Co author Kelley Clark Morris
Samson Expl., LLC et al v. Moak considered the duties owed by a unit operator to an unleased mineral interest owner in tracts within the unit but on which no well is drilled or completed.
The Samson parties own leases in a pooled unit created by a 2012 unit designation. Moak did not own any interest within the boundaries of the unit at the time the unit was created. Samson is operator; Moak is not a party to the Operating Agreements. After the creation of the unit, certain leases located on tracts within the boundaries of the unit were terminated when the lessors’ interests were foreclosed. Moak acquired the minerals on some tracts and took leases on other tracts. The unit designation was never amended to include Moak’s mineral interests. Samson drilled and completed two wells in the unit, neither of which had a surface or bottom hole location on or within 467 feet of any of the mineral interest tracts.
Moak alleged that it owned real property in the pooled unit and asserted claims for an accounting, conversion, unjust enrichment, negligence, and to quiet title. The trial court ruled that Moak’s mineral interests were pooled because the unit designation described the lands pooled rather than leases pooled. Therefore Moak was an unleased mineral co-tenant within the unit. The trial court rendered judgment that Moak take nothing on its claims to quiet title and for negligence, but found for Moak for conversion and unjust enrichment against Samson, entitling Moak to equitable damages in the amount of $43k. Samson appealed.
Was Moak entitled to an accounting?
No. Nothing was produced from the mineral interests, so there was no common law duty to account. And Moak had no contractual relationship with any of the defendants. Samson prevails.
Did the unit declaration pool the interests of the prior lessors?
No. Because the mineral interests were encumbered by deeds of trust, the legal and equitable estates in the properties were severed. The original lessors never acquired the reversionary rights in the lands because the properties were foreclosed on. Moreover, because Moak never entered into any agreement with the mortgagees of the mineral interests, Moak had no contractual relationship with the owners of the leases in the unit that would give Moak the right to minerals produced form the unit but not produced from the mineral interest tracts. Any attempt to pool the leases would have been ineffective because the mortgagees had not consented to pooling. Samson prevails.
Did Samson owe Moak an opportunity to ratify the pre-foreclosure leases?
No. Equitable remedies were improper; Moak failed to prove a claim for unjust enrichment or conversion. Samson as operator owed no duty to Moak as unleased mineral co-tenant with no interest in the pooled unit to offer an opportunity to ratify the pre-foreclosure mineral leases. Final judgment awarding Moak equitable damages reversed. Samson prevails.