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WHITE v. NEW YORK STATE NATURAL GAS CORP.

December 29, 1960

Harry Faber WHITE, Plaintiff,
v.
NEW YORK STATE NATURAL GAS CORPORATION and Tennessee Gas Transmission Company, Defendants



The opinion of the court was delivered by: MILLER

In this proceeding, plaintiff, as owner of a partial interest in the proceeds from the sale of gas produced by certain wells, seeks an accounting and to restrain the artificial cutting-back and restriction of production. Defendants admit the curtailing of production, but allege by way of defense that the native reserve of gas in the drainage areas of these wells had previously been exhausted and that the gas now being produced is storage gas which has migrated from an adjoining underground storage pool. Defendants contend that production of this gas for plaintiff's benefit would amount to a wrongful taking of property belonging to the storage companies. *fn1" On the other hand, plaintiff denies that storage gas is being produced. Should that fact be established, however, plaintiff then contends that title to such gas is lost by its injection into natural underground reservoirs for storage purposes.

This action having been tried by the court without a jury, the court makes the following findings of fact and conclusions of law:

 Findings of Fact

 1. Plaintiff is a resident and citizen of Crawford County, Pennsylvania. Defendant, New York State Natural Gas Corporation (hereinafter referred to as 'defendant New York'), is a New York corporation and doing business in Pennsylvania. Defendant, Tennessee Gas Transmission Company (hereinafter referred to as 'defendant Tennessee'), is a Delaware corporation and doing business in Pennsylvania. The amount in controversy exceeds the sum of $ 3,000 exclusive of interest and costs.

 2. On November 2, 1935, C. E. Updegraff of Williamsport, Pennsylvania, was the owner of certain gas leases with producing gas wells thereon located in Genesee Township, Potter County, Pennsylvania. On that date, the said C. E. Updegraff and plaintiff entered into a contract under which plaintiff obtained a right to a portion of the proceeds resulting from the sale of the production of the gas wells involved. C. E. Updegraff retained to himself under that contract sole discretion to determine what, if any, gas should be sold, and accordingly, whether the wells should be produced.

 3. By agreement dated June 1, 1940, C. E. Updegraff agreed to sell to North Penn Gas Company and North Penn Gas Company agreed to purchase all the gas produced from the O'Donnell Well No. 1 at a net price of 15 1/2 cents per m.c.f.

 4. Subsequently, the said C. E. Updegraff died and his son, Charles H. Updegraff, succeeded to the ownership of the gas leases and gas wells, either by will or through the intestate laws of the Commonwealth of Pennsylvania. Subsequently, in January 1956, said Charles H. Updegraff sold, transferred and conveyed the said leaseholds and gas wells to defendant New York.

 5. In January 1955, the defendants New York and Tennessee entered into an agreement in writing, by the terms of which defendant New York agreed to obtain and transfer to defendant Tennessee an undivided one-half interest in the lands, leases, royalties and other interests of the so-called Ellisburg Pool, and thereafter operate the said Pool as a storage pool for gas on behalf of both defendants.

 6. The only well involved in this case is the O'Donnell Well No. 1 (hereinafter referred to as the 'O'Donnell Well') since the Cobb Well No. 1 was plugged and abandoned in July 1947 because of lack of production and has remained plugged and abandoned ever since. No income in any form has been received by the plaintiff on account of Cobb Well No. 1 since the year 1944. To date, plaintiff has continued to receive his portion of the proceeds from the sale of gas produced by the O'Donnell Well.

 7. The O'Donnell Well is in an Oriskany Sand gas pool commonly known as the Ellisburg Pool located in Potter County, Pennsylvania. The Ellisburg Pool lies to the east of another Oriskany Sand gas pool commonly known as the Hebron Pool. For years it was thought that these two pools were separate gas pools, but it has now been established that they are in reality only two different parts of the same pool connected by a neck of porous and permeable Oriskany Sand.

 8. The O'Donnell Well, designaged by defendant New York as Well No. N482, was completed on March 28, 1935, but by September 1938, its production was dropping rapidly. By April 1942, its monthly production was under 2,000 m.c.f. and by August 1946, its monthly production was under 1,000 m.c.f. During the years 1950, 1951, 1952, 1953 and 1954, the annual production of the O'Donnell Well did not exceed 8,795 m.c.f. or an average of 733 m.c.f. monthly. The production of the well declined steadily as did also the pressure of the well. The pressure in the O'Donnell Well when it was brought in was 2,010 p.s.i. but had fallen to 21 p.s.i. in 1949, which was the last time that the pressure in that well was taken prior to August 1955. The same pattern of high original but rapidly declining production and pressure was also true of other gas wells in the Ellisburg part of the Hebron-Ellisburg Pool.

 9. During October 1953, defendant Tennessee began to store gas from Southwest United States in the Hebron part of the Hebron-Ellisburg Pool and continued to do so through 1954, 1955 and thereafter to date. In July 1955, United Natural Gas Company (hereinafter referred to as 'United') also began to store gas from the Southwest in the Hebron part of the Hebron-Ellisburg Pool and continued to do so thereafter to date.

 10. In July 1955, the production of the O'Donnell Well suddenly jumped from 541 m.c.f. in the previous month to 1,904 m.c.f. This increase in production continued until in December 1955, it reached the level of 41,020 m.c.f. per month, which was higher than the monthly production had been at any time since August 1938. This monthly production in December 1955 was higher than the well's production for an entire year had been at any time since 1941. The well's production during the whole year 1954 was only 7,335 m.c.f. The pressure in the O'Donnell Well followed the same pattern as its production, soaring from 21 p.s.i. in 1949, to 685 p.s.i. in March 1960. This great increase in production and pressure was due solely to the migration from the Hebron area into the Ellisburg area of gas from the Southwest which had been stored in the Hebron area by defendant Tennessee and United, resulting in the production of such storage gas through the O'Donnell Well.

 11. The analyses, both with respect to chemical content and physical properties, of the gas produced through the O'Donnell Well since the beginning of 1956 are substantially the same as the analyses of the gas from Southwest United States which had been stored in the Hebron part of the Hebron-Ellisburg Pool by defendant Tennessee and United; but differ materially from the analyses of the original native Oriskany gas produced from ...


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