Tide Water Associated Oil Co. v. Stott

Virginia Stott (plaintiff) issued an oil and gas lease to which Tide Water Associated Oil Company (Tide Water) (defendant) became the lessee. Tide Water also leased minerals in the majority of the lands surrounding Stott’s land. A portion of Stott’s land contained wet gas that was part of a common reservoir. Other operators sharing the reservoir began recycling operations, under which wet gas was produced and dry gas was returned to the reservoir. Tide Water brought Stott multiple offers to unitize her land with other lands common to the reservoir. Specifically, Tide Water proposed unitization so that the Stott land could participate in the recycling operations. Tide Water’s other leaseholds were unitized and were participating in the recycling. Stott was offered the same terms as the royalty owners under those other leases. Stott refused all offers to unitize and participate in the recycling operations, as independent recycling operations were not possible on a tract of land as small as hers. Stott brought suit against Tide Water, seeking to recover royalties for the condensate removed from the wet gas under her land as part of the recycling operations conducted on the other leases common to the reservoir. Tide Water had drilled a well on Stott’s land, and Stott conceded that the well was producing all gas that could reasonably be produced from her land, such that drilling an additional well was not prudent. The trial court ruled in favor of Stott. Tide Water appealed.