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Novy v. Woolsey Energy Corp.

Court of Appeals of Kansas

June 27, 2014

MICHAEL E. NOVY and JANET L. NOVY, Appellants,
v.
WOOLSEY ENERGY CORPORATION, et al., Appellee

Editorial Note:

This decision has been designated as "not for publication" in the Pacific Reporter, it is published in table format. See KS R S AND A CTS RULE 7.04

Appeal from Kingman District Court; LARRY T. SOLOMON, judge.

Robert R. Eisenhauer and Daniel O. Lynch, of Johnston Eisenhauer & Eisenhauer, LLC, of Pratt, for appellants.

Steven D. Gough and Joseph A. Schremmer, of Withers, Gough, Pike, Pfaff & Peterson, LLC, of Wichita, for appellee.

Before ARNOLD-BURGER, P.J., BUSER and SCHROEDER, JJ.

OPINION

MEMORANDUM OPINION

Per Curiam

Michael and Janet Novy (the Novys) own land subject to an oil and gas lease held by Woolsey Energy Corporation (Woolsey). Woolsey has refused to drill for either oil or gas on their land for over 30 years because Woolsey has determined, based on its own engineering study, that any well would not produce oil or gas in commercial quantities and the cost would significantly exceed any benefit. The Novys argue that Woolsey has breached its implied duty to develop the land and, accordingly, the lease as to the right to drill for oil should be terminated. The district court granted judgment as a matter of law for Woolsey, finding that the Novys failed to present substantial evidence to show that Woolsey breached the implied covenant to prudently develop. Because we agree, we affirm the district court's judgment.

Factual and Procedural History

The Novys are the owners of a tract of land in Kingman County, Kansas. The land is subject to an oil and gas lease held by Woolsey. The oil and gas lease provides that the lease will remain in effect for 3 years " and as long thereafter as oil, gas, casinghead gas, casinghead gasoline or any of the products covered by this lease is or can be produced." The lease also allows for unitization with other lands for gas production and states, in pertinent part:

" Any well drilled on such unit shall be for all purposes a well under this lease and shall satisfy the rental provision of this lease as to all of the land covered thereby; Provided, however, lessee shall be under no obligation, express or implied, to drill more than one gas well on said Unit."

The Novys' land was unitized in 1977 for the production of gas with another neighboring 160-acre tract of land, which has a producing gas and oil well located on it.

The Novys filed a petition alleging that Woolsey breached the implied duty to further develop their land because Woolsey failed to drill for oil or gas on the Novys' land for over 30 years and refused to drill a well upon the Novys' request. Because of this failure, the Novys asked the district court to cancel the lease as to the right to drill for oil.

A bench trial was held where the Novys' only evidence submitted was through Michael Novy's testimony and three exhibits outlining the correspondence between the Novys and Woolsey regarding cancellation of the lease. After the Novys rested their case, the district court found as a matter of law in favor of Woolsey because the Novys failed to present sufficient evidence to show that Woolsey breached the implied duty to prudently develop the Novys' land.

The Novys filed a timely notice ...


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