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July 10, 1964
by drilling into formations known to be fresh water aquifers in the area surrounding the well. Accordingly, under the criterion discussed above, the drilling operations it undertook did not serve to extend the lease.
Therefore, pursuant to the authority delegated to the Solicitor by the Secretary of the Interior (210 DM 2.2A (1) (a); 21 F.R. 1318), the decisions of the Division of Appeals, Bureau of Land Management, are affirmed.
MICHIGAN OIL COMPANY
Decided July 10, 1964 Oil and Gas Leases: Extensions—Oil and Gas Leases: Drilling An oil and gas lease is not entitled to a 2-year extension under section 4(d)
of the Mineral Leasing Act Revision of 1960, which grants such an extension when the lessee has commenced “actual drilling operations” before the end of its term and is diligently prosecuting such operations at the end of the term, when prior to the expiration date of the lease the only acts undertaken by the lessee are acts preliminary to the actual drilling and the
actual drilling is not commenced until after the lease has terminated. Words and Phrases Actual drilling operations. The term “actual drilling operations" as used
in section 4(d) of the Mineral Leasing Act Revision of 1960 means the actual boring of a well with drilling equipment and does not include such preparatory work as grading roads and well sites and moving equipment on the lease.
APPEAL FROM THE BUREAU OF LAND MANAGEMENT
The Michigan Oil Company has appealed to the Secretary of the Interior from a decision of the Division of Appeals, Bureau of Land Management, dated October 11, 1962, which affirmed a decision of the Riverside, California, land office, dated May 10, 1962, declaring oil and gas lease Los Angeles 088643-E as having terminated at midnight April 30, 1962, because actual drilling operations were not commenced prior to the end of the primary term of the lease and were not being diligently prosecuted at that time in accordance with the provisions of regulation 43 CFR 192.120a, now 43 CFR, 1964 Supp., 3127.2.
Lease Los Angeles 088643-E was created by partial assignment out of lease Los Angeles 088643, which issued effective June 1, 1950, and was extended for five years from June 1, 1955. Both leases were further extended pursuant to section 30(a) of the Mineral Leasing Act, as amended, 68 Stat. 585 (1954), 30 U.S.C. $ 187a (1958), for two years from May 1, 1960, and so long thereafter as oil or gas is produced in paying quantities.
The appellant contends that it has complied with the requirements of former regulation 43 CFR 192.120a that,
Any lease on which * * * actual drilling operations were commenced prior to the end of its primary term and are being diligently prosecuted at that time shall be extended for two years and so long thereafter as oil or gas is produced in paying quantities. Its compliance, it alleges, is demonstrated by these acts done before the expiration date of the lease, April 30, 1962: its construction of access roads and grading of two well locations on the leasehold, its moving of a drilling rig upon the property with tools and equipment capable of performing the task, its engaging in drilling operations until stopped by notice from the Government, and its fulfilling of the various procedures required by the State and Federal Governments for drilling operations.
The Division of Appeals held that since it was not until May 2, 1962, after the lease expired, that a string of tools entered the well bore actual drilling operations did not commence, within the meaning of the regulation, supra, until that time because what had preceded the drilling was, in effect, only preparation for the drilling itself. The appellant contends that actual drilling operations consist of all those operations made in good faith and diligently continued leading up to and necessary to the actual preparations for actual drilling in the ground.
The regulation referred to simply restates the provisions of section 4(d) of the Mineral Leasing Act Revision of 1960, 74 Stat. 789, 30 U.S.C. $ 226–1(d) (Supp. IV, 1963). In fact, the regulation uses the exact words of the statute that a 2-year extension is granted a lease only where * * * actual drilling operations were commenced prior to the end of its primary term and are being diligently prosecuted at that time * * *
The question presented is whether the term “actual drilling operations” means the entering of the ground with a string of drill tools, as the Division of Appeals stated, or whether it includes also acts preparatory to such entry, as the appellant contends.
July 10, 1964
In construing another provision of the Mineral Leasing Act, the second paragraph of section 17, as amended by the act of July 29, 1954, 68 Stat. 583, which provided that no lease should terminate because of cessation of production if within 60 days thereafter “reworking or drilling operations are commenced * * * and are thereafter conducted with reasonable diligence," the Department stated:
* * * The common usage of the phrase "drilling operations" within the oil and gas industry is in reference to the actual digging or deepening of a hole with a string of drill tools * * * Morton Oil Company, 63 I.D. 392, 396 (1956).
If the term “drilling operations" means the actual digging of a hole with drill tools, the term “actual drilling operations” would doubly have that meaning. The legislative history of section 4(d) shows that the term originally employed was simply “drilling operations,” but it was then amended to read "actual drilling operations." See Associate Solicitor's opinion M-36657 (July 17, 1963). This change is certainly suggestive that Congress intended that a lessee should actually be drilling in the ground at the end of his lease term in order to be entitled to a 2-year extension.
Appellant cites 2 Summers, Oil and Gas, $ 349 (perm. ed) for the proposition that the general rule in interpreting clauses in leases requiring the commencement or beginning of a well or drilling operations within a stated time is
* * * that actual drilling is unnecessary, but that the location of wells, hauling lumber on the premises, erection of derricks, providing a water supply, moving machinery on the premises and similar acts preliminary to the beginning of the actual work of drilling, when performed with the bona fide intention to proceed thereafter with diligence toward the completion of the well, constitute a commencement or beginning of a well or drilling operations * * *
It does not appear from the cases cited in support of this proposition that any of them involved leases containing the term “actual drilling operations.” Rather, it is noted that Summers uses the terms "actual drilling" and "actual work of drilling” as denoting the drilling of a hole in the ground as distinguished from such acts as erecting derricks, moving machinery on the ground, etc., which the courts generally hold to constitute “the beginning or commencement of a well or of drilling or reworking operations."
Even if acts less than the drilling of a hole could be said to satisfy the requirement for “actual drilling operations,” it does not appear that the acts performed by appellant would suffice. Appellant has submitted work sheets showing that in December 1961 a road and well location or locations were graded. The next evidence of work is a work order showing that on April 30, 1962, two men spent two hours moving in a rig and tools. A subsequent work order shows that on May 2 drilling operations were commenced. Thus the grading work apparently completed in December 1961 and the moving on of the rig and tools on April 30, 1962, are the only acts that are supposed to meet the statutory requirement for “actual drilling operations
1 The same substantive provision now appears in section 17 (f) of the Mineral Leasing Act, as amended by the Mineral Leasing Act Revision of 1960, 74 Stat. 782, 30 U.S.C. $ 226 (f) (Supp. IV, 1963).
commenced prior to the end of * * * primary term and * * * being diligently prosecuted at that time *
We cannot accept these limited and widely spaced acts as satisfying the statutory requirement.
Therefore, pursuant to the authority delegated to the Solicitor by the Secretary of the Interior (210 DM 2.2A (4) (a); 24 F.R. 1348), the decision appealed from is affirmed.
ERNEST F. HOM,
CLAIM OF PALMER E. SCHRAG
Decided July 13, 1964
Irrigation Claims: Generally
a finding that the damage was the direct result of nontortious activities of the Bureau of Reclamation personnel.
Palmer E. Schrag of Soap Lake, Washington, has filed a claim against the United States in the sum of $8,021.56 for damage to a herd of feeder cattle. The claimant alleges that on July 15, 1963, Bureau of Reclamation personnel placed aromatic solvents in a project lateral adjoining his farm, and the cattle were poisoned as a result of contact with the treated water.
This claim has been submitted to us for determination under the Public Works Appropriation Act, 1964 (77 Stat. 844). That act authorizes the payment of claims for damage to or loss of property arising out of activities of the Bureau of Reclamation. However, this authority is applicable only with respect to claims which are the
1 The claim cannot be considered administratively under the Federal Tort Claims Act (28 U.S.C., secs. 2671-2680 (1958) as amended, 28 U.S.C., secs. 2672, 2679, and 2680(n) (Supp. IV) (1959-62), since it is in excess of that act's $2,500 jurisdictional limitation for administrative determination.
July 13, 1964
direct result of some nontortious action by Bureau of Reclamation personnel. 39 Op. Atty. Gen. 425, 428 (1940); Harold D. Jensen, TA-227 (Ir.) (March 14, 1963), 70 I.D. 97; Northern Pacific Railway Co., T-560 (Ir.) (May 10, 1954).
As shown by the report of the investigating officer, the claimant owned a herd of feeder cattle, pastured on Farm Unit 138, Irrigation Block 70, Columbia Basin Project, Washington. The W3F2 lateral, an irrigation canal of the Bureau of Reclamation, passes through the farm. On July 15, 1963, at about 11:10 a.m., Bureau of Reclamation personnel injected an aromatic solvent into the waters of the W3F2 lateral, about two and a half miles upstream from claimant's farm. Aromatic solvents are a herbicide used to kill water weeds in project waterways. At about 4:15 p.m., claimant notified the Bureau's Watermaster that his cattle had been poisoned from these aromatic solvents. By that evening, one calf had died and a second died on July 16 about noon. Twelve other feeder cattle and one Angus Heifer subsequently died.
In his claim, Mr. Schrag seeks to recover his loss of profit on the dead cattle, together with reimbursement for veterinary bills. He also seeks to recover loss of profit on the remainder of his herd—185 head-which claimant alleges came down with "secondary conditions of pneumonia" and failed to gain weight properly.
Aromatic solvents are a moderately volatile petroleum byproduct which has been in rather extensive use for the past fifteen years in irrigated areas as a means of controlling aquatic weeds. In this case, the solvent was injected into the lateral to form an initial concentration ranging between 185 to 742 parts per million. Allowing for evaporation and dilution, the investigating officer estimates the solvent treated water passed in the area of claimant's farm for a maximum of one hour and fifteen minutes at concentrations ranging from 0 to 370 parts per million. The lateral in this reach is readily accessible to claimant's cattle.
The investigating officer in his report concludes that the sickness and death of the cattle had no relation to the aromatic solvents, but rather was caused by a bacterial pneumonia which the cattle had previously contracted. This conclusion is based on the following evidence appearing in the administrative record :
2 On May 5, 1964, proposed findings to this effect were sent to the claimant for his comments by the Field Solicitor, Ephrata, Washington. No reply was received nor did claimant submit any evidence.