Petition — Ellis v. Arkansas Louisiana Gas Co.

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‘39-1278 1, = FEB 11 1980

FTCHACL NOLAN, JR., CLERK

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Inthe Supreme Court of the United States

OcToBEeR TERM, 1979

No. 78-1453

JAMES C. ELLIS and

WANDA LOU ELLIS, his wife,

Petitioners,

VERSUS

ARKANSAS LOUISIANA GAS COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

JACK R. BARD

1411 Classen Blvd., Suite 344

Oklahoma City, Oklahoma 73106

Counsel for Petitioners

February, 1980

UTTERBACK TYPESETTING CO.— PHONE 235-0030 — 3740 S. HOLLIDAY AVE. — OKLA. CITY, ORLA. 73115

TABLE OF CONTENTS

BESSA ee 1

BR eR ec et 2

QUESTIONS PRESENTED 2

CONSTITUTIONAL PROVISIONS INVOLVED __. 2

STATEMENT OF THE CASE . 3

REASONS RELIED ON FOR THE ALLOWANCE OF

THE WRIT 3

CONCLUSION 5

APPENDIX:

Opinion of the U. S. Court of Appeals (10th Cir.),

dated Nov. 13, 1979 A-1

Memorandum Opinion of the U.S. District Court

for the Eastern District of Oklahoma, dated Mar.

31, 1978 A-9

nade:

TABLE OF AUTHORITIES

-—-__e

Cases

Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82

L.Ed. 1188, 114 A.L.R. 1487 (1938) _

Leach v. West, 504 P.2d 1233 (Okl. 1972).

Marcias v. Guymon Industrial Foundation, 595 P.2d

oe 35. ve

St. Louis-San Francisco Ry. Co. v. Walter, 305 F.2d 90

(10th Cir. 1962)

Statutes

12 O.S. 1971, Sec. 93 Bees, camer =

Rules

Supreme Court Rule 19(1) (b)

PAGE

a

In the

Supreme Court of the United States

OcTOBER TERM, 1979

No. 78-1453

JAMES C. ELLIS and

WANDA LOU ELLIS, his wife,

Petitioners,

VERSUS

ARKANSAS LOUISIANA GAS COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS .

FOR THE TENTH CIRCUIT

Petitioner respectfully prays that a writ of certiorari

issue to review the final judgment of the United States

Court of Appeals, Tenth Circuit, entered herein on the 13th

day of November, 1979, affirming the decision of the United

States District Court for the Eastern Disirict of Oklahoma,

which decision was entered the 3lst day of March, 1978.

Said judgment was in favor of the defendants-respon-

dents herein, and against the plaintiffs-petitioners herein.

OPINIONS BELOW

The order of thé Court of Appeals was accompanied

by a published opinion appended hereto at page A-1 and is

reported at 609 F.2d 436.

a

The order of the district court was accompanied by

a memorandum opinion appended hereto at page A-9 and is

reported at 450 F.Supp. 412 (E.D. Okla. 1978).

JURISDICTION

The final judgment of the United States Court of Ap-

peals for the Tenth Circuit was entered the i3th day of

November, 1979. Jurisdiction of this Court is invoked pur-

suant to U.S. Supreme Court Rule 19(1) (b)

“(b) Where a court of appeals has . . . decided an

important state . . . question in a way in conflict with

applicable state... law...”

QUESTIONS PRESENTED

1. Where adverse possession is based upon color of

title can one acquire a prescriptive right if that color of

title was a void lease agreement?

2. Where adverse possession is based upon hostility

can one acquire a prescriptive right if one claims the prop-

erty was used under a lease agreement?

CONSTITUTIONAL PROVISIONS INVOLVED

Where jurisdiction of the federal court is based upon

diverse citizenship of the parties the federal court is bound

to following the decision of the state court in which it is

sitting. See Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct.

817, 82 L.Ed. 1188, 114 A.L.R. 1487 (1938).

-

STATEMENT OF THE CASE

Petitioners, the plaintiff below, is a landowner. Re-

spondent, defendant below, was a leasehold owner.

Respondent used petitioners’ land in which to store

natural gas since 1946. The mineral and surface estate was

severed in 1945. Petitioners purchased the surface in 1963.

Petitioners sought damages for the unauthorized storage of

natural gas by the respondent.

Respondent claimed the right to storage via a lease.

The lease did not convey any storage rights.

REASONS RELIED ON FOR THE

ALLOWANCE OF THE WRIT

The United States District Court for the Eastern Dis-

trict of Oklahoma made a ruling on adverse possession

which was subsequently affirmed by the United States

Court of Appeals, Tenth Circuit, which ruling is contrary

to the law of Oklahoma.

The trial court cited the applicable Oklahoma rule of

law on how to obtain title by prescription but failed to

take into account that prescriptive title must be hostile.

That is, there must be a claim of ownership.

Even in the case of Leach v. West, 504 P.2d 1233 (Okl.

1972), which stated:

“Fact that adverse claimant was mistaken as to true

boundary line and was not aware that he was en-

croaching upon lands owned by others did not pre-

clude claimant from acquiring the disputed tract by

prescription if, under claim of right, he occupied and

a

had possession of the tract openly, peaceably, and ex-

clusively for more than 15 years.” Leach v. West, 504

P.2d 1233 (Okl. 1972).

That was a claim of right. One does not and cannot

acquire title by prescription by accident. In a most recent

decision by the Supreme Court of Oklahoma, May 15, 1979,

in the case of Marcias v. Guymon Industrial Foundation,

595 P.2d 430, it states:

“Adverse occupancy cannot be predicated on per-

missive possession.” 12 O.S. 1971, Section 93 (4).

The transcript of the proceedings does not reflect any

claim of ownership and neither do the briefs on appeal to

the Tenth Circuit.

There can be no prescriptive title obtained by permis-

sion. A lease is nothing more than a permissive use of

land. If one claims under a lease one cannot later claim

that lease gave rise to ownership. Claim under a lease and

claim of ownership are necessarily contradictory by their

own definition.

Without a claim of ownership, there can never be any

adverse possession. In the case of St. Louis-San Francisco

Ry. Co. v. Walter, 305 F.2d 90 (10th Cir. 1962), it states

this rule as follows:

“Railroad’s claim of title by adverse possession to

right of way, for which railroad had been granted an

easement, could arise only when railroad asserted a

right greater than that granted by the easement.”

In other words, if one has an easement one must later

claim ownership, for the easement is a permissive use of

the land.

pr Te

In the case at Bar, the lease was a permissive use of

land. That although the use was actual, open, notorious,

peaceable and exclusive, it was never adverse and hostile.

Since there was no claim of ownership until pre-trial in

this case in the District Court, there can never be adverse

possession.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

JACK R. BARD

1411 Classen Blvd., Suite 344

Oklahoma City, Oklahoma 73106

Counsel for Petitioners

February, 1980

APPENDIX

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

| [Filing Stamp omitted in printing)

JAMES C. ELLIS and

WANDA LOU ELLIS, his wife

Plaintiffs-Appellants,

v. No. 78-1453

ARKANSAS LOUISIANA GAS

COMPANY,

i ie de a a

Defendant-Appellee.

Appeal from the United States District Court

For the East-rn District of Oklahoma

(D.C. No. 76-211-C)

Jack R. Bard, Oklahoma City, Oklahoma, (Charles B. Gre-

then, Purcell, Oklahoma, on the brief ) for Plaintiffs-Ap-

pellants.

William D. Curlee, of Lytle Soulé & Emery, Oklahoma City,

Oklahoma, for Defendant-Appellee.

Before DOYLE, BREITENSTEIN and LOGAN, Circuit

Judges.

LOGAN, Circuit Judge.

This appeal is from the judgment in a diversity suit

brought by James C. and Wanda Lou Ellis against Ar-

kansas Louisiana Gas Company (Arkla). Plaintiffs, who

own the surface rights to certain land in Oklahoma, sought

damages and injunctive relief for the allegedly unauthor-

ized storage of natural gas by Arkla in strata underlying

their property. Arkla was using the strata for storage under

leases from the mineral fee owners.

A-2

(APPENDIX)

The district court held that the mineral fee owners did

not own the strata or have the right to lease it for storage

and therefore could not give Arkla the right to storage use.

The court also determined that an easement for pipelines

and gas injection wells on the surface granted to Arkla by

the Ellises did not give the right to. store gas under that

property. But the court found Arkla had acquired an ease-

ment by prescription for storing the gas. Ellis v. Arkansas

Louisiana Gas Co., 450 F.Supp. 412 (E.D. Okla. 1978).

The issues on appeal concern only the court’s conclu-

sion that Arkla acquired a prescriptive easement. No one

contests the other determinations.

Because the facts are fully described by the trial court

in its memorandum opinion, 450 F. Supp. at 414-19, we will

only summarize. In 1963 the Ellises acquired the surface

rights to 76 acres of land in Pontotoc County, Oklahoma;

in 1972 they acquired the surface rights to an additional

2% acres. Severance of the surface and mineral estates

had been effected by their predecessors in title in a series

of convyances, the last occurring in 1945. Prior to sever-

ance the owners of the tracts leased the right to produce

natural gas from the underlying strata, and the natural gas

was totally depleted by 1928. Since then the strata has

been used for gas storage. The record contains gas storage

leases, dated in 1946 and 1947 executed by the mineral in-

terest owners, purporting to lease to Southwest Natural

Gas Company the subsurface strata for the purpose of stor-

ing natural gas. The leases contained a 1978 expiration

date. No surface owner participated in the execution of

any gas storage lease. Arkla thereafter acquired South-

west’s rights and has continuously used the substrata for

gas storage since 1949. The gas storage lease under the

larger tract was recorded in the office of the County Clerk

of Pontotoc County in 1947; the lease under the smaller

tract was similarly recorded in 1952.

In April 1976 Arkla brought a condemnation action in

_ Oklahoma district court against several surface owners; in-

A-3

(APPEN Ox?)

cluding plaintiffs, seeking to acquire by condemnation the

rights to subsurface storage. The Ellises brought the pres-

ent suit against Arkla in June 1976 in state court, from

which Arkla removed it to the United States district court.

I

Plaintiffs first contend the trial court erred in reach-

ing the prescription issue, which was neither pleaded nor

mentioned in the pretrial order. Arkla freely concedes the

issue was not raised formally, but asserts the trial court

correctly concluded: the issue had been tried with the im-

plied consent of the parties. See 450 F.Supp. at 423.

Fed. R. Civ. P. 15(b) provides, “[w]hen issues not

raised by the pleadings are tried by express or implied

consent of the parties, they shall be treated in all respects

as if they had been raised in the pleadings.” Whether an

issue was tried by implied consent is to be determined by

the trial court, whose finding will not be disturbed absent

a showing of abuse of discretion. See déHaas v. Empire

Petrol. Co., 435 F.2d 1223, 1229 (10th Cir. 1970); Simms v.

Andrews, 118 F.2d 803, 807 (10th Cir. 1941). The test for

determining whether the pleadings should be deemed

amended is whether the opposing party had a fair op-

portunity to defend and whether it could offer additional

evidence if the case were retried on the different theory.

deHaas, 435 F.2d at 1229.

Pursuant to the trial court’s request, and more than

three weeks before trial, the parties filed proposed findings

of fact and conclusions of law. Paragraph twelve of Arkla’s

proposed conclusions of law stated that

[e]xcept for the fact that defendant and its. predeces-

sors were using the well for gas injection and the

Upper Cromwell Sand for gas storage under express

grants from plaintiffs and their predecessors, defend-

ant long since would have acquired the prescriptive

right to do so, all other elements of adverse ——

having been shown by the evidence. .. -

A-4

C&P PENDEX)

(Emphasis added). This paragraph is sufficient to provide

plaintiff with notice that evidence bearing on the pre-

scriptive rights issue would be offered at trial by Arkla.

Plaintiffs did not object to the proposed conclusion, or to

the introduction. at trial of substantial evidence directly

relevant to this issue. Plaintiffs objected to the prescrip-

tive rights consideration only in a post-trial brief solicited

by the court. Although plaintiffs claim to be prejudiced by

the court’s consideration of the issue, they have not shown

lack of a fair opportunity to defend or the existence of any

evidence not already in the record that they would have in-

troduced in opposition to the prescriptive easement theory.

Implied consent may not be inferred merely because

evidence relevant to a properly pleaded issue incidentally

tends to prove a fact not within the pleadings. See, Simms

v.. Andrews, 118 F.2d 803, 807 (10th Cir. 1941). Plaintiffs

apparently contend the evidence supporting the prescrip-.

tive rights claim was relevant to their request for injunc-

tive relief, i.e, whether Arkla’s use of the storage strata

was willful and continuing. Arkla admitted in its answer,

however, that it had intentionally used the storage strata

under the leases executed in 1946 and 1947. Thus, Arkla’s

,willful use of the strata was never a contested matter.

Moreover, most of the evidence relied upon by the court

on the prescriptive issue was introduced by Arkla, not the

plaintiffs, in support of its continuing assertion of the right

to store the gas. 450 F. Supp. at 423. From our review of

the record, we hold that the trial court did not abuse its

discretion.

II

Plaintiffs next contend that Arkla is estopped from

claiming a prescriptive easement because of the doctrine

of preclusion against inconsistent positions in judicial pro-

ceedings. In the state court condemnation proceeding Arkla

alleged that the Ellises owned the interests in the storage

strata at issue in this case. Applying the governing princi-

_ ples of Oklahoma law, we hold Arkla’s claim is not barred.

A-5 me

[APPENDI2&}

To avoid repetitious litigation and to protect justifiable

reliance on opposing parties’ positions in litigation, the Ok-

lahoma courts have fashioned the doctrine of preclusion

against inconsistent positions in judicial proceedings. See,

e.g., State ex rel. Hunt v. Liberty Investors Life Ins. Co.,

543 P.2d 1450 (Okla. 1975); Magnolia Petrol. Co. v. Ouart,

200 Okla. 258, 192 P.2d 698 (1947). For a position asserted

in one judicial proceeding to be barred because of litigation

in a prior proceeding, it must be shown that

. (1) The inconsistent position first asserted must

have been successfully maintained; (2) a judgment

must have been rendered; (3) the positions must be

clearly inconsistent; (4) the parties and questions must

be the same; (5) the party claiming estoppel must

have been misled and have changed his position; and

(6) it must appear unjust to one —" to tore the

other to change.”

Halliburton Co. v. Scroggins, 520 P.2d 667, 669 (Okla. 1974),

quoting 28 Am. Jur. 2d Estoppel and Waiver § 70.

We think the positions are not clearly inconsistent.

Arkla’s claim for the underground storage rights was only

for a limited period expiring in 1978, measured by the

length of the term in its leases from the mineral estate

owners. It made no claim of a right to possess beyond

that date without a new lease from an appropriate lessor

or the condemnation judgment. It is simply trying to avoid

liability for the storage use before the 1978 expiration date.

Also, Arkla’s allegation in the condemnation case that the

Ellises owned the storage strata or an interest therein does

not necessarily exclude the assertion of its ownership of

an easement. An easement by definition is an interest in

property owned by someone else. 2 AMERICAN Law OF

Property § 8:4 .(A.J..Casner ed. 1952). ~ :

Further, there is no evidence olaintiffs ¥ were misled or

changed positions. Plaintiffs’ assertion they would not have

incurred the. expenses of maintaining the present action

A-6

{[APPENDIX)

had not Arkla included them in the condemnation proceed-

ing is without merit. It amounts to an argument they

would have acquiesced in Arkla’s continued possession had

not Arkla called their rights to their attention, and now

Arkla should. be punished for having done so. Considering

that Arkla undoubtedly had discovered the unsettled state

of the Oklahcma law concerning who had the right to lease

the strata for storage, and its lease from the mineral estate

owners was about to expire, Arkla took the only prudent

course by joining the Ellises in its condemnation action

when it could not acquire their interests by purchase. This

is not a case in which the doctrine of preclusion against

inconsistent positions should apply.

III

, Finally, plaintiffs contend the trial court’s determina-

tion that Arkla acquired an easement by prescription. was

clearly erroneous. We do not agree.

Under Oklahoma law, an easement may be sedubedk by

prescription. Frater Okla. Realty Corp. v. Allen Laughon

Hardware Co., 206 Okla. 666, 245 P.2d 1144 1147 (i952).

The elements that must be shown are generally the same

as required for claiming acquisition of a fee simple title

by adverse possession. Zimmerman v. Newport, 416 P.2d

622, 629 (Okla: 1966). In the instant case the trial court

found that

[t]he evidence of knowledge on the part of plaintiffs

and their predecessors in title of actual, adverse, open,

,; notorious, peaceable, exclusive and hostile possession

- by defendant of the Ada Gas Storage Facility for a

period of time far in excess of 15 years is overwhelm-

450 F. Supp. at 425. This finding will not be disturbed un-

less it is,shown to be clearly erroneous. Fed. R.. Civ. P.

52.(a).

A-7 fi ae

(APPENDIX)

Plaintiffs argue that Arkla’s possession of the storage

strata was not hostile to the true owners, relying on Chap-

man v. Tiger, 356 P.2d 571 (Okla. 1960). Chapman, how-

ever, was a tacking case wherein the court held that time

served as a tenant under a lease from a nonowner could

not be added to his subsequent possession of the land as

fee owner under a void tax deed. In the instant case Arkla

entered under color of title — its own leases from the min-

eral estate owners — never claiming more than its rights

under the leases, and occupied thereunder for more than

fifteen years contrary to the true owners’ rights to pos-

session of the substrata. Cf. Brewster v. Herron, 267 P.2d

143 (Okla. 1952) (possession under a deed purporting to-

convey title is holding adversely under color of title).

Prescriptive easements may be acquired for different

durations. See 25 Am. Jur.2d Easements & Licenses § 99

(1966). In this case, Arkla’s claim under color of title was

limited to the terms of the leases; thus; the prescriptive

easement would be limited to that period also. See RE-

STATEMENT OF Property § 461 (1944). While occupancy by

Arkla as tenant might assist its lessors to establish fee

ownership to the substrata, see Christ Church Pentecotal

v. Richterberg, 334 F.2d 869 (10th Cir. 1964); Redwine v.

King, 366 P.2d 921 (Okla. 1961), we have before us only

the claim of the tenant to be free of liability to Pisin ine

for its occupancy.

The evidence recited in the trial court’s opinion of the

open, continuous, adverse and notorious nature of the pos-

session is very strong. See 450 F. Supp. at 424. We'do not

consider Arkla’s providing free gas to the surface dwelling

as constituting recognition of the surface owners’ superior

rights in the storage strata, or as rendering such possession

nonexclusive. The provision of free gas apparently. derived

from a 1916 lease (according to Mr. Ellis’ testimony) or

from a requirement in the mineral estate owriers’ 1947 lease

to Arkla to supply a house on the surface. Ellis testified

at trial] the free gas was not paid by Arkla for his con-

oOo CF FP TUBS ISOS Bs wh 2 FH

A-8

(APPENDIX)

tinuing consent to storage. That Arkla provided gas to the

surface owner does not amount to sharing possession and

' control of the gas stored under the ground.

-. The offer to buy gas storage rights from the surface

owners in 1973 or 1974 may be construed as an offer to

settle rather than litigate the respective rights of the parties.

But even if it is not so construed, the offer was made after

the prescriptive period had run. An offer to purchase or

an admission of superior position made during the pre-

scriptive period may be fatal to a claim of adverse pos-

session, Rose v. Roberts, 195 Okla. 687, 161 P.2d 851, 853

(1945), but not if made after the period has run, 28 C.J.S.

Easements §13f (1941). Such conduct is admissible evi-

dence on the question of hostility, id., but we cannot say

the trial court’s finding of hostility was clearly erroneous.

Plaintiffs also contend that Arkla’s acquisition from

them in 1967 of an easement for pipelines and injection

wells on the surface of the larger tract evidences lack of

hostility concerning the storage strata. This argument is

without merit.. As found by the trial court, even if plain-

tiffs did not own the storage strata Arkla would have had

to secure the rights from plaintiff.to use the surface in this

manner. |

Finally, plaintiffs contend there was no evidence that

Arkla’s use of the storage strata under the second and

smaller tract, acquired by plaintiffs in 1972, was open, visi-

ble and notorious. The court found, however, that Arkla

actually possessed the strata under both tracts and that

plaintiffs and their predecessors knew of the gas storage

use. Also Arkla was claiming under color of title based

upon two recorded leases, one for each tract. Even though

no evidence was.adduced to show open and visible use of

the smaller tract, the court could justifiably conclude that

plaintiffs had sufficient notice of the possession of the gas

Storage strata to satisfy this requirement: See 25 Am.

Jur. 2d Easements & Licenses § 60 (1966).

A-9 a eee

[APPENDIX

IN THE UNITED STATES DISTRICT COURT .

FOR THE EASTERN DISTRICT OF OKLAHOMA

{Filing Stamp omitted in printing}

James C. Extis and Wanpa Lov ELLIS, )

Plaintiffs, )

-vs- ) No. 76-211-C

)

ARKANSAS LOUISIANA GAS COMPANY, )

; Defendant. )

MEMORANDUM OPINION

The principal question in this case has not been de-

cided in Oklahoma and remains undecided in the over-

whelming majority of jurisdictions in the United States.

The question is: when the oil, gas and other minerals have

been severed by conveyance from the fee simple estate in

a tract of land, and subsequent to severance naturai gas is

injected in and under that tract of land as a part of an

underground gas storage reservoir, from whom must the

injector secure permission to store natural gas?

Plaintiffs, James C. Ellis and Wanda Lou Ellis, his wife,

are the surface owners of approximately 78 acres of land in

Pontotoc County, Oklahoma. They seek to recover damages

and injunctive relief for the unauthorized use by defendant

of an underground strata of plaintiffs’ land for the storage

of natural gas. Plaintiffs also seek damages for the un-

authorized use of an injection well located on plaintiffs’

land and claim that an easement given by plaintiffs to de-

fendant which grants defendant the right to operate a gas

injection well on plaintiffs’ land should be rescinded for

lack of consideration. Mr. Ellis will sometimes be referred

to herein as plaintiff. . 3

The defendant denies any liability to plaintiffs, claims

it has the right to inject gas by virtue of certain oil and

gas leases, gas storage leases and the gas injection ease-

A-10

(APPENDIX)

ment granted to defendant by plaintiffs. Defendant further

claims that plaintiffs’ action is barred by the doctrine of

prescription.

The case was tried to the court without a jury. At

trial neither side introduced into evidence the instruments

which effected the severance of the oil, gas and other min-

erals from the surface and because the court viewed the

record as incomplete without such instruments, the court

invited counsel to submit them for the court’s consideration

and to make them part of the record. By stipulation filed

on November 22, 1977, counsel so stipulated.

Plaintiffs acquired the surface of approximately 76

acres of the land in question in 1963, referred to in this

action as Tract. I; they acquired the surface of approxi-

mately 21% acres of the land in question in 1972, referred

to in this action as Tract II (Tr. 5 and 19). The surface of

Tract I had been severed from the oil, gas and other min-

erals in 1939 in a deed from O. W. Skirvin to Eunice David-

son which reserved to Skirvin all of the oil, gas and other

minerals (Stipulation filed November 22, 1977). Eunice

Davidson conveyed the surface of Tract I to her son, Glen

D. Davidson, in December of 1962 or January 1963 (Tr.

117) and shortly thereafter in 1963 Davidson conveyed the

surface of Tract I to plaintiffs (Tr. 5 and 120).

The surface of Tract II was severed from the oil, gas

and other minerals in a series of deeds commencing in 1921

with a complete severance of all oil, gas and other minerals

from the. surface being effected on July 16, 1945. Plaintiffs

have always been surface owners only; they have never

been the owners of the oil, gas and other minerals in and

under Tracts I and II (Stipulation filed November 22, 1977).

In 1928 the predecessor in title of defendant secured

gas leases from the then owners of Tracts I and II. These

leases did grant, lease, let and demise unto the lessee for

“the sole and only purpose of mining and operating for gas,

and laying pipe lines, building tanks, towers, stations and

A-11 ;

{APPEND1X}

structures thereon, to produce, save and take care ‘of said

products” on land embraced in Tracts I’and II (Emphasis

added). Each of the two leases was for a flat term of 50

years, during which 50 year term the lessee was to have

“the sole and exclusive right to prospect for and produce,

use and market gas, including the natural gasoline. . .”

(Emphasis added). The leases further proyided that the

consideration paid at the time of lease execution by the

lessee to the lessor relieved the lessee of any “obligation to

develop said lands for gas or pay any rental or royalty on

the production thereof, and that no implied obligation for

development shall apply to this lease as to offset wells or

otherwise, and the amount and extent of exploration and

development of said lands shall be optional with lessee

only.” (Emphasis added). The leases further provided that

“failure to develop said lands or any part thereof shall not

be construed as an abandonment of the whole or part of

the land.” (Defendant’s Exhibits 1 and 2).

In 1939 the first mineral severance accurred. The deed

effecting the severance of the minerals from the surface in

Tract I provided in part as follows:

It is especially understood and déjeut by the parties

hereto that ALL interest in and to all of the oil, pe-

troleum, gas, coal, asphalt and all other minerals of

every kind or character in and under, and that may be

produced from the above described land, is hereby. re-

served by party of the first part, together with the

right of ingress and egress at all times for the purpose

of mining, drilling and exploring said lands for said

minerals and removing the same therefrom, and with

the rights of way, easement and servitudes for pipe

lines, telephone and telegraph lines, for tanks, power

houses, stations, gasoline plants and fixtures for pro-

ducing, treating and caring for such products, and hous-

ing and boarding employees, and all other rights and

provileges necessary, incident to, or convenient for the

A-12

[APPENDIX]

economical operation of the said land for the produc-

tion of said minerals, ... (Emphasis added).

Exhibit A to Stipulation filed November 22, 1977.

Three deeds effected the severance of the minerals

from the surface of Tract II, the last one being executed

in 1945. These three deeds provided in part as follows:

1. WITNESSETH: That said parties of the first part

in consideration of the sum of One Dollar, ($1.00) and

‘other valuable consideration, the receipt of which is

hereby acknowledged, do by these presents grant, bar-

gein, sell and convey unto the said party of the second

part, his heirs and assigns, an undivided one-half in-

terest in and to all oil, gas and all other mineral sub-

stances in and under the hereinafter described land and

the right to extract and market the same, together with

all right of ingress and egress, at all times, for the pur-

pose of prospecting for said oil, gas or minerals, in-

cluding, the right to occupy and use so much of the

surface of said land as may reasonably be necessary

to carry on the work of extracting, mining, piping, .. .

(Emphasis added).

Exhibit B to Stipulation filed November 22, 1977.

2. EXCEPT Grantor does hereby except from this

grant and reserves unto himself, his heirs, executors,

administrators, and assigns, an undivided one-fourth

(1/4th) interest in and to all of the oil, gas and other

minerals, in and under the surface of all the above

described lands . . . together with the free right of

ingress and egress thereto, and the right to use and

occupy such portion of the land as may be reasonably

necessary for the purposes of operating, drilling and

marketing the production therefrom. (Emphasis ad-

- ded).

Exhibit C to Stipulation filed November 22, 1977.

~~

A-13

[APPEND!x}

3. It is especially understood and agreed by the part-

ies hereto that.Grantor’s undivided interest in and to

all of the oil, petroleum, gas, coal, asphalt and all other

minerals of every kind or character in and under, and

that may be produced from the above described lands,

is hereby reserved by party of the first part, together

with the right of ingress and egress at all times for the

purpose of mining, drilling, and exploring said lands

for said minerals and removing the same therefrom,

and with the rights of way, easements and servitudes

for pipe lines, telephone and telegraph lines, for tanks,

power houses, stations, gasoline plants and fixtures for

producing, treating and caring-for such products, and

housing and boarding employees, and all other rights

and privileges necessary, incident to, or convenient for

the economical operation of the said land for the pro-

duction of said minerals. (Emphasis added).

Exhibit D to Stipulation filed November 22, 1977.

In 1946 and 1947, subsequent to the severance of the

surface from the oil, gas and other minerals, the mineral

interest owners executed instruments denominated as gas

storage leases in favor of Southwest Natural Gas Company.

These gas storage leases were thereafter acquired by the

defendant.

The gas storage lease on Tract I provided in part as

follows:

WHEREAS, Second Party is desirous of obtaining

a lease on the above described premises for the pur-

pose of introducing and storing gas in, and extracting

said gas from, any sand or formation down to a depth

of 1,500 feet deemed suitable by second party for such

purposes but particularly in and from what is com-

monly known as the Cromwell Sand found at approxi-

mate depth of 1,300 feet;

A-14

{APPENDIX}

NOW, THEREFORE, for and in consideration of

the sum of Ten Dollars ($10.00), cash in hand paid by

second party, receipt whereof is hereby acknowledged,

first party hereby grants and leases unto second party

the exclusive right and privilege of introducing and

storing gas in any form and extracting and taking such

gas from said sand or sands, either through a well or

wells now or to be situated on said premises, or through

wells located on adjacent and surrounding premises,

and for the purposes of laying pipe lines, building

power stations and structures, warehouses, dwellings,

telephone and telegraph lines used in conjunction with

_ the storing and extracting of said gas, together with the

_ Tight of ingress and egress, and the further right to

drill any additional well or wells on said premises in

_. such locations as deemed advisable by second party for

_ the purpose of introducing or extracting gas already

introduced.and stored. (Emphasis added). (Defend-

ant’s Exhibit 3).

The gas storage lease on Tract II contained virtually iden-

tical language with minor differences in language being

used to identify the parties (Defenadnt’s Exhibit 4). The

surface owners did not join in the execution of the gas

storage leases.

_ Tract No. I is essentially the East Half of the North-

east Quarter of Section 17, Township 6 East, Range 4 North,

Pontotoc County, Oklahoma, with a small piece out in the

northwest corner (Plaintiffs Exhibit 2). When plaintiffs

acquired Tract I there were four pipelines running across

the land. Three of those pipelines run essentially north

and south and almost the full length of Tract I (Tr. 7, 118,

119). Portions of at least two of those pipelines were on

the surface and were visible a long time before plaintiff

bought Tract I (Tr. 119). The 8” and 4” lines going straight

to his house could be seen on top of the ground (Tr. 132).

A-15

(APPENDIX)

Plaintiff is a building contractor (Tr. 6). He has lived

in this area all of his life (Tr. 18). Shortly after he ac-

quired Tract I he built a home on his land. It is a three

minute drive away from Ada (Tr. 12). He later made an

addition to his home, converted his garage to an office and

started a 36 foot long car port (Tr. 7). It was discovered

during the construction that one of the defendant’s pipe-

_ lines ran beneath the corner of plaintiff’s house and would

also be beneath a swimming pool he proposed to build (Tr.

7, 81, Defendant’s Exhibit 5). Plaintiff immediately con-

tacted a representative of the defendant (Tr. 7). There-

after defendant’s representative Mr. Courtney came out to

plaintiff's house and discussed the matter with him at

length. There was some discussion concerning who should

pay the cost of rerouting and relocating the lines, whether

or not the defendant had any easements for the initial lay-

ing of the lines, and whether the defendant had permission

to use the gas injection well, which, together with the

blow pit, is located 450 or 500 feet south of plaintiffs’ house

(Tr. 11-12 and 81-85). As a result-of these conversations,

an instrument dated June 3, 1967 and signed by plaintiffs

was ®xecuted and delivered by them to the defendant

(Plait *s’ Exhibit 7) and the pipe line which ran beneath

the corner of their house was taken out of use insofar as

the transmission of gas was concerned and the gas line was

rerouted (Tr. 84-85; Defendant’s Exhibit 5). The easement

signed by plaintiffs grants to the defendant the right-of-way

to maintain, alter, repair, operate and remove pipelines for

the transportation of oil, gas or products of oil and gas on,

over and through certain lands described as follows:

The existing four (4) pipelines on the surface across

part of the E/2 NE/4 Section 17-T4N-R6E, including a

Gas injection well for gas storage and a pit.

Relocation of approximately 450’ of 8” Transmission

Line #634 across part of the North End of the E/2

NE/4 Section: 17-T4N-R6E, lying East and South of

' dwelling.

A-16

{APPENDIX}

The instrument recites that the consideration paid to plain-

tiffs was $5.00. The $5.00 was not in fact paid (Tr. 96-97).

The defendant’s cost of installing, rerouting and relocating

the pipeline was $2,736.34 (Defendant’s Exhibit 7; Tr. 158).

Tracts I and II are located within the confines of what

is sometimes referred to as the Ada Storage Facility. (Plain-

tiff’s Exhibits 3 and 4). The sand strata which is being used

for the underground storage of gas by the defendant is the

Upper Cromwell Sand. It is bounded on all four sides by

an impermeable barrier of some type and thus makes a

good underground gas storage reservoir (Tr. 46-47). The

total acres inside the reservoir limits are 1230; of those

1230 acres plaintiffs own approximately 78 (Tr. 49, 44 &

64). The average pay thickness of the reservoir as a whole

is 100 feet with the average pay thickness in and under

plaintiffs’ land being 96 feet (Tr. 49; Plaintiff’s Exhibit 5).

The reservoir comprising the Ada Storage Facility (the

Upper Cormwell Sand) was originally a gas only producing

reservoir; there was never any oil in this reservoir (Tr. 48).

The reservoir was discovered as a producing gas reservoir in

1922, it produced more than 23 billion cubic feet of gas be-

fore it was depleted in 1928 (Tr. 50). “The volumes of

recoverable native gas originally in place therein were de-

pleted prior to the commencement of gas storage operations

...” (Findings of the Oklahoma Corporation Commission

on October 3, 1973, p. 3 of Order attached as Exhibit A to

Exhibit A of Plaintiff's Request for Admissions. See Tr.

75). It has been used continuously since 1949 by the de-

fendant for underground storage of natural gas and some

use was made of it as a storage facility prior to that time

(Order and Journal Entry of Judgment of District Court

within and for Pontotoc County, Oklahoma, filed December

16, 1975, a part of plaintiffs’ request for admissions; Tr. 75).

Plaintiffs’ expert witness, Victor W. Pryor, testified that it

had been used as an underground storage facility for ap-

proximately 50 years (Tr. 48). There are nine gas produc-

ing-injection wells in the reservoir (Plaintiffs’ Exhibit 3,

> a oe er

ee ee ee eee

A-17

{APPENDIX}

Tr. 49). Two of the nine injection wells are located on

plaintiffs’ Tract I (Plaintiffs’ Ex. 3; Tr. 7) -although one

has been plugged (Tr. 126). A third injection well, the

Balthrop #6, is located just across the road immediately

north a short distance from plaintiffs’ house (Plaintiffs’ Ex.

3; Tr. 11). On plaintiffs’ land and south of their house 450

to 500 feet is an injection well. It is identified as WP #3

(Plaintiffs’ Ex. 2; Tr. 127). This well has been serviced by

an employee of defendant once or twice a week, and oftener

when the weather was cold from 1945 to the date of trial

(Tr. 127, 128, 141). Plaintiff knew what the well was being

used for (Tr. 130). The WP #3 “sticks up out of the ground

there and it has a big blow pit.to the west of it that takes

up nearly a half acre where, when it gets water in the tank

it has a huge silver tank, when they take gas out of the

ground moisture comes up and catches and blows it out in

the pit and the pit takes up some of it, the well takes up

some of it, and then at times the cattle in the pasture, it

has a big handie on it, pull it down and it blowed gas,

after the fluid is all gone it blows natural gas and some-

times the cattle gets against that, it has an automatic turn-

on and turn-off, and sometimes it gets hung and blows gas,

and that gas smell gets real strong at times. And it would

make noise, wake us up in the middle of the night and

make noise. I called Mr. Scroggins if it gets hung and he

would come down and fix it. The blow pit killed a few trees

around there and all. I guess you expect stuff like that.”

(Tr. 11-12).

Although plaintiff testified that he did not know at the

time he purchased Tract I that it was part of an under-

ground gas storage reservoir (Tr. 18, 22) and that he did

not learn that it was until 1967, the court finds that he in

fact had both actual and constructive knowledge that Tract

I was part of a gas storage reservoir at the time he bought

it in 1963. Mr. Davidson, plaintiffs’ grantor, told Mr. Ellis

prior to his purchase of the land that he was getting the

“surface only” — none of the minerals — but “because of

the storage of gas . . . on the place, he would get free gas

A-18

{APPENDIX

for this one house.” (Tr. 120). Furthermore, the Gas Stor-

age Lease which. covered Tract I was recorded in the office

of the County Clerk of Pontotoc County on February 14,

1947 (Defendant’s Ex. 3) thereby giving him constructive

knowledge of its terms. 16 O.S. § 16. And he had the title

examined prior to purchase (Tr. 121). Moreover he de-

scribed in considerable detail the gas injection well just

south of his house — how it looked, how it sounded and

how it smelled. Thus, although the testimony is in con-

flict the court finds that plaintiff knew that the land in

question was being used as a gas storage reservoir.

There is no issue in this case relating to who is en-

titled to produce the injected gas although both sides have

directed this court’s attention to various cases which do

involve that issue. See Hammonds v. Central Kentucky

Natural Gas Co., 255 Ky. 685, 75 S.W.2d 204 (1934); Lone

Star Gas Co. v. J. W. Murchison, 353 S.W.2d 840, 94 A.L.R.

2d 529 (Tex.Civ.App. 1962), error refused nre; White v.

New York State Natural Gas Corp., 190 F.Supp. 342 (W.D.

Pa. 1960). Plaintiffs, as surface owners, are not asserting

that they have title to or the right to drill into and produce

any of the injected gas. But plaintiffs do assert that after

the pore spaces in the reservoir rock have been depleted of

native natural gas — and it is uncontroverted in this case

that all economically recoverable gas reserves were depleted

by 1928 (Tr. 50) — that they, as surface owners, own the

reservoir and the void pore space in the rocks which is now

being utilized by the defendant in storing natural gas pro-

duced elsewhere and injected into the reservoir. They claim

in essence that their land is being used by the defendant

without authority and that they are entitled to damages

for. its unauthorized use.

Defendants, on the other hand, deny liability and as-

sert that because of the peculiar nature of the common law

concerning ownership of natural gas in place, the owner-

ship of the subsurface strata does not determine the right

to store and recapture natural gas and that one injecting

Ws. eannceab dt:

A-19

[APPEND!IX}

natural gas into such a stratum cannot be held to have

committed a trespass. It further argues that gas storage

rights were properly secured from the mineral owners by

the oil and gas leases and the gas storage leases. in 1928,

1946 and 1947 and that it is the mineral interest owner and

not the surface owner who is empowered by law to grant

storage rights to the defendant. The defendant argues that

under the authority of Hammonds, supra, Central Kentucky

Natural Gas Co. v. Smallwood, 252 S.W.2d 866. (1952) and

West Edmond Salt Water Disposal Association v. Rosecrans,

226 P.2d 965 (Okl. 1950) one who reinjects gas or water

into a reservoir loses ownership of the reinjected fluid, that

such fluid becomes subject to the law of capture and that

because ownership is lost by virtue of reinjection, the de-

fendant cannot be held liable for trespass or damages. The

defendant especially urges West Edmond because it was de-

cided by the Oklahoma Supreme Court. :

There is no question, this being a diversity case, -but

that this court is obligated to follow state law. But in this

court’s view, West Edmond is not dispositive. West Edmond

.was concerned with the potential liability of a party who

injected salt water into an underground formation, which

formation was already saturated with salt water. Proof

was adduced that salt water, which was injected by de-

fendant into a well located on a 40-acre tract which ad-

joined plaintiffs’ land to the west, was forced to the east

through the porous stratum into which it was injected

where it commingled ‘with the salt water which already

Saturated that stratum in and under plaintiffs’ land. Un-

like the facts in this case, no one knew what the perimeter

boundaries were of the Hoover-Tonkawa formation into

which the salt water was injected. That “formation was

saturated with salt water and was of great extent, the

actual boundaries thereof not being capable of accurate

ascertainment.” 226 P.2d 965, 968. The court did find, how-

ever, that following injection of salt water into the Hoover-

Tonkawa Sand, the deféridants lost ownership of the in-

a

A-20

[APP ENDtX)

jected salt water, did seem to say that minerals were faere

naturae and did cite Hammonds, supra, with approval. 226

P.2d at 970-71.

The factual setting of West Edmond is important.

There, the salt water which was injected was commingled

with the salt water which already saturated the stratum

in and under plaintiffs’ land. The salt water was a value-

less substance. No one knew what the confines or bound-

aries were of the formation into which the salt water was

injected. In the case before this court none of those cir-

cumstances exist. There is no commingling of economically

recoverable native gas and storage gas. The reservoir was

depleted prior to injection. All of the gas injected is owned

by the defendant. The limits of the reservoir are well de-

fined. All of this is undisputed.

In a fact circumstance quite similar to the one which

is before this court, and in declining to follow the animal

faere naturae analogy, the court in White, supra, stated:

It becomes readily apparent, however, that a strict

application of this analogy to the present facts is of

no benefit to plaintiff’s cause. To begin with, the stor-

_ age gas in question has not escaped from its owners.

On the contrary, it is yet very much in the possession

of the storage companies, being within a well-defined

storage field, the Hebron-Ellsburg Field, and being sub-

ject to the control of the storage companies through

the same wells by which the gas originally had been

_ injected into the storage pool.

190 F.Supp. 342, 348. .

Looking at this same analogy, Professor Kuntz has

noted: ; ete

The analogies used are imperfect and objectionable, and

the result reached is reasonable only if compelled by

a lack of scientific knowledge. The result is not reason-

able if the character and area of the reservoir can be

at ot me see a ete olan

A-21 ak

CAPPENDIXx})

determined or if the specific substance can be identi-

fied and traced. ,

If the underground area is capable of being defined

with certainty, ownership of the substance injected

Should not be lost, unless it appears that they have

been abandoned. Further, the injector should be held

to be a trespasser if the substance was intended to in-

vade the land of another. ,

1 Kuntz, The Law of Oil and Gas § 2.6, p. 71.

This court’s decision in this case is limited to a circum-

stance where the reservoir is defined and there is no com-

mingling between economically recoverable native gas and

injected gas. In this factual setting, it is my view that the

law of Oklahoma is that the injector does not lose owner-

ship of the gas by injecting it into the underground reser-

voir. And for these reasons I do not regard Bezzi v. Hocker,

370 F.2d 533 (10th Cir. 1966) as determinative in this case.

See, Lone Star Gas Co., supra. es

But the question still remains: Did the severed mineral

interest owners have the legal right to grant gas storage

rights to the defendant? If they did the plaintiffs cannot

prevail because such rights were granted to the defendant.

Professors Williams and Meyers say that in this country:

there “are two reported cases dealing with this matter.”

1 Williams and Meyers, Oil and Gas Law, § 222, p. 328.3.

A Kentucky case, Central Kentucky Natural Gas Co. v.

Smallwood, 252 S.W.2d 866 (1952), noted in 7 Okla. L. Rev.

225 (1954) has held that the mineral interest owner has

authority to grant a gas storage lease. A West Virginia

case, Tate v. United Fuel Gas Co., 7 S.E.2d 65 ( 1952) holds

that the surface owner has authority to grant a gas storage

lease. These two cases, looking in opposite directions, were

both decided in 1952. The Court of Claims has also ad-

dressed the question more recently and has concluded that

the right and power to use a depleted reservoir for gas

Se Ne ee ee

A-22

LAP PEN DEX)

Storage purposes is vested in the surface owner. Emeny v.

United States, 412 F.2d 1319 (Ct.Cl. 1969).

Writers and academicians who have looked at the ques-

tion are about equally divided. Professors Williams and

Meyers urge “adoption of the view that the mineral sever-

ance should be construed as granting exclusive rights to

subterranean strata for all purposes relating to minerals,

whether ‘native’ or ‘injected’, absent contrary language in

the instrument severing such minerals.” Williams and Mey-

ers, supra, at p. 333. In accord with this view, see Stamm,

Legal Problems in the Underground Storage of Natural Gas,

36 Tex. L. Rev. 161 (1957). A contrary view is expressed by

McGinnis, Some Legal Problems in Underground Gas Stor-

age, Southwestern Legal Foundation, 17th Annual Institute

on Oil and Gas Taxation 23 (1966); Scott; Underground

Storage of Natural Gas: A Study of Legal Problems, 19 Okl.

L. Rev. 47 (1966); Creekmore and Harvey, Subsurface Stor-

age of Gas; 39 Miss. L. J. 81 (1967).

There are several factors which should be considered

in arriving at a decision concerning whether the mineral

owner or the surface owner has the right and power to

grant the storage right and to receive the compensation

therefor. One is intention. What was the intention of the

parties at the time the minerals were severed from the

surface? Was it the intention that the mineral interest

owner have the power to explore, develop, produce and

store gas in and under the land in question? The first place

to look in ascertaining that inténtion are the deeds which

effect the severance. In this case it seems quite clear that

the mineral severance instruments gave to the mineral in-

terest owner all of the oil, gas and other minerals “that

may be produced”; that he had the “right of ingress and

egress at all times for the purpose of mining, drilling and

exploring said lands.” Indeed all of the words used denote

exploration, production and development. Nothing is said

about injection, storage or occupation. And there is nothing

before me which suggests that these rights should be rea-

sonably inferred from other language used in the deeds.

+ edn

— ARATE AA I ei es hm a ~

nee

i ES Bie rns = Re Ce Nn a taht sk

A-23

(APPENDIX)

Speaking to this same point, Mr. McGinnis has stated:

It is submitted, however, that neither the right to store

nor the right to use the surface in connection with

storage should be implied or presumed in the absence

of clear evidence of intent to grant such rights.

McGinnis, Some Legal Problems in Underground Gas Stor-

age, supra, at 51.

Although Professors Williams and Meyers are of the view

that the power to grant storage rights should be in the

mineral interest owners, they urge this position “absent

contrary language in the instrument severing such min-

erals.” (Emphasis added). While the severing instruments

in this case do not negate in express terms the right to

inject or store gas (that is to say, they do not read “the

mineral interest owner shall not have the power or right

to inject or store gas”) the only reasonable construction of

the language used is that.no such power is bestowed upon

him. This court accordingly concludes that:the parties: did

not intend that the mineral interest owner should have in-

jection, storage or occupation rights. | 3

Apart from intention, if A owns a tract of land in fee

simple and conveys to B all of the oil, gas ard other min-

erals in and under and that may be produced from that

tract of land, A retains everything which he did not con-

vey. It is clear in Oklahoma that a grant of minerals

simply gives to the grantee the right to explore for, pro-

duce and reduce to possession, if found, the oil, gas and

other minerals. It is an incorporeal interest analogous to

a profit to hunt and fish on the land of another. Rich v.

Doneghey, 71 Okl. 204, 177 P. 86 (1918). Such a deed does

not convey the minerals in place and does not convey the

stratum of rock containing the pore. spaces within which

the oil and gas may be found. In the hard mineral area of

the law and in the.absence of language in the severing

deed dictating a different construction, the English and

Canadian rule is that the cavern which remains in the land

|

A-24

[APPEND1IX)}

after the hard minerals are mined is owned by the mineral

interest owner; the American view is that the cavern is

owned by surface owners. See Mines and Minerals, 54 Am.

Jur.2d § 204 (1971); Mines and Minerals, 58 C.J.S. § 162, at

338 (1948); Stamm, Legal Problems in the Underground

Storage of Natural Gas, supra, at 168; Creekmore and Har-

vey, Subsurface Storage of Gas, supra, at 96; Lyndon, The

Legal Aspects of Underground Storage of Natural Gas, 1

Alberta L. Rev. 543, 545 (1961). There is no reason in

principle why the American rule should not apply to a de-

pleted gas storage reservoir. Mr. Scott, in addressing him-

self to this question, has stated:

Based upon the foregoing principles, the surface owner

alone should be compensated for the use per se of a

Stratum. He is the owner of this formation, and like

an owner of a warehouse, he is entitled to the rental

_ or other compensation paid for the use of his property.

Scott, Underground Storage of Natural Gas: A Study of

Legal Problems, supra, at 61.

While the Supreme Court of Oklahoma has not Passed

upon this point, it has considered a closely analogous ques-

tion in dealing with the rights of the mineral and surface

owners which leads this court to conclude that it would

hold, in the circumstances which face this court, that the

surface owner has the power ‘to convey gas storage rights.

In Sunray Oil Co. v. Cortez Oil Co., 112 P.2d 792 (Okl.

1941) Cortez Oil Company was the owner of an undivided

1/4 mineral interest in a tract of land. A well had been

drilled by an oil and gas lessee on said land which was

unproductive of oil or gas. The Cromwell Sand had been

encountered and was approximately 105 feet thick; it was

not productive of oil or gas and was saturated with salt

water. Sunray Oil Company secured from the lessee an as-

signment of the oil and gas lease on the ten acres on which

the well was situate. Genevieve Greer was the owner of

the surface and of 53/80ths of the minerals. Sunray secured

from her a license to use the well as a salt water disposal

Ae ih AE tic TN Dt a le a i a wt cto a

A-25

(APPENDIX)

well. Cortez Oil Company sought to enjoin Sunray from

So using the well. On the basis of the evidence adduced the

court concluded that there was no possibility of finding oil

or gas in the Cromwell Sand and hence any threat of in-

jury to the Cortez mineral interest in that formation was

purely speculative. The court then addressed the question

of who had the right to Grant to Sunray the right to inject

and store salt water which was produced by Sunray from

oil and gas wells on another lease some distance from the

well in question. The court stated:

So in this case Genevieve Greer, . . . has the right to

so use the surface and substrata of her land as she sees

fit, or permit others so to do, so long as such use does

not injure or damage other persons. (Emphasis added).

112 P.2d 792, 795. This court must conclude that a reason-

able construction of that language is that Genevieve Greer,

as the surface owner, was entitled to grant the salt water

Storage rights to Sunray. I consequently must conclude

that a similar construction would be reached by that court

on. the evidence adduced in the trial of this case.

It is undisputed that the underground storage of nat-

ural gas as a conservation measure is one that clearly pro-

motes the general welfare; it is a highly desirable and

worthwhile undertaking in our severely energy-short econ-

omy. As a matter of policy, it is an undertaking which

should be encouraged. The conclusion which the court

reaches this day does not on the whole fetter or burden

or make gas storage projects more difficult. If this court

had concluded that it was the mineral interest owner and

not the surface owner who had the power to grant storage

rights, it would typically mean that hundreds of severed

mineral interest owners would have to be contacted if those

rights were to be obtained privately. Especially is this so

if the underground gas storage reservoir was once a pro-

ducing gas field. Small fractional mineral interests are

typically extremely numerous on any tract of land which

A-26

(AP PEN DEX)

at some time in its history has been involved in a substan-

tial oil and gas play. Admittedly there may be instances

where, for example, the gas storage facility underlays a

metropolitan area, it will be necessary to secure the con-

sent of a large number of surface tract owners. But on the

whole, that would not ordinarily be the case and there is

no evidence before this court to suggest that it is the case

here.

Furthermore, even if the mineral interest owner is the

one who has the power to grant gas storage rights, all

writers apparently agree that if there is. to be “some user

of the surface for injection or production wells or other

surface installations” the surface owner’s consent and au-

thority must be secured in all events. Williams and Meyers,

supra, at 331.

For all of. the foregoing reasons the court concludes

that the defendant did not have authorization or permission

to inject and store the gas in the subsurface stratum of

plaintiffs’ land.

Defendant also argues that it acquired gas storage

rights on plaintiffs’ land by virtue of the easement granted

on June 3, 1967 (Plaintiffs’ Exhibit 7). That easement

granted unto the defendant the “right of way to maintain,

alter, repair, operate ... . on, over and through” Tract I

“the existing four pipelines on the surface... . including a

gas injection well for gas storage and a pit.” There is noth-

ing in this instrument which purports to grant gas storage

rights as such and the court concludes that such rights are

not so granted by it. Even if the mineral interest owner

had the right to grant gas storage rights, it would still be

necessary for defendant in this circumstance to secure per-

mission from the surface owner to install upon the topo-

graphic surface of his land the injection well and. other

equipment which might be necessary to inject or withdraw

natural gas. This easement granted those rights to the de-

fendant; it granted nothing more. Williams and Meyers,

- supra, pp. 331 and 332.

Ls RRR Bee ai EE Pe Ae ~

A-27 |

[APPENDIx}

Plaintiffs argue. and allege in the amendment to their

complaint that this easement “fails for lack of consideration

in that the consideration cited therein has never been paid.”

They contend that in view of the lack of consideration the

court should grant rescission of the instrument.

It is undisputed that $5.00 was not paid to plaintiff.

The easement shows on its face, however, that defendant

agreed to relocate some 450 feet of pipeline (see also De-

fendant’s Exhibit 5). It is undisputed that this relocation

was performed without cost to plaintiffs at a cost to de-

fendant of $2,736.34. Plaintiffs admit in their brief of May

9, 1977 that the relocation, as set out in the instrument in

question, was bargained for between the parties. They ex-

pressly state that “the only thing that was bargained for

as to... [the June 3, 1967 instrument] is the relocation

of the 450 feet of lines.” However, they argue that since

the only thing bargained for between the parties was the

moving of the pipeline, the balance of the terms and con-

ditions set out in the instrument are severable and should

be rescinded.

The argument is without merit. The relocation was

performed at substantial expense to defendant. Plaintiffs

admit that this relocation was bargained for. Defendant’s

obligation under the “bargain” was to relocate the pipe and

bear all expenses associated therewith. It is obvious that,

in exchange for defendant’s promise, plaintiffs promised,

as set out in the instrument, to grant defendant the right

of way to maintain, alter, repair, operate and remove pipe

lines on plaintiffs’ land, including a gas injection well for

gas storage and a pit.

It is clear, therefore, that plaintiffs’ promise to grant

defendant the easement was supported by defendant’s prom-

ise to relocate the pipeline. This constituted a bargained-.

for exchange, since mutual promises are consideration for

the formation of a bilateral contract. 15 0.S. § 106; Nadel v.

Zeligson, 207 Okla. 658, 662, 252 P.2d 140 ( 1953).

A-28

[APP-EN DIX]

The defendant finally contends that it obtained by pre-

scription the right to inject and store gas in the subsurface

strata of plaintiffs’ land. Plaintiff argues that this conten-

tion should not. be countenanced by the court because it

was not contained in the pleadings or in the pretrial order.

Prior to the trial this court directed the parties to submit

trial briefs and proposed findings of fact and conclusions

of law. On April 5, 1977, more than three weeks in ad-

vance of trial, the defendant filed and submitted to oppos-

ing counsel his proposed findings of fact and conclusions of

law. Paragraph 12 of his proposed conclusions of law was:

Except for the fact that defendant and its predecessors

were using the well for gas injection and the Upper

Cromwell Sand for gas storage under express grants

from plaintiffs and their predecessors, defendant long

since would have acquired the prescriptive right to do

so, all other elements of adverse possession having been

shown by the evidence. (Emphasis added).

This court has concluded that the “grants” referred to by

defendant, namely (1) the oil and gas leases, (2) the gas

Storage leases, and (3) the line relocation easement provide

no authority in law for the defendant’s underground stor-

age of natural gas. Substantial amounts of evidence were

adduced at trial directly bearing on the maturation of a

prescriptive easement. Plaintiff did not suggest before the

t. .al or object during the trial to any evidence being intro-

duced on the grounds that it was beyond the issues framed

by the pleadings or the pretrial order. At the conclusion

of the trial the court invited counsel to submit briefs on

the question of whether defendant had matured a prescrip-

tive right to store injected gas. Then; for the first time, in

his brief filed on May 16, 1977, did plaintiffs object on the

grounds that this issue was outside the pleadings and the

pretrial order. The Court of Appeals for the Tenth Circuit

has quite recently stated:

It is the general rule that where an issue is developed

in the evidence admitted without objection, the issue

A-29

[APPEND!X}

is before the court for determination and the pleadings

should be regarded as amended to conform to the proof.

See Rule 15(b) F.R.Civ.P.; Hopkins v. Metcalf, 435 F.

2d 123, 124-25 (10th Cir.); and see Rule 16, F.R.Civ. >.

governing amendment of pretrial orders.

Sanders v. International Harvester Co., Case No. 76-1407

(10th Cir. 1978).

The contention of plaintiffs is accordingly lacking in merit

and the court will consider whether or not the defendant

matured an easement by prescription for the storage of gas.

60 O.S. § 333 provides as follows:

Occupancy for the period prescribed by civil pro-

cedure, or any law of this State as sufficient to bar an

action for the recovery of the property, confers a title

thereto, denominated a title by prescription, which is

sufficient against all.

An easement may be acquired by prescription. Frater Ok-

lahoma Realty Corp. v. Allen Laughon Hardware Co., 206

Okl. 666, 245 P.2d 1144, 1147 (1952). The burden of proof

is upon the party asserting a prescriptive right and the

requisite showing has been stated by the Oklahoma Su-

preme Court as follows:

To obtain title to property by prescription, all ele-

ments of adverse possession must be established by

clear and positive proof and cannot be established by

inference. Adverse possession is to be taken Strictly,

and every presumption is in favor of possession in sub-

ordination to the rightful owner. The burden of proof

rests on the party asserting adverse Possession to show

the necessary elements of actual, adverse, open, notor-

ious, peaceable, exclusive and hostile possession for a

period of fifteen years. Where the evidence is con-

flicting it is an issue of fact to be determined by the

trier of the facts.

A-30

fAPPENDIX]

Tindle v. Linville, 512 P.2d 176, 178 (Okl. 1973). See also

Sears v. State Department of Wildlife Conservation, 549 P.

2d 1211 (Okl. 1976).

In this case plaintiffs and their predecessors in title

knew that the Upper Cromwell Sand underlying the topo-

graphic surface of the land in question was a part of the

Ada Gas Storage Facility. The reservoir has been contin-

uously used as a gas storage reservoir since 1949. There are

nine injection wells on the surface of the land embraced in

the storage facility. Plaintiff is a building contractor and

has lived in the area all of his life. One of the principal

injection wells is on his land and is located 450 to 500 feet

south of his house. It has been there since before 1945. The

log from this well formed the basis for the determination

by the Oklahoma Corporation Commission concerning the

thickness of the Upper Cromwell Sand (Plaintiffs’ Ex. 5;

Tr. 47). That well, according to plaintiff’s testimony, with

its “big blow pit” that “takes up nearly a half acre” and its

“huge silver tank” is highly visible, is noisy and is smelly

(Tr. 11-12). It has been serviced once or twice a week by

employees of defendant from 1945 to the date of trial. Plain-

tiff knew what it was being used for. Some of the pipelines

running from the gas reservoir were visible on the surface.

The 8” and 4” lines going straight to plaintiff’s house could

be seen on top of the ground.

. Plaintiffs’ immediate predecessor in title was Mr. Glen

D. Davidson and he had acquired title from his mother. Mr.

Davidson was employed by the defendant from 1956 until

1977. He worked at the defendant’s Ada warehouse just 3

miles north of Ada (Tr. 115). He and his father had a hog

farm on the land where plaintiffs’ house is located before

plaintiff bought the land from him (Tr. 118). He was quite

familiar with the land and had prepared for defendant the

diagram (Defendant’s Ex. 5) rerouting the pipeline around

plaintiff’s house (Tr. 116). Although Mr. Davidson and his

father and mother did not live on the land, they were inti-

mately familiar with it and members of their family lived

A-31 ’

[APPENDIX)}

on it for several years (Tr. 118). They all knew of the

pipelines and their connection with the gas storage reser-

voir (Tr. 118-119). Mr. Davidson, plaintiffs’ grantor, told

plaintiff prior to his purchase of the land that he was get-

ting the “surface only” but “because of the storage of gas

on the place, he would get free gas for this one house.” (Tr.

120). Plaintiff also had constructive knowledge of the gas

storage leases (Defendant’s Exhibit 3) and had examined

the title prior to purchase (Tr. 121).

Plaintiffs argue that the use by the defendant has been

permissive. The record is devoid of any evidence which

suggests that the plaintiffs or their predecessors in title have

granted permissive use to the defendant to store gas. The

plaintiff has testified, although the court has found to the

contrary, that he did not know his land was being used as

an underground gas storage reservoir until 1967. He ob-

jected at that time to defendant’s use of the land as a gas

storage reservoir. He testified as follows:

Q. And what was it that you said to him complaining

about or objecting to the use of the injection well?

A. Well, I remember it very well, I said looks to me

like if a man had a big warehouse and it’s full of can-

ned oil and I sold you the oil and I said, sir, this is

your oil, sir you can get it out anytime you want to,

he gets all of the canned oil out and I look around and

he is putting oil back in there that is relatively unfair.

When the gas company got out their gas out of the land

it looks like this property is mine and I should be paid

something for using it again. He said it’s absolutely

under the mineral part of it and you don’t have no

say-so under it. So, that’s how come that is still in that

easement with my name on it. (Tr. 32).

Plaintiff then went to an attorney to get an opinion on the

right of the defendant to use his land as an underground

gas storage reservoir but did not follow it up (Tr. 33) and

A-32

[APPENDIX]

although he did not formally object again to the gas com-

pany, he “moaned and groaned and complained to every-

body but an attorney,” including his “friends and business

acquaintances” (Tr. 33). The record is simply devoid of

any evidence whatsoever that any surface owner ever gave

permission to the defendant to store gas in and under this

land; the only permission defendant obtained was from min-

eral interest owners.

Plaintiffs next argue that it is essential that the de-

fendant be claiming under color of title and that it was not

so claiming. This contention is totally lacking in merit. It

is abundantly clear that, mistaken though the defendant

was concerning who had authority to grant gas storage

rights, it is and always has been claiming under the oil

and gas leases, the gas storage leases and the easement it

took from plaintiffs; all of these are claims under color of

title.

The evidence of knowledge on the part of plaintiffs and

their predecessors in title of actual, adverse open, notorious,

peaceable, exclusive and hostile possession by defendant of

the Ada Gas Storage Facility for a period of time far in

excess of 15 years is overwhelming. The court accordingly

must conclude that defendant has matured a prescriptive

easement for the underground storage of natural gas.

Plaintiffs also argue that the condemnation action by

the defendant in the District Court of Pontotoc County

against plaintiffs to condemn the Upper Cromwell Sand

pursuant to state law “is in fact an admission that plain-

tiffs, as surface owners, own storage rights in the afore-

described tracts. Such an admission standing alone should

warrant only examination of the case on the issue of dam-

ages...” (Plaintiffs’ Trial Brief p. 2). In effect plaintiffs

argue that this action somehow bars or prevents the legal

assertions which defendant makes here. This contention is

not well founded. It may well be that defendant’s April

1, 1976 condemnation action exhibits uncertainty concern-

A-33

[APPENDIX)

ing the state of the law on whether it is the mineral owner

or the surface owner who has the power to grant gas stor-

age leases. That question, after all, had not been resolved

in Oklahoma when that action was brought. Indeed, it

stands unresolved today in most of the jurisdictions of this

country. And it is essential for the effective operation of

an underground gas storage reservoir for the injector to

acquire the requisite authority from all of the property in-

terest owners in that reservoir. But simply because the

defendant took a cautious step to protect against the possi-

bility of the very decision which this court today makes

does not mean that the defendant is precluded from con-

tending that it had gas storage rights under its gas storage

leases and the other instruments of title on which it relies

or that it is precluded from asserting that it has matured

a prescriptive easement. The contention by plaintiffs that

the institution of a condemnation action by the defendant

somehow infects the validity of its arguments here is with-

out merit.

Judgment will be entered in accordance with this Mem-

orandum Opinion.

DATED this 31st day of March, 1978.

(s) Joseph W. Merrik

United States District Judge

[Caption omitted]

JUDGMENT

Pursuant to memorandum opinion of even date, judg-

ment is entered against the plaintiffs and in favor of the

defendant.

DATED this 1st day of March, 1978.

(s) Joseph W. Merrik

United States District Judge