Stack v. Harris

Section 6132-21(c) of the Mississippi Code (the statute) provided that oil wells had to be drilled in accordance with rules promulgated by the state oil-and-gas board (the board). The statute also provided that drilled wells had to follow the board’s approved well-spacing pattern for the relevant oil pool, subject to limited exceptions. If an exception was granted, the board could offset any advantage drilling the exception well might give the well’s operator over other producers. However, the statute limited the board’s ability to reduce the allowable amount of daily oil production—or allowables—by an exception well. One board rule, General Rule 14 (the rule), provided that no well could be directionally deviated from its original course without prior board authorization, except for intentional deviations necessary to straighten the hole or address mechanical difficulties. If intentional deviation occurred, the board had to approve the well as completed. The rule gave the board the right to assess penalties on allowable oil production to adjust any inequities caused by the directional drilling. J. W. Harris (plaintiff) received permission to drill an exception well in the Smackover Sands oilfield to a depth of roughly 12,000 feet. At that depth, the typical allowable production amount was 400 barrels of oil per day. As Harris’s well was being drilled, Harris learned that the well was drifting toward a dry hole. Harris changed the well’s direction 180 degrees and continued drilling until the well’s bottom nearly intersected with active drilling units owned by J. E. Stack and others (defendants). In that location, Harris’s exception well would drain from Stack’s wells. The board approved Harris’s completed well but limited allowable production to 150 barrels of oil per day to address the directional deviation and drainage. Harris appealed in state circuit court. The court concluded that the statute prohibited the board from reducing the allowable production from Harris’s exception well. Stack appealed to the Mississippi Supreme Court.