Baumgartner v. Gulf Oil Corp.

The plaintiff owned an oil and gas lease on a tract of land. The tract was part of a larger section of land that had seen its oil reserves depleted. To help prevent waste, the Nebraska Oil and Gas Conservation Commission (Commission) issued an order establishing the larger section of land as a pooled unit. The resulting unit agreement called for the secondary recovery of oil through the process of water flooding. The plaintiff refused to sign the agreement, despite the fact that his allocation under the agreement would be fair and equitable. All of the other working interest owners in the section of land signed the agreement. The plaintiff’s tract was excluded from the pooled unit. The defendant was named the operator of the unit. Subsequently, the plaintiff applied for a permit to drill on his tract. However, the plaintiff did not end up drilling the well, because the water flooding process started on the pooled unit had drained most, if not all recoverable oil from the plaintiff’s tract. The plaintiff brought suit, claiming that the defendant’s water flooding constituted willful trespass. The plaintiff’s witness conceded that without the defendant’s water flooding, there would have been no secondary recovery on the plaintiff’s tract. As a result, given the state of the oil reserves in that area, the plaintiff would have lost money if he had started any independent development on his tract. The trial court found in favor of the plaintiff and awarded the value of the oil drained from the plaintiff’s tract of land. The defendant appealed.