A grant in a lease of forty acres of land, described by metes
and bounds, for the sole and only purpose of boring, mining, and
excavating for petroleum or carbon oil and gas and piping of oil
and gas over all the tract excepting reserved therefrom ten acres,
also described by metes and bounds, upon which no well shall be
drilled without the consent of the lessor, is a grant of all the
gas and oil under the entire tract, conditioned that the lessee
shall not drill wells on the ten-acre plat without the consent of
the lessor.
John F. Taylor, July 29, 1889, leased a tract of land containing
forty acres, in Grant Township, Pleasants County, West Virginia, to
Joseph S. Brown for the purpose of boring and mining for oil and
gas, by a deed of that date, which was, on August 3, 1889, duly
recorded in the clerk's office of Pleasants County. Brown took
possession under this lease and proceeded to exercise possession
therein conferred.
On the 30th day of June, 1890, John F. Taylor and his wife, by
their deed of that date, sold and conveyed the same tract of land
to B. D. Spilman and W. N. Chancellor, subject to the lease to
Brown, which lease is described in the deed as being a lease of
thirty acres of said tract of land for oil and gas purposes.
On the 9th day of July, 1890, Spilman and Chancellor filed in
the Circuit Court of the United States for the District of West
Virginia a bill of complaint against Joseph S. Brown wherein they
set up their ownership of the said tract of land, containing forty
acres, conveyed to them by Taylor and wife, and complain that
Brown, without right, was asserting a claim and title to the oil
and gas in certain ten acres of said land, and was threatening to
interfere with the right and possession of the plaintiffs in
drilling oil wells and operating on said ten acres of land, and
they charge that the claim of Brown
Page 155 U. S. 666
created a cloud upon their title to the ten acres, and ask for
an injunction and equitable relief. As exhibits, copies of the
lease to Brown and of the deed to Spilman and Chancellor were
annexed to the bill.
Brown, on July 18, 1890, filed an answer to the bill asserting
his right to possession of the entire tract of forty acres for oil
and gas purposes and denying that the complainants had, under their
deed from Taylor, any right to bore for oil on the said ten acres
or to exclude him therefrom. On the same day he filed a cross-bill
against Spilman and Chancellor in which, after narrating the
contents of the lease and of the deed as he claimed them to be, he
asked that Spilman and Chancellor should be enjoined from boring or
mining for oil and gas on the said ten acres, and from interfering
with his rights in the same.
To this cross-bill Spilman and Chancellor filed a general
demurrer, and on August 25, 1890, by agreement of counsel, the case
was set down for hearing upon the bill and exhibits and answer and
replication to said answer to the original bill and upon the
cross-bill and demurrer thereto.
On February 10, 1891, the court entered a final decree and filed
opinion, reported in 45 F. 291, sustaining the original bill and
enjoining Brown and all persons acting under him from entering into
or upon said ten acres of land and from instituting any action or
suit against the plaintiffs in respect to the said ten acres, and
from interfering with or interrupting the plaintiffs in their use
of the ten acres for any purpose. By the decree, the demurrer to
the cross-bill was sustained and the cross-bill dismissed with
costs.
From this decree an appeal was taken to this Court.
Page 155 U. S. 667
MR. JUSTICE SHIRAS, after stating the facts in the foregoing
language, delivered the opinion of the Court.
Whatever rights Spilman and Chancellor have in the ten acres in
controversy they hold subject to the provisions of the prior lease
to Brown, of which, as a recorded instrument, they took with
notice, which is referred to as an existing lease, in the deed to
them from Taylor, and which they attach as an exhibit to their
bill.
In order to reach an intelligible construction of the lease, it
will be necessary to have before us its entire language, as
follows:
"This lease, made this ___ day of July, A.D. 1889, by and
between John F. Taylor, of the County of Pleasants and State of
West Virginia, of the first part, and Joseph S. Brown, of
Pittsburgh, Pa. of the second part, witnesseth: "
Page 155 U. S. 668
"That the said party of the first part, in consideration of
fifteen dollars in hand paid, the receipt whereof is hereby
acknowledged, and the stipulations, rents, and covenants
hereinafter contained, on the part of said party of the second part
to be paid, kept, and performed, hath granted, demised, and let
unto the said party of the second part, his heirs, executors,
administrators, or assigns, for the sole and only purpose of
boring, mining, and excavating for petroleum or carbon oil and gas,
and piping of oil and gas, over all of that certain tract of land
situate in Grant township, Pleasants County, and State of West
Virginia, and bounded and described as follows, to-wit: on the
north, by lands of Mrs. Jones and the Ohio River; south, by lands
of A. Smith; west, by county road; east, by Mrs. Jones, containing
forty acres, more or less, excepting reserved therefrom ten acres,
beginning at the railroad, and running thence to the county road,
thence south with said county road to A. Smith's line, thence with
said Smith's line to a line to be drawn from the railroad to meet
it, upon which no wells shall be drilled without the consent of the
party of the first part; to have and to hold said premises
peaceably and quietly for the said purposes only for, during, and
until the full term of two years next ensuing the date and year
above written or so long thereafter as oil or gas shall continue to
be found thereon in paying quantities. The said party of the second
part hereby covenants, in consideration of the said grant and
demise, to deliver unto the said party of the first part, his heirs
and assigns, the full, equal one-eighth part of the petroleum or
carbon oil discovered, excavated, mined, pumped, and raised on the
premises herein leased, as produced in the crude state, to be
delivered in pipelines at the wells, and in case of a gas well
being struck and utilized, then, in lieu of a royalty, the party of
the first part agrees to accept a yearly rental of two hundred
dollars for each and every well drilled on above-described
premises. All pipelines shall be laid along the fences or buried
two feet underground. The said party of the first part to fully use
and enjoy the said premises for the purpose of tillage except such
parts as may be necessary for said mining purposes, and a right
of
Page 155 U. S. 669
way to or from the place or places of said mining or excavating.
The said party of the first part hereby grants to the party of the
second part the right to remove any machinery, buildings, or
fixtures placed on said premises by the said party of the second
part. The party of the second part further to have the privilege of
using sufficient water from the premises herein leased for the
prosecution of said business. The party of the second part agrees
to and will, within one month from this date, commence a test well
for gas and oil in this vicinity and complete the same within two
months thereafter, unavoidable accidents and delays excepted. Said
second party is to commence and drill a well on the
within-described lands within nine months after the completion of
said test well, and to prosecute said drilling with reasonable
diligence to its completion. He is also to pay to first party a
monthly rental of ten dollars in advance until said drilling one
well is completed. The party of the second part is to keep up all
fences, and to pay any damage done by leaving said fences down by
said second party on his premises. A failure of the party of the
second part to make said payments will render this lease null and
void, not binding on either party. The party of the second part is
only to have the right to assign this lease to the company of which
he is a member and to no one else without the consent of the first
party."
"In witness whereof, the said parties have hereunto set their
hands and seals, the day and year first above written."
It may be well to make some preliminary observations on the
subject matter of this contract, and thus facilitate the task of
its construction.
The subject of the grant was not the land, certainly not the
surface. All of that except the portions actually necessary for
operating purposes and the easement of ingress and egress was
expressly reserved to Taylor. The real subject of the grant was the
gas and oil contained in or obtainable through the land, or rather
the right to take possession of the gas and oil by mining and
boring for the same.
Petroleum gas and oil are substances of a peculiar character,
and decisions in ordinary cases of mining, for coal and other
Page 155 U. S. 670
minerals which have a fixed situs cannot be applied to contracts
concerning them without some qualifications. They belong to the
owner of the land and are part of it so long as they are on it or
in it or subject to his control; but when they escape and go into
other land or come under another's control the title of the former
owner is gone. If an adjoining owner drills his own land, and taps
a deposit of oil or gas extending under his neighbor's field, so
that it comes into his well, it becomes his property.
Brown v.
Vandergrift, 80 Penn.St. 147;
Westmoreland Nat. Gas Co.'s
Appeal, 25 Weekly Notes of Cases (Penn.) 103.
To operate the machinery used in boring an oil well, it is
necessary to erect a derrick, which is a structure of considerable
height, and occupies a large space of ground. This derrick is also
used, if oil be found, in connection with the pumping machinery. A
very strong odor proceeds from a gas or oil well, and the noise of
a well in operation can be heard for a long distance. These are
some of the reasons why it is usual for farmers, when they grant
the right to drill for oil and gas, to stipulate that wells shall
not be drilled in close proximity to their dwelling houses.
When oil or gas is found in paying quantities, it is not usual
to consume it or reduce it to use at the wells, but it is conducted
in iron pipes to large tanks or reservoirs, whence it is
distributed by other pipes to the places of consumption, often many
miles distant.
These are matters within the common experience or knowledge of
all men living in those portions of the country where oil and gas
are produced, and courts will take notice of whatever ought to be
generally known within the limits of their jurisdiction. 1
Greenl.Ev. ยง 6.
Taking up the contract in the present case, we find that the
grant is expressly
"for the sole and only purpose of boring, mining, and excavating
for petroleum or carbon oil and gas, and piping of oil and gas,
over all of that certain tract of land situate in Grant township,
Pleasants County, and State of West Virginia, and bounded and
described as follows [here follow the boundaries], containing forty
acres, more or less,
Page 155 U. S. 671
excepting reserved therefrom ten acres, beginning at the
railroad [here follow boundaries], upon which no wells shall be
drilled without consent of the party of the first part."
Do these latter words import an exception of the ten acres,
taking them wholly out of the grant, or a condition affecting the
mode of enjoying the grant, and, as alleged in the cross-bill, "for
the personal benefit, comfort, and enjoyment of the said
Taylor"?
As the grant in terms was for the purpose of boring and mining
for oil and gas, and piping of oil and gas over all of the
forty-acre tract, it would be strange if an exception of ten acres
was to be immediately added. If thirty acres only were to be
included in the lease, and to be affected by its terms, the obvious
course to pursue was to grant those thirty acres only. But if we
read the grant as giving all the gas and oil under the entire tract
of forty acres, and the subsequent clause as a provision that, in
exercising the rights granted, Brown should not, without the
consent of Taylor, drill wells on the ten-acre plat, we shall thus
give effect to all the language used.
There is given an express right to run pipes for gas and oil
over the entire tract, and also a right of way to and from the
place or places of mining. The so-called "exception" does not seek
to reserve anything out of the grant to bore or mine for oil and
gas, nor to restrict the rights of way to thirty acres. Its only
purport is to forbid the drilling of wells upon the ten acres.
While the lease, in some sense, may be said to cover the entire
tract for gas and oil purposes, yet the operation of drilling
wells, with its accompanying discomforts to those living on the
tract, is restricted to the thirty acres.
Questions such as we are now considering have been determined by
the Supreme Court of Pennsylvania in several cases.
In
Appeal of the Westmoreland and Cambria Natural Gas
Company, 25 Weekly Notes of Cases 103, was a case where an oil
lease in terms almost like the one before us was given by the owner
of a farm to a gas company
"for the sole and only purpose of drilling and operating wells,
and transporting and conveying petroleum oil or gas, through, over,
and from all
Page 155 U. S. 672
that certain tract of land situate, be,"
with an excepting clause as follows: "No wells to be drilled
within three hundred yards of the brick or stone building." And the
landlord or grantor undertook to subsequently grant to third
persons the right to bore for oil on the excepted territory. This
the court held he could not do, saying:
"We have to consider whether the well threatened to be put down
was upon the land leased to the plaintiff. Of this there cannot be
the slightest doubt. The lease is of 'all that certain tract of
land,' etc. This means the whole tract. The grant is limited as to
use, 'for the sole and only purpose of drilling and operating
wells,' but it is not limited as to territory. Following the
description of the tract is the clause on which respondents rely:
'No wells to be drilled within three hundred yards of the brick
building belonging to J. H. Brown.' The well which the respondents
propose to bore is within the prohibited distance, and they claim
that Brown, the landlord, and they, as his lessees, have the right
to drill wells within that part of the territory. But the clause in
question is neither a reservation nor an exception as to the land,
but a limitation as to the privilege granted. It does not in any
way diminish the area of the land leased -- that is still the whole
tract -- but it restricts the operation of the lessee in putting
down wells to the portions outside of the prohibited distance. For
right of way and other purposes of the lease, excepting the
location of wells, the space inside the stipulated line is as much
leased to the lessee as any other part of the tract. The terms of
the lease would imply the reservation of the lessor of the
possession of the soil for the purposes other than those granted to
the lessee, and the parties have expressed what otherwise would
have been implied by the provision that the lessor is 'to fully use
and enjoy the said premises for the purpose of tillage, except such
part as shall be necessary for said operating purposes.'"
"From the nature of gas and gas operations, the grant of well
right is necessarily exclusive. It was so held as to oil wells in
Funk v. Haldeman, 53 Penn.St. 229, although in that case
the plaintiff had a mere license to enter, etc., and not, as here,
a lease of the land. And it is exclusive in present case
Page 155 U. S. 673
over the whole tract. As already said, the clause relative to
the three hundred yards distance was a restriction on the privilege
granted, and not a reservation of any land or any boring rights to
the lessor, and a well upon the prohibited portion was just as
damaging to the lessees as upon any other portion of the tract. The
drilling of the well threatened by respondents is therefore in
violation of the lease, and should be enjoined."
Duffield v. Hue, 26 Weekly Notes 387, is to the same
effect.
We observe in the cross-bill a distinct averment that Taylor,
before he sold and conveyed to Spilman and Chancellor, had given
his consent to Brown to drill wells on the ten-acre tract. If this
were so, it would follow that Spilman and Chancellor must be
regarded as having purchased subject to an exclusive right in Brown
to bore for oil and gas over the entire forty-acre tract.
As, however, this averment does not seem to have received the
attention of the court below, where the case went off wholly on the
construction put upon the lease, we prefer to leave that feature of
the case to be further dealt with in the court below should the
defendants desire to withdraw their demurrer and traverse the
allegation of a license.
The decree of the court below sustaining the original bill
is reversed, and the decree sustaining the demurrer and dismissing
the cross-bill is also reversed, and the cause remanded for further
proceedings in accordance with this opinion.