Page images

(230 P.) was marketable in the condition in which it | pipes in the tanks until the fluid was heated was pumped. Later salt water came into the sufficiently so as to separate water from the oil wells and gradually increased in volume, and to such an extent that the portion of the fluid during the last few years a large percentage above the pipe line connection would be of such of the fluid, produced by the wells, has been purity that the purchaser would accept it. Besalt water, amounting on many leases to more fore the purchaser would accept it, a sample of than 90 per cent. This is commingled with the the oil would be taken from near the pipe line oil, and has to be pumped out with it. The connection by means of an instrument called a mixed fluid thus pumped out is run into a tank. 'thief' and that sample tested by the use of Since the water is heavier than the oil, a con- what is called a 'centrifuge machine.' If the siderable portion of it settles by gravity into sample satisfied the purchaser, he would buy the bottom of the tank and is drawn off with the oil. If it did not, he would require further out disturbing the oil. A large amount of wa-{ treatment. ter, however, remains mixed with the oil, and "(12) By this method the heating of the oil under ordinary temperature will not separate. caused some of the lighter vapors of the oil to It was found that by heating the mixture a escape, so that there was a distinct loss in still greater portion of the water, which has volume before the oil was sold, and there was remained suspended in the oil, could be sepa- a distinct and important loss in the quality of rated and precipitated to the bottom and again the oil by reason of the fact that the lighter drawn off; but, even when the fluid was heat, gasoline vapors were lost and the value of the ed, the water descending carried with it con-oil was consequently lessened. There was ansiderable oil. This mixture, with such other other loss also in the amount of emulsion impurities as are brought up by the pump, which settled below the pipe line connection, forms an emulsion at the bottom of the tank, and which would not be accepted by the purwhich is called 'basic sediment or most gener- chaser, and which was thrown away, with the ally 'B. S.' This B. S. gradually thickens in possibility of reclaiming only a small portion. the bottom of the tank, and much of it has to All of these losses were suffered by the lessor be scraped out and thrown away, and most op- and the lessee in proportion to their interests erators deposit it in large artificial ponds upon of one-eighth and seven-eighths. the leases, where occasionally it is finally dis

“(13) In addition to the above losses, the exposed of by burning.

pense of this method of treatment was very .(8) Purchasing companies will not ordina- substantial; the cost of constructing these rily accept oil having much more than 1 per separate steaming plants and maintaining and cent. of water and other foreign matter.

operating them was borne by the defendant, “(9) (A finding as to the divisional order except that, as provided by the leases, and as given by plaintiffs for the payment of oil.)

was customary in the field, the fuel for this "(10) The delivery of oil to the purchasing purpose was oil taken from the lease, and

amounted to about 10 barrels a day. company was made in the following manner: "A pipe line was connected with stock tanks

“(14) Seeking to prevent the above losses on the leased premises somewhere from 12 to and expenses, the defendant during the year 20 inches above the bottom of the tank, and 1918 undertook extensive experiments to de. the oil was run through this pipe line. Before vise a method of treating the oil in such a way being run an agent of the purchasing company, and to reclaim from the B. S. the oil contained

as to save the vapors which had been escaping, called the gauger, carefully measured the depth therein; also to recover from the B. S. ponds, of the fluid in the tank. Then the pipe line where the waste matter had been deposited, connection was opened and the oil allowed to the maximum amount of oil capable of repass into the pipe line from the tank and as much taken out as the purchaser was willing to construct what is known as the dehydrater.'

covery therefrom, and it was finally determined to accept. Then the pipe line was closed, and

"(15) The dehydrater is a large plant costagain the depth of the fluid in the tank was carefully measured and the number of barrels miles east of the Hamilton and Shriver lands,

ing over $400,000 and is located about three and fractions of barrels run was then deter- and on the main road to El Dorado. A system mined by the purchasing company.

Prior to

of pipe line was laid connecting the tanks of all this time each tank had been carefully meas, of the wells upon plaintiffs' lands and upon ured, and a very elaborate table was prepared nearly all other leases owned by the defendant by an expert engineer at Tulsa, employed by in the El Dorado district at a further cost of practically all purchasing companies for this

about $250,000. The defendant operated at Purpose. That table showed the number of that time, and at the time of the trial of this barrels of 42 gallons each that would be con action about 75 leases in that district with tained in each portion of the height of the about 1,350 wells, all connected with the dehytank figured down to a quarter of an inch and drater. No other company owns nearly that an hundredth part of a barrel. From this table number of leases in the district. the purchasing company figures the number of “(16) The dehydrater was built by the de. barrels delivered, and remits at the market fendant. It is operated by the Empire Pevalue, one-eighth to the royalty owner and troleum Company, but the defendant pays the seven-eightbs to the producing company. The Empire Petroleum Company the entire exlandowner could have an agent present to ver pense of operating the plant. The defendant ify these measurements and keep a record of also pays the Empire Petroleum Company for same when this was done.

any loss due to any overpayment which the "(11) The first method used by the defend Empire Petroleum Company may make on acant in removing water from the oil, so as to count of its giving credit for more oil delivered make it marketable, was by establishing upon from the leases than the actual runs from the each lease a steaming plant, and placing steam dehydrater delivered, if any such there be.



The pipe lines, receiving the oil from the leas-, line, less the proportion of water found to be
es, are owned and operated by the Empire contained therein.
Pipe Line Company.

"(21) The method of selecting the sample of
“(16a) The Empire Gas & Fuel Company is the fluid in the tank for testing during all of the
the producing company. The Empire Pipe Line time from the date the steaming process was
Company is the company that transports oil abandoned for making marketable oil and until
through its pipe lines. The Empire Petroleum January 19, 1921, was as follows:
Company is the buying company. The Empire "The instrument above referred to and call-
Pipe Line Company lines connect with the de- ed the 'thief' (which is a square can 1 foot
hydrater plant, and the oil from the dehydrater deep and about 2 inches across, open at the
is turned into the connecting lines of the Em- top, also open at the bottom, when being sub-
pire Pipe Line Company. The treating of the merged but with a sliding bottom, which is
oil at said dehydrater is done by the pur- closed by a spring which can be released quick-
chasing company. There is no treatment of ly when the thief is at the point at which it is
the oil on the property of the plaintiffs. desired to take the sample) was submerged in-

"(17) The method of conducting the dehy- | to the fluid in the tank at the top of that fluid drater, briefly stated, is as follows:

and filled and emptied into a can, then the "The oil, including water and other in- thief was lowered half way down to the pipe purities, except such as have settled out by line connection in the tank, and again filled and gravity, is collected through the pipe line from emptied into tue same can, and was again the various leases and run into large receiving lowered down to just above the pipe line contanks and there commingled. From these nection, and again filled and emptied into the tanks it passes through entirely closed large same can. These three samples were thorpipes which are heated by steam, and passes oughly mixed by agitation, passed through a into entirely closed reservoirs, where it is fur- quartering device, and two portions separately ther treated with chemicals, and this treatment tested in the centrifuge machine until about removes practically all water and other im- August, 1920, which was revolved rapidly by purities, and the oil in good marketable con- hand until the water carried by centrifugal dition is delivered into stock tanks or run into force separated from the oil so far as this pipe lines for final shipment. In this treatment treatment would separate it, and the proporsubstantially all gasoline vapor is saved. tion only, represented by the water thus sepa

“(18) The dehydrater was completed about rated, was accepted as the proportion to be March, 1919, and all leases were connected as deducted from the amount of oil delivered from soon thereafter as practicable. The J. E. the tank, for which both lessor and lessee Hamilton lease, referred to herein, was con- received credit and payment from the purnected with the dehydrater March 18, 1919; chasing company. the Joshua Shriver lease was connected March “(22) This method of testing the samples 15, 1919; and the J. L. Shriver connected May of oil by the use of the centrifuge machine 24, 1919, and since those respective dates all was continued upon all leases until August 19, oil from these leases has been delivered to the 1920, and payments were made during that dehydrater.

time on the basis of that test, when it was de"(19) Ever since the connection with the determined and claimed by the defendant that hydrater the same method of measuring the the lessor in each case was receiving credit fluid at the tanks on the leases and the same for more than his one-eighth of actual oil demethod of estimating the number of barrels of livered which was claimed to be due to the fluid run from the tanks with the same strap-fact that the centrifugal machine did not sepping tables and the same method of payment arate all of the water from the oil, this being therefor by the Empire Petroleum Company largely the water contained in the emulsion or have continued as were used prior to the time B. S. which formed a part of the sample. that the dehydrater was connected.

“(23) Upon the 19th day of August, 1920, "(20) Some time between March and the the defendant discontinued the use of the cenmiddle of the year 1919 the use of steaming trifugal machine for making the tests and plants upon the lease was discontinued for the adopted the method of distillation. By this purpose of preparing the oil for the market, method the samples taken from the tanks have and as a consequence the fluid run from the been treated in the laboratory of the defendtank into the pipe line and to the dehydrater ant first about 1 mile and later at Oil Hill contained considerable water which had not about 6 miles from the leases by being meas. been separated by gravity from the oil, and ured, placed in a still, subjected to heating, which amounted to from about 6 to about 12 and, the vapors of gasoline and of water being per cent. or more of the total fluid content de collected in an accurately graduated tube in livered from the tank; and in order to deter- which the water settles to the bottom with the mine the amount of credit that should be given gasoline on top and the amount of water thus to the lessors and to the lessee respectively by extracted by distillation and this only, is dethe purchasing company a sample was taken ducted from the total cubic contents of the of this fluid, and that sample tested for the sample which is treated, and this proportion purpose of determining the proportion of water of water to the total volume of the entire samcontained in the sample; and, when that pro-ple is the proportion that is used and deducted portion of water in the sample was thus de- by the Empire Petroleum Company in estitermined, then the same proportion was de mating the amount of actual oil delivered from ducted from the total volume of fluid delivered the tank, and upon this estimate its payments into the pipe line, and credit was given to the have been made. lessor and the lessee for their respective por "(24) After further consideration, and after tions of the remainder so that the lessor re- the commencement of this suit, the defendant ceived full credit for his one-eighth of the total upon January 19, 1921, in taking the samples amount of fluid run from the tank into the pipe to be tested, used what is called a 'continuous

(230 P.) column method.' This is done as follows: A, connected with the dehydrater, will at all times thief 2 feet long is attached to the pole used / substantially exceed the cost of operating the in gauging the depth of the fluid in the tank dehydrater itself. at a point so that the top of the thief is level “(33) Under the steaming plant a very subwith the top of the fluid. This sample is taken stantial portion of the oil was necessarily out and deposited in the receiving can; then thrown away into the B. S. ponds. The abanthe thief is placed 2 feet lower on the pole, donment of the steaming process and chargand is submerged, and the sample taken and ing against the lessor only the water contained deposited in the same can; and so on, until in the B. S. has saved to both parties subthe thief has taken a continuous sample down stantially all of the oil contained in the B. S. to the pipe line connection, and these samples, About 30 per cent. of this B. S. is oil. being throughly mixed and treated by distilla “(34) By the use of the dehydrater the B. tion, have formed the basis of estimating the S., which had formerly been thrown into the amount of oil for which credit is given since ponds, has been reclaimed and run to the de. January 19, 1921.

hydrater, and there practically all of the oil "(25) Each lessor receives payment for his has been extracted from it, and in each case royalty based upon the amount of fluid run the lessor has received payment for his onefrom the tank upon his own land, after deduct- eighth. ing the amount of water as so determined by “(35) The maintenance of steaming plants the test of the samples, without regard to upon the separate leases necessitated the use what happens to the oil after it passes from of a considerable quantity of oil per day, which the tank into the pipe line, and without regard expense was borne by both lessor and lessee, to what is done with it at the dehydrater. and the abandonment of the steaming plants

"(26) The present method of gauging and has resulted in a saving to both lessor and measuring the tanks and fluid in the tanks is lessee in this respect. correct and proper.

“(36) The plaintiffs have been offered the “(27) The present continuous column method privilege of observing all tests made in the of taking the samples, to be tested and treat- laboratory, and have at all times had the prived, gives a fair sample of the whole volume ilege of observing the gauging of the oil and of fluid in the tank.

the sampling of the same at the tanks upon "(28) The present method of testing the the leases, but it is not practicable, if possible, samples by distillation to determine the per for the lessors to visit the laboratory of the cent. of water contained therein is correct, defendant at all times when the particular and, if the work in the laboratory is accurate samples of fluid from their leases are being ly done, and this must be very accurate, since worked, and then only a chemist, or one reathe sample is such a very small portion of the sonably familiar with this character of labowhole, and honestly reported, then the result ratory work, could check up the result, and the is correct.

lessors have no control over the samples of “(28a) This method of determining the fluid which are finally treated after they are amount of marketable oil delivered into the taken from the tanks at the wells. pipe line is not used by any other company in

(37) The returns in money to the plaintiffs this midcontinent oil field, but all others steam for oil from their leases fell off suddenly and the oil on the leases, before turning same into very mater ally about August, 1920.” the pipe line, when necessary. “(29) Comparisons have been made of the

The court stated the conclusions of law as records of the dehydrater which show the total follows: amount of oil actually recovered during definite "First. For the purpose of eliminating waperiods, and the other records of the Empire ter and basic sediment and ascertaining quanPetroleum Company, showing the total amount tity of marketable oil, the plaintiffs are entiof oil during the same periods, for which alltled to have the fluid from their wells treated lessors in the field have received payment for upon the leases so that they may ascertain their one-eighth royalty. These comparisons and know for themselves the amount of oil that show that during the time from March, 1919, is delivered into the pipe line; or the defendwhen the dehydrater was completed, to August ant should inaugurate a plan in the use of its 1, 1920, during which time the centrifuge ma present system under and by which the plainchine was used, there was an overpayment to tiffs may be afforded an opportunity to know all lessors.

that a correct sample of the fluid from their "(30) The comparisons referred to in con- wells is treated, and properly treated, in asclusion 29 also show that from August 1, 1920, certaining the amount of marketable oil run to June 1, 1921 (shortly before the trial of from their leases, and this without any greater this case), during which time the distillation expense to them than they would ordinarily test had been in operation, there was still a incur for the services of a gauger to oversee small overpayment to lessors, amounting to and measure the quantity of marketable oil in about 0.65 per cent.

their tanks prior to being turned into the pipe “(31) The total number of barrels of oil line, after being steamed or otherwise made produced by the defendant in the field during marketable by the defendant upon the leases. the year 1918 was 12,066,191.65, while the “Second. Unless the defendant afford the total number of barrels produced by the de- plaintiffs, without additional trouble and exfendant in the field during the year 1919 was pense to them, reasonable means and oppor7,837,284,17, showing a decrease in the amount tunity of ascertaining and knowing that the of production for the 12 months next prior to proportion of the fluid turned into the pipe January 1, 1920, to be 35 per cent.

line from the tanks on their leases, and which "(32) The cost to the Empire Gas & Fuel is reported by defendant to be marketable oil, Company of maintaining and operating the and for which they are paid, is correct, then it separate steaming plants upon all of the leases should be required to treat the fluid upon the

[ocr errors]

leases so that, when turned into the pipe line, that the "thief test,” or method used by deit shall represent oil sold, one-eighth of which fendant in determining the amount of oil would represent the plaintifi's share of mar- produced and saved from the lease, was inketable oil.

“It is therefore ordered that, as a condition accurate, and resulted in loss to plaintiffs. precedent to the continued use of its present So thorough was this evidence that counsel method of ascertaining the amount of mar- for plaintiffs, while a witness was being exketable oil delivered to the pipe line from the | amined in the trial, spoke up and said “Untanks on the leases of the plaintiffs, the de- derstand me, I think your distillation test is fendant shall pursue the following course: a splendid test. I am not attempting to at

"First. Furnish to the gauger of the plaintiffs tack your test at all on that.” And both in in a proper receptacle an equal part of the the oral argument and brief in this court it sample taken from the tanks for treatment is frankly conceded that the method of testat the laboratory.

“Second. Treat its sample at a time reason- ing the samples taken from the tanks by the
ably convenient for the gauger of the plain-instrument called a “thief” is scientific and
tiffs to be present and observe the work, and accurate, and correctly shows the percentage
of which time the gauger shall be given notice of water to be deducted from the total quan-
by the defendant when the samples are taken tity of oil and water run from the tank. The
from the tanks.
“Third. Give to the gauger of the plaintiffs, the defendant in testing the oil and in treat-

allegation in the petition that the method of at the time of treating the fuid in the labor-ing it so as to make it marketable resulted atory, a record report of the result thereof.

"Fourth. Treat the sample delivered to the in loss and damage to plaintiffs also was gauger of the plaintiffs, when requested to do thoroughly disproved. 80, and give to said gauger a record report of On the other hand, the evidence and findsame for the purposes of comparison. ings show that the method used by defend

"Fifth. Number all samples and reports of ant results in a substantial saving and bentreatment thereof, so as to insure correct com-efit to plaintiffs, as well as to defendant, parisons.

“Sixth. Pay to plaintiffs the reasonable ex- by saving the most volatile and valuable pense incurred by them in handling the samples portions of the oil that were lost by the and observing the work of the defendant in heating and steaming process, by saving treating the same, over and above the ordinary the basic sediment, 30 per cent. of which and reasonable cost of hiring a competent is oil, all of which was wasted under the gauger to measure the oil in the tanks upon heating and steaming process, and by not the leases after their being made ready for the having to use 10 barrels of oil per day to market and before being turned into the pipe line, and, if plaintiffs and defendant are not operate the heating and steaming plants. able to agree, then this court to ascertain and So the relief sought by plaintiffs in their pefix the amount which shall be paid by defend-titions--that defendant be enjoined from conant to the plaintiffs on this account.

tinuing to use the "thief test" in determin"Seventh. File in these cases its consent and ing the amount of oil produced and saved offer to comply with these suggestions within from the leased premises, and for a decree 40 days from this date.

"And it is further ordered and adjudged that requiring defendant to re-establish and oper-
when, and as long as, the defendant complies ate the steam heating plants upon the leases
with these requirements as hereinbefore sug- --is no longer seriously contended for.
gested, then it shall be permitted to continue fact, they say, in substance, that this large,
its present method of marketing the oil from expensive, efficient dehydrating plant used by
the leases of the plaintiffs, and the relief prayed defendant should not be junked, and the
for by them be denied; but, upon defendant's former wasteful and more expensive method
refusal to comply with these requirements,
judgments should and will be rendered in favor of steam heating the oil in the tanks on the
of the plaintiffs in these actions."

leases re-established in its stead.

But plaintiff's contend that because of the Defendant moved for a modification of clause in the lease which obligates the lessee some of the findings of fact made, and for “to deliver to the credit of the first party, some additional findings. Reading the evi- his heirs or assigns, free of cost, in the pipe dence, it would seem that this motion might line to which it may connect its wells, the have been sustained, in part at least, but we equal one-eighth of all oil produced and savdo not regard the overruling of this motion ed from the leased premises,” and since deas material. The defendant objected to the fendant, with consent of plaintiffs, did estabconclusions of law and to the judgment ren- lish and operate the steam heating plants dered, and moved for judginent in its favor upon the leases so as to treat the oil and upon the findings made. This motion was make it marketable when turned into the overruled, as was also its motion for a new pipe line from the tank, the parties to the trial.

lease have put an operative interpretation Defendant's motion for judgment in its upon the lease which has become in effect a favor on the finding of fact made by the trial part of the lease, which plaintiffs are entitled court should have been sustained. Plaintiffs to have enforced. Let us examine this conwere defeated by the evidence, and the court tention for a moment. When the leases were found against them upon their allegation made in 1914 there was no oil produced in the


(230 P.) El Dorado field where these lands are situat- establish and operate the steam heating ed, hence whether oil, if found there, would plants on the leases as they prayed in their need treatment to make it marketable, or the petitions, but they want the defendant to be method of treatment, if that should be neces- compelled to perform the alternative judgsary, was not mentioned in the lease. The ment offered it by the trial court. It lease did provide that the lessor should have should be a sufficient answer to this contenone-eighth of the oil produced and saved tion to say that, when a plaintiff brings a from the leased premises; that is all it did suit and makes allegations which, if estab. provide. The method of producing the oil and lished by proof, would entitle him to the resaving it was for the lessee to determine. It lief sought, or some similar relief, and then was contemplated, of course, that the lessee's in the trial his proof fails, and he does not methods of producing and saving the oil establish any of the material allegations upshould be fair, and that no fraud should be on which he relies, he is not ordinarily enpracticed upon the lessor; but plaintiffs do titled to any judgment in his favor. not charge fraud, and the court has found, Since the method now used in marketing and plaintiffs now admit, that the method is the oil from plaintiffs' leases is not to treat fair. For some time after the wells were the oil so it is marketable when turned from drilled in 1917 the oil was sufficiently pure the tanks on the leases into the pipe lines of that it needed no treatment, the pipe lines the purchaser, but to turn oil and water took it as it came from the wells; hence dur- from the tanks into the pipe line leading to ing that period there was no mutual inter- the dehydrater, where it is mingled with othpretation of the lease which required the er oil, and all of it treated, it is important treatment of the oil on the lease. Later, as that fair samples be taken, and that these be the wells were pumped, water came into them accurately tested, for the oil is sold by samand was pumped up with the oil, so much ple, and the lessors are paid by what the water that the purchasing company would sample shows. This method of taking and not take the oil in that condition. The oil, testing the sample is described in the find, of course, was worth nothing either to plain- ings, and is found and conceded to be correct. tiffs or to defendant unless it could be sold, By this method the lessors receive and are so defendant began to treat the oil to free paid for one-eighth of all the oil produced the water from it enough to make it market- and saved from the lease. This is all their able. There is no evidence that it consulted | lease provides that they shall receive. the plaintiffs about what method to use. It

The court found that the method used by went ahead to prepare the oil for market, 1 defendant in determining the amount of and used the best and most practical method marketable oil delivered into the pipe line is then known to its officers and employees, and not used by any other lessee in the midconthe method then generally used in the El tinent oil field, but all others steam the oil Dorado field. It discovered that this method was expensive and wasteful, and it set about on the leases, when necessary, before turnto find a better one. Defendant had 75 leas- ing the same into the pipe lines. And there es in a compact territory upon which it had was evidence that, aside from the practice of 1.350 producing wells. Its officers concluded defendant, it was the universal custom in the it could well afford to spend $650,000 to build mid-continent oil field that the lessor receive a central dehydrating plant which would his royalty upon all oil turned from the stock take all the water and foreign elements from tanks on the leases into the pipe lines withthe oil and make it marketahle and connect out regard to what percentage of water it all its wells with it. Plaintiffs' wells were contained. From this it is argued that deconnected in March and May, 1919, and the fendant has a right to be treated as all other steam heating plants on the leases were then lessors in the field are treated. While it is discontinued. These suits were filed No-true that custom in the oil field determines vember 3, 1920, so at that time the use of the the rights of the parties in many particulars, steam heating plants had been discontinued here is a situation to which it cannot be ap for a longer period than they had been used plied. The defendant is the only company on the leases. Under this state of facts their in the mid-continent oil field having sufficient use cannot be said to have been an operative production in a compact territory to justify interpretation of the lease by the parties so it in expending the sum necessary to build a that the oil must be treated by the steam central dehydrating plant and connect its heating process upon the lease which the wells with it. The method is advantageous plaintiffs are entitled to have enforced, even financially both to plaintiffs and to the deif the clause in the lease were open to such an fendant. It is a step forward in the method interpretation, which may well be doubted. of treating the oil which conserves all of the

What plaintiffs are really asking now is, production from the wells, a portion of which not that defendant be enjoined from using was under the old method wasted or lost. A its present method of treating the oil to ren- court should not require the abandonment of der it marketable and of testing the quantity a correct, efficient, beneficial method because to be paid for, and that it be required to re- it is advanced; and require the return to a

230 P.--7

« PreviousContinue »