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PURSUE ENERGY CORPORATION v. STATE OIL AND GAS BOARD OF MISSISSIPPI

APRIL 13, 1988

PURSUE ENERGY CORPORATION
v.
STATE OIL AND GAS BOARD OF MISSISSIPPI, ET AL



BEFORE HAWKINS, P.J., PRATHER & SULLIVAN, JJ.

SULLIVAN, JUSTICE, FOR THE COURT:

This appeal calls upon us to determine if interest charges are recoverable as" costs of development and operation, "under Mississippi Code Annotated, Section 53-3-7 (1972), our force-pooling statute.

In 1978 both Shell Oil and Pursue Energy had leasehold interests in the Thomasville Field. Pursue filed a petition requesting that the Oil & Gas Board create two drilling units, force-pool the mineral interests of the non-consenting owners, and designate Pursue as the operator of the units. Shell filed a similar petition, and also asked to be designated as the operator of the units. These petitions were consolidated and the Oil & Gas Board granted Pursue's petition.

 Shell declined to join the units which were created, so its interests were force-pooled pursuant to Section 53-3-7. The Oil & Gas Board set forth those well costs which Pursue could charge to the non-consenting working interest owners of the units. The Board's orders tracked the statute and limited those charges to the following:

 The costs of development and operation of the pool unit chargeable by the operator to the other interest owner or owners shall be limited to the actual expenditures required for such purposes, not in excess of what are reasonable, including a reasonable charge for supervision. . . .

 The wells were completed in early 1979 and production began in October of 1979 after the completion of a gas processing plant for the field.

 A dispute arose when Shell Western and 3300 Corp., successors in interest to Shell Oil Company, objected to Pursue withholding interest expenses. Shell Western and 3300 Corp. filed petitions with the Oil & Gas Board requesting that the Board exercise its authority under Section 53-3-7 to" determine the proper costs "attributable to the non-operating interests.

 The Board concluded" that interest at the legal rate is a proper cost within the meaning of Section 53-3-7, calculated at the legal rate according to Section 75-17-1. "Orders were entered permitting Pursue to recover interest at the rate set out in Section 75-17-1 and ordering Pursue to refund all sums above that amount.

 All parties appealed the Board's order to the Circuit Court of Hinds County. The circuit judge reversed the Oil and Gas Board's order holding that interest charges incurred by Pursue were not recoverable under Section 53-3-7.

 Pursue appeals this order.

 I.

 WAS PURSUE ENTITLED TO RECOVER INTEREST UNDER SECTION 53-3-7 FOR THE DEVELOPMENT OF THE TWO SUBJECT WELLS?

 The statute in question is set out in ...


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