Deed allows owners to make wells deeper, court rules

A family that sold mineral rights to a company but reserved the rights to oil and gas from certain producing wells was not restricted by the deed from making the reserved wells deeper, the Indiana Court of Appeals held Friday.

The judges affirmed summary judgment in favor of the Mumford family on Allen Gray Limited Partnership IV’s motion for summary judgment. Mumford reserved oil and gas rights for 20 years from the date of the conveyance and for “as long thereafter as oil and gas is being produced” from the property. The deed provided that after the 20-year period expired, the Mumfords’ reservation would continue as to each well then producing and as to “the drilling unit upon which each such producing well is located as evidenced by the drilling permit” until production ceases and the well is plugged.

Allen Gray argued that the reference to the drilling permit limited the family’s reservation to oil and gas that could be produced under the terms of permits that existed at the end of the 20-year term but could not deepen existing wells because that would require a new permit.

The trial court denied its motion for summary judgment and ruled in favor of the Mumfords, finding that the reservation included the acreage surrounding each well as defined by the permit.

“(The deed) explicitly reserves for Mumford ‘the drilling unit upon which’ each producing well is located, and says nothing about the depth of the well or any other aspect of the permit other than the ‘drilling unit.’ Mumford reserved the acreage on which the wells were drilled, and that reservation of the drilling unit does not limit Mumford’s ability to deepen the wells on those units if it can obtain a permit to do that,” Judge Melissa May wrote in Allen Gray Limited Partnership IV v. Bishop Mumford, Christopher Mumford, Elizabeth B. Mumford, Richardson S. Mumford, Thomas F. Mumford, Jr., and William M. Mumford, 26A01-1503-MI-92.

“The trial court correctly determined the reservation applied to the surface area of the ‘drilling unit,’ and did not restrict Mumford from making the reserved wells deeper. Summary judgment for Mumford therefore was not error, and we affirm.”