Banks v. Calstar Petroleum Co.

WILSON, J.

This is an action to quiet title to real property and to declare terminated an oil and gas lease alleged to have been forfeited by reason of the abandonment in 1944 of the oil well drilled on the property and the failure of the lessee to do further exploration work. From a judgment for plaintiffs defendant has appealed.

The material facts necessary to a consideration of the appeal as found by the court and substantiated by the evidence are as follows: The lease was executed on May 12, 1938; in August, 1939, a well was drilled to a depth of 7,651 feet, which

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had an initial daily production of 1,400 barrels of 36 gravity oil. In October, 1941, appellant discontinued producing oil, gas and other hydrocarbon substances from the well and has produced none since that time for the reason that in the opinion of appellant production from the well did not render it economically feasible to continue further operations, and since that date appellant has not operated, deepened or re-drilled the well. In January, 1944, appellant pulled the casing and plugged the well with cement. In April, 1945, respondents notified appellant that it was in default in its operations under the lease and that the lease would be terminated and forfeited unless within 90 days thereafter operations were commenced for the drilling of a new well or for the redrilling or deepening of the well theretofore drilled on the premises. Appellant failed to do any work on the property and in August, 1945, respondents gave notice to appellant of their election to terminate the lease and demanded a quitclaim deed to the property.

1.

The lease was abandoned.

The failure of appellant to perform any work on the premises between October, 1941, when the operation of the well ceased, and January, 1944, was in violation of the terms of the lease requiring the operation of the well or the drilling of an additional well.

Appellant’s intention to abandon the lease was indicated by a notice given by it on January 15, 1944, to the Division of Oil and Gas of the State of California of its intention to abandon the well. On January 20, the Division of Oil and Gas approved appellant’s plan for abandonment. In a report filed with the division dated February 10, 1944, appellant stated that in January, 1944, all tubing had been pulled from the well; a cement plug had been placed at 7,372 feet; 7-inch casing had been shot at 1,870 feet; all easing from 1,794 feet to the surface had been pulled; a cement plug had been placed in the well between a depth of 709 and 734 feet, and a third plug had been placed in the 13%-inch casing at the surface. These acts made it impossible to produce any oil from the well. The report of abandonment was approved by the Division of Oil and Gas, whereupon appellant removed the tanks and pumping equipment that had been used by it in the operation of the well.