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ELF AQUITAINE, INC. (FORMERLY AQUITAINE OIL CORP.), ET AL AND FLORIDA EXPLORATION COMPANY, ET AL v. AMOCO PRODUCTION COMPANY AND SABINE CORPORATION

FEBRUARY 26, 1986

ELF AQUITAINE, INC. (FORMERLY AQUITAINE OIL CORP.), ET AL AND FLORIDA EXPLORATION COMPANY, ET AL
v.
AMOCO PRODUCTION COMPANY AND SABINE CORPORATION



BEFORE WALKER, DAN LEE AND ROBERTSON

DAN LEE, JUSTICE, FOR THE COURT:

This is an appeal from a declaratory judgment rendered in the Chancery Court of Jefferson Davis County on July 18, 1983. The appellees had filed a complaint requesting a declaratory judgment to determine the rights of all of the parties to this suit with respect to an oil, gas and mineral lease executed on January 7, 1972, and covering 2505.22 acres in Jefferson Davis County. After several additional parties

intervened, a motion for summary judgment was filed by the defendants. The parties stipulated that the bona fide contention between them involved the rights and legal relations of the parties to the lease, which depended upon the resolution of the issue of whether two parcels of the land in dispute were contiguous or non-contiguous to the remainder. The issue of contiguity relied upon the admission by all of the defendants, with the exception of Placid Oil Company, that two of the parcels of land in question touched only at the corners.

 The motion for judgment on the pleadings and the motion for summary judgment were denied. After trial, the court ruled that the two parcels of land in question were non-contiguous, and that the lease had expired, thus terminating any rights of appellants under the lease. The defendants have appealed that ruling.

 STATEMENT OF FACTS

 Sometime prior to 1972, Robert M. Moon, who represented United States Lumber Company, and Clyde Love, who represented Shubuta Oil Company, began negotiations for various oil, gas and mineral leases. U. S. Lumber wished to lease approximately 54,000 acres of land. However, since the terms of the leases would allow production on any part of a tract to" hold "the entire tract, U. S. Lumber wished to limit each lease to approximately 2,560 acres of land. Accordingly, the company entered into several leases, each representing a different configuration of land within the 54,000 gross acres. It was apparently the intention of both U. S. Lumber and Shubuta to negotiate each lease so that the land in question would consist of adjoining tracts. As was conceded by both sides during oral argument, that intent was realized in all of the leases except for one which is not the subject of this dispute.

 The lease which is the basis for this lawsuit covers the land described as follows:

 Township 6 North, Range 18 West: Section 17: N 1/2 NE 1/4; E 1/2 SE 1/4 NE 1/4; N 1/2 NW 1/4; NE 1/4 SW 1/4; SW 1/4 SW 1/4; Section 18: Entire Section except NE 1/4 SE 1/4 and SE 1/4 SW 1/4; SE 1/4 SW 1/4; Section 19: Entire Section except E 1/2 SE 1/4; Section 20: NW 1/4 NE 1/4; SW 1/4 NE 1/4; E 1/2 NW 1/4; NE 1/4 SW 1/4; N 1/2 SE 1/4; SE 1/4 SW 1/4; S 1/2 SE 1/4; Section 21: NW 1/4 SW 1/4; Section 30: N 1/2 NW 1/4;

 SE 1/4 NW 1/4; SW 1/4 NE 1/4; SW 1/4; SW 1/4 NW 1/4; and Section 31: SW 1/4; S 1/2 NW 1/4; W 1/2 NE 1/4; W 1/2 SE 1/4; W 1/2 NE 1/4 SE 1/4.

 A diagram of the area in dispute follows (land covered by the lease is shaded):

 Because of the problems anticipated in attempting not to hold all of the leases involving other non-adjacent properties, the parties drafted and inserted paragraph two into all of the leases, when, in fact, this particular 2505.22 acre lease did not contain any widely separated tracts. This lawsuit is based on conflicting interpretations of paragraph two of the subject lease. Paragraph two reads as follows:

 2. Subject to the other provisions herein contained, this lease shall be for a term of five years from this date (called" primary term ") and as long thereafter as oil, gas or other mineral is produced from said land or lands with which said land or any part thereof is pooled hereunder, provided that if this lease covers any one or more areas of land which do not have any boundary line in common with any part of any other areas of land covered by this lease, each such area being referred to herein as a noncontinuous area, and if this lease is maintained in force pursuant to any of its provisions for at least two years after termination of the primary term, then as to each noncontinuous area, after the seventh anniversary date of this lease, this lease shall be for a term as long thereafter as oil, gas or other mineral is produced from such noncontiguous area or from lands from which any part of such noncontiguous area is pooled hereunder, provided, further, if upon the seventh anniversary date of this lease oil, gas or other mineral is not being produced on any such noncontiguous area or on acreage pooled therewith, but lessee is then engaged in drilling or reworking operations thereon or shall have completed a dry hole thereon within sixty (60) days prior to the seventh anniversary date, this

 lease as to such noncontiguous area shall remain in force so long as operations are prosecuted with no cessation of more than sixty (60) consecutive days, and if they result in the production of oil, gas or other mineral, so long thereafter as oil, gas or other mineral is produced from such noncontiguous area or from lands pooled therewith.

 By the terms of paragraph 2, the lease may run indefinitely as long as there is production on the land, or ...


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