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Wronski v. Sun Oil Co. - 89 Mich. App. 11, 279 N.W.2d 564 (1979)

Rule:

Under the law of capture, there is no liability for reasonable and legitimate drainage from the common pool. The landowner is privileged to sink as many wells as he desires upon his tract of land and extract therefrom and appropriate all the oil and gas that he may produce, so long as he operates within the spirit and purpose of conservation statutes and orders of the a regulatory body. These laws and regulations are designed to afford each owner a reasonable opportunity to produce his proportionate part of the oil and gas from the entire pool and to prevent operating practices injurious to the common reservoir. In this manner, if all operators exercise the same degree of skill and diligence, each owner will recover in most instances his fair share of the oil and gas. This reasonable opportunity to produce his fair share of the oil and gas is the landowner's common law right under the theory of absolute ownership of the minerals in place. But from the very nature of this theory the right of each landholder is qualified, and is limited to legitimate operations

Facts:

Defendant Sun Oil leases property from H. H. Winn (Tract 9) and from H. H. Winn, et al (Tract 12). Sun Oil has drilled several wells on these tracts in compliance with the uniform well spacing pattern, including well 1-C on Tract 9 and wells 3 and 6 on Tract 12. These three wells were operating during the effective date of the proration order and were subject to its terms. Plaintiffs, Walter F. and Eleanor J. Wronski and plaintiffs Eugene and Aniela Koziara, owners of certain real property and the attendant mineral rights, filed this action, alleging that Sun Oil illegally overproduced more than 180,000 barrels of oil from these three wells, and that the illegally overproduced oil was drained from beneath plaintiffs' lands. They sought rescission ab initio of their oil and gas leases with Sun Oil coupled with an accounting, or in the alternative both compensatory and exemplary damages.

Issue:

Was defendant oil company liable in conversion to the landowners for the overproduction of oil?

Answer:

Yes.

Conclusion:

The court affirmed the decision. If it can be said that defendant’s overproduction deprived plaintiffs of the opportunity to claim and take the oil under their respective properties, then defendant is liable for conversion. The trial court's findings were not clearly erroneous, given the state's incorporation of the fair-share principle and its subsequent modifications of the rule of capture into Mich. Comp. Laws § 319.13. However, the court held that the trial court should have applied the "harsh" rule of damages and awarded the value of the oil at the time of conversion.

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