Kidd v. Jarvis Drilling, Inc.

2006 WL 344755 (2006)

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Kidd v. Jarvis Drilling, Inc.

Tennessee Court of Appeals
2006 WL 344755 (2006)

Facts

The West Oneida Field (field) began producing oil in 1969. By 1996, oil production had dropped precipitously even though the field still contained almost 1.5 million barrels of oil. Jarvis Drilling (plaintiff), owner of the oil-producing wells in the field, developed a proposal to reinvigorate oil extraction by injecting natural gas into the field, which would drive the remaining oil to the existing oil wells. The natural gas being injected into the field would be owned by third parties, who would be paying for its storage there. Thus, revenue would be generated not only through the oil extracted, but also through the storage of natural gas. More than 95 percent of the field’s landowners consented to Jarvis Drilling’s proposal, but some refused. Jarvis Drilling filed a petition with the Tennessee Oil and Gas Board (board) seeking to unitize the field in accordance with state regulations, which would allow the company to execute its proposal despite some landowner opposition. The board granted Jarvis Drilling’s petition, and the dissenting landowners (defendants) appealed. The dissenting landowners argued that the board lacked the authority to grant unitization in this case, in which subterranean gas storage was being proposed. Among other things, they also complained that the proposal did not adequately compensate them and that it was not economically feasible.

Rule of Law

Issue

Holding and Reasoning (Koch, J.)

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