Face Challenges Confidently

134 Freeman v. Samedan Oil Corp.

Tuesday, September 1st, 2015

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
Freeman v. Samedan Oil Corporation, 2000 WL 33279603 (Tex. App.–Tyler 2001, no pet.), holds that a common lease pooling clause may not be extended or construed to include the authority to unitize the lease acreage into a large waterflood unit. The twenty-five acre Freeman Lease covering an undivided 1/10 mineral interest was granted on June 28, 1966. On July 15, 1966, a producing oil well was completed on the duly formed Price Oil Unit, which included 19.83 acres from the Freeman Lease. The Price Oil Well was a unit well, but not a lease well. In early 1967, the lessee sought agreement from Freeman for a much wider secondary recovery unit. Freeman refused. The waterflood was nevertheless put in place, and on September 1, 1967, the Price Oil Well was converted into the primary water injection well for the project. The Price Oil Well did not produce oil after September 1, 1967. In 1986, the Freeman Lease was included in a 764.25-acre gas unit and a new well, the Price Gas Well, was completed directly on the Freeman Lease. The waterflood was abandoned in 1990. Freeman sued for declaratory judgment that the Freeman Lease terminated in 1967 (sixty days after the Price Oil Well was converted into an injection well) and for a 1/10 interest in the Price Gas Well.
The Freeman Lease pooling clause was a common form of pooling clause authorizing pooled units for oil up to 40 acres and for gas up to 640 acres, plus a tolerance of 10%. The court refused to imply the authority to form a waterflood unit from this common clause based on the plain meaning of the pooling clause, the Railroad Commission order on the Waterflood Unitization Agreement (which expressly stated that it would not bind interest owners who did not execute the agreement), and statutory limits on the authority of the Railroad Commission to modify the contractual rights expressed in the lease.