Agreement, approved effective June 30, 1959 (30 U.S.C., 1958 ed., sec. 226e; 43 CFR, 1959 Supp. 192.122(c)). The lands which were committed to the unit retained serial number Denver 053302 and the segregated non-unitized lands were given serial number Colorado 029285. It is land in non-unitized Colorado 029285 which contains the producing well that extended the term of the base lease before unit commitment and segregation. There was and has been no production from any other lands covered by the base lease. A land office decision of August 27, 1959, amended the decision of July 8 by holding that segregated lease Colorado 029285 is in a producing status and Denver 053302 is considered to have terminated by operation of law on June 29, 1959, because the producing
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well which extended the lease prior to the effective date of the unit agreement is on nonunitized segregated lease Colorado 029285. Thus, the land office decision held that the effect of committing the nonproducing portion of a producing lease to a unit agreement at a time when the base lease is in an extended term because of production is to terminate the non-producing portion of the lease by operation of law.
Section 17(b) of the Mineral Leasing Act, as amended by the act of July 29, 1954 (30 U.S.C., 1958 ed., sec. 226(e)), provides in applicable part:
Any other lease issued under any section of this Act which has heretofore or may hereafter be committed to any such [unit] plan that contains a general provision for allocation of oil or gas, shall continue in force and effect as to the land committed, so long as the lease remains subject to the plan: Provided, That production is had in paying quantities under the plan prior to the expiration date of the term of such lease. Any lease hereafter committed to any such plan embracing lands that are in part within and in part outside of the area covered by any such plan shall be segregated into separate leases as to the lands committed and the lands not committed as of the effective date of unitization: Provided, however, That any such lease as to the nonunitized portion shall continue in force and effect for the term thereof but for not less than two years from the date of such segregation and so long thereafter as oil or gas is produced in paying quantities.
There is nothing in the statute which specifically provides for the situation presented here.
The Director reversed the land office decision of August 27, 1959, on the ground that in an opinion (M-36592) of January 21, 1960,* the Associate Solicitor for Public Lands held that when the non-producing portion of a producing oil and gas lease, which is then in its extended term by reason of production, is committed to an approved unit plan under which production has not yet been obtained, the segregated unitized portion will continue in effect for the life of production on the non-unitized portion, and thereafter for the life of the unit, if production under the unit plan is obtained before production ceases on the segregated non-unitized portion. In the instant case, the Director held, consistently with the Associate Solicitor's opinion, that unitized lease Denver 053302 did not expire by reason of segregation from the producing portion of the parent lease, but that the unitized lease continues in force end effect during the continuance of production on the non-unitized portion.
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The Associate Solicitor's opinion of January 21, 1960, upon which the Director's decision is based points out that upon commitment of a non-producing portion of a lease which is the in its extended term by reason of production, the 'term' of the committed portion includes the entire, though indefinite, period the parent lease has to run as of the date of its segregation (citing Solicitor's opinion, M-36349, 63 I.D. 246 (1956)).** That is, at the time of separation into two leases as a result of unitization, the parent lease had neither a fixed number of years nor a definite period of time to run; its term was to continue as long as oil or gas was produced in paying quantities. The Director held, in effect, that after segregation by unitization, the non-producing unitized portion of the lease kept the term of the parent lease. Thus, even if there has been no production under the unit at the time of unitization of a non-producing portion of a lease which at the time of unitization is in its extended term by reason of production, the segregated unitized lease continues in effect for the life of production on the non-unitized portion, which is the term of the parent lease. The division of the leased lands at the time of unitization does not change the term of the parent lease, and it is that term which determines the expiration date of the unitized lease (see M-36349, supra).
None of the matters mentioned on appeal provides a basis for modifying the Director's decision. The Director's interpretation, in the circumstances of this case, of the effect of unitization of the non-producing portion of a lease which is in its extended term by reason of production is harmonious with the legislative history of the provision.1 Moreover, to interpret the relevant statutory provision as resulting in the termination of a non-producing segregated portion of a lease upon unitization if the parent lease is in an extended term by reason of production, as is urged on behalf of the appellant, would make the provisions relating to the unitization of such lands quite pointless. The statute will not be so interpreted if this is unnecessary.
Therefore, pursuant to the authority delegated to the Solicitor by the Secretary of the Interior (sec. 210.2.2A(4)(a), Departmental Manual; 24 F.R. 1348), the decision of the Director of the Bureau of Land Management is affirmed.
| (Sgd) | Edward W. Fisher, |
| Deputy Solicitor |
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SYLLABUS - Oil and Gas Leasee: Extensions.
When the law provides for the segregation of an oil and gas lease and that the segregated portion "shall continue in force and effect for the terra thereof but for not less than two years * * *", it means the entire terra of the lease or the period that the lease had to run, whether that period was definite or indefinite, as it existed on the date of the segregation.
UNITED STATES
DEPARTMENT OF THE INTERIOR
Office of the Solicitor
Washington 25, D. C.
| M-36349 | August 10, 1956 |
Memorandum
| To: | Director, Bureau of Land Management |
| Director, Geological Survey | |
| From: | Solicitor |
| Subject: | Extension of the portion of a lease outside of and segregated as the result of the creation of a unit plan |
In connection with the pending proposed Little Eddy Unit Plan in New Mexico, the question has been raised as to the interpretation of the words "the terra thereof" in the following provision of the act of July 29, 1954 (68 Stat, 583):
"Any lease hereafter committed to any such plan (unit plan) embracing lands that are in part within and in part outside of the area covered by any such plan shall be segregated into separate leases as to the lands committed and the lands not committed as of the effective date of unitization: Provided, however, That any such lease as to the non-unitized portion shall continue in force and effect for the term thereof but for not less than two years from the date of such segregation and so long thereafter as oil or gas is produced in paying quantities."
It is my opinion that the words "the term thereof" means the term of the lease as it exists at the time of the segregation, whatever that "term" may then be.
Ordinarily, the word "term" when used with reference to a lease means the entire estate demised by the lease. Sanderson v. City of Scranton, 105 Pac. 469, 472; Hurd v. Whitsett, 4 Colo. 77, 84; Barnes v. Standard Oil Co. of California., 9 P. 2d 1095, 1099 (Wash.); Meander v. Claussen Brewing Assn., 84 Pac. 735; 114 Am. St. Rep. 110; 7 Am. Gas, 536. By
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definition, therefore, the word "term" when used alone applies to the whole estate and not to the fixed period specified...
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