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Blaser Farms, Inc. v. Anadarko Petroleum Corp.

United States Court of Appeals for the Tenth Circuit

January 4, 1990

Nos. 87-2420, 87-2474

Opinion

 [*260]  MCKAY, Circuit Judge.

This is an appeal from a ruling in favor of defendants-appellees on their motion for summary judgment.

This diversity action by plaintiff-appellant Blaser Farms, Inc. ("Blaser") against defendants-appellees Anadarko Petroleum Corporation and ENRON Corporation (collectively "Anadarko") involves the construction of the terms of an oil and gas lease. 1 Anadarko is the successor-in-interest to an oil and gas lease covering the minerals underlying a quarter section of property in Texas County, Oklahoma. Blaser's predecessors-in-interest,  [**2]  Mary Ellen and Ralph M. Smith, executed the lease in favor of Prince Petroleum on July 31, 1981. The lease states that it "shall remain in force for a term ending July 31, 1984 and as long thereafter as oil, gas, casinghead gas, casinghead gasoline or any of them is produced." On October 14, 1982, within the primary term of the lease, Anadarko completed a well on the leased property that was capable of producing gas in commercial quantities. The total cost of the drilling and completion of the well amounted to approximately $ 299,094.00.  [*261]  Anadarko was unable to market the gas immediately, however, so it kept the well "shut in" until approximately December 7, 1985, at which time Anadarko connected the well to a gas pipeline and produced gas. Because the well was completed and shut in, Anadarko was required to pay certain "substitute royalties" pursuant to paragraph 26 of the Addendum to the lease which provides:

Notwithstanding anything in this lease to the contrary, it is expressly agreed that if the Lessee shall commence drilling operations within the primary term of this lease or upon a consolidated gas unit of which this lease is a part and shall complete a well [**3]  capable of producing gas in paying quantities, this lease shall remain in force and its term shall continue only in the event either (a) pipeline connections are made within one (1) year from the date the well is completed and shut-in; or (b) in the event pipeline connections have not been made within said one (1) year period, then the Lessee shall pay or tender to the Lessor a royalty being referred to as substitute royalty in the amount of $ 3.00 per acre, per year; or (c) if pipeline connections are not made within two (2) years from date the well is shut-in, then the Lessee shall pay or tender to the Lessor a royalty hereafter referred to as substitute royalty in the amount of $ 5.00 per acre, per year. Said substitute royalties may be paid directly to the Lessor at his last known mailing address or made to the Lessor's credit in the United Bank, Fort Collins, Colorado. The payment of said substitute royalties as just provided shall continue said lease; said lease shall be in full force and effect as if said well had been completed and connected to a pipeline and producing within the primary term as hereinbefore mentioned.

 [**4]  In September 1983, Anadarko tendered royalties in the amount of $ 480.00 to Blaser's predecessors-in-interest, which were accepted. In September 1984, Anadarko tendered royalties in the amount of $ 800.00 to Blaser, which were also accepted. On or about January 7, 1986, Anadarko tendered royalties in the amount of $ 800.00, but Blaser refused to accept them.

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893 F.2d 259 *; 1990 U.S. App. LEXIS 18 **; 107 Oil & Gas Rep. 530

BLASER FARMS, INC., an Oklahoma corporation, Plaintiff-Appellant/Cross-Appellee, v. ANADARKO PETROLEUM CORPORATION and INTERNORTH, INC. a/k/a ENRON CORPORATION, Defendants-Appellees/Cross-Appellants

Prior History:  [**1]   Appeal from the United States District Court for the Western District of Oklahoma, D.C. No. CIV-86-1707R.

CORE TERMS

lease, royalties, special limitation, shut-in, terminate, oil, district court, automatically, equitable, summary judgment, forfeiture, connected, pipeline, Lessee, royalty payment, primary term, provisions, correctly

Civil Procedure, Appeals, Summary Judgment Review, General Overview, Summary Judgment, Entitlement as Matter of Law, Genuine Disputes, Materiality of Facts, Energy & Utilities Law, Leases & Licenses, Shut In Royalty Clauses