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Newkirk v. Bigard

OPINION FILED MARCH 6, 1984.

WALTER NEWKIRK ET AL., PLAINTIFFS AND COUNTERDEFENDANTS-APPELLANTS AND CROSS-APPELLEES,

v.

JOSEPH G. BIGARD, INDIV. AND D/B/A B & B OIL COMPANY, ET AL., DEFENDANTS-APPELLEES — (JOSEPH G. BIGARD, INDIV. AND D/B/A B & B OIL COMPANY, ET AL., COUNTERPLAINTIFFS-APPELLEES AND CROSS-APPELLANTS).



Appeal from the Circuit Court of Jasper County; the Hon. Michael R. Weber, Judge, presiding.

PRESIDING JUSTICE WELCH DELIVERED THE OPINION OF THE COURT:

Rehearing denied August 6, 1984.

At issue here is an order of the Illinois Mining Board integrating oil and gas interests in certain Jasper County land and establishing a drilling unit composed of that land. The question presented is whether that order was invalid for failing to prescribe the time and manner in which owners of interests in the proposed unit could elect to participate in it. (Ill. Rev. Stat. 1981, ch. 96 1/2, par. 5436(d).) We hold that it was, but only in part.

The land affected by the order of the Mining Board is a 40-acre tract which was owned prior to 1961 by Paul A. and Mildred A. Lucas (the Lucases) and Cora E. Lucas. On May 4, 1961, these owners conveyed the north 30 acres of this land to plaintiff Walter Newkirk. The grantors reserved unto themselves a one-half interest in the oil, gas and minerals associated with that property for a period of 20 years from the date of the conveyance "and as long thereafter as oil, gas or other minerals are produced from operations commenced within said 20 year period." On November 13, 1980, the Lucases executed an oil and gas lease to Joseph G. Bigard. This lease, with a primary term extending to February 28, 1981, covered all of the mineral interests of the Lucases in the 40-acre tract.

In late 1980, the Lucases and Bigard filed a petition with the Mining Board. The petitioners sought integration of the mineral interests of the Lucases and Newkirk in the 40-acre tract and the issuance to Bigard of a drilling permit covering that land. They also requested that the Mining Board prescribe the time and manner in which all owners in the proposed drilling unit may elect to participate in it. In the petition it was also suggested, as alternatives, that the board

"1. Make provision for the payment by all those who elect to participate therein, of the reasonable actual costs thereof plus a reasonable charge for supervision and interest.

2. Provide one or more equitable alternatives if Walter Newkirk does not elect to participate in the risk and cost of the drilling and operation or operations of a well he may elect to surrender his leasehold interest to Joseph G. Bigard on some reasonable basis and for a reasonable consideration which if cannot be agreed upon shall be determined by the Mining Board.

3. Provide that Walter Newkirk may elect to participate in the drilling and operation or operations of the well on a limited or carried basis upon the terms and conditions to be just and reasonable."

Notices of the hearing on the petition were sent to all interested parties, including Walter Newkirk. A hearing was held in Springfield on December 1, 1980, at which testimony was heard. Newkirk was not present. On December 11, 1980, the board issued an order integrating the mineral interests of Newkirk and the Lucases in the 40-acre tract and establishing two 20-acre drilling units, one composed of the west half of the tract and the other consisting of its east half. Bigard was authorized to drill wells in both units. The order also stated

"that Walter Newkirk shall participate in the drilling unit described above to the extent of 37.5% of the 7/8ths working interest and 37.5% of the 1/8th royalty interest in the drilling unit. The participation factor shall be in accordance with Section 22.2(d) of `An Act in Relation to Oil, Gas, Coal and Other Surface and Underground Resources and Rules and Regulations,' being a part of Chapter 96 1/2 of the Illinois Revised Statutes. The participation factor is determined to be:

1. 37.5% of the costs and expenses of all surface equipment and 37.5% of the costs of operating the well concerning with the production to be borne by Walter Newkirk and 62.5% of the costs and expenses of all surface equipment and 62.5% of the costs of operating the well concerned with first production to be borne by Joseph G. Bigard.

2. 56.25% of actual costs and expenses of drilling, testing and completing the well to be borne by Walter Newkirk and 43.75% of actual costs of drilling, testing and completing said well to be borne by Joseph G. Bigard."

On January 19, 1983, Walter Newkirk and his wife, June Fay Newkirk, commenced this action in the circuit court of Jasper County. Although, as in many actions pertaining to mineral rights, the pleadings were amended to allow the inclusion and deletion of parties, the defendants in these proceedings are those parties who claim interest in the 40-acre tract by virtue of the Lucases' lease to Bigard, in addition to Brad Evilsizer, the director of the Illinois Department of Mines and Minerals. The Newkirks' complaint was in four counts. Count I averred that the December 11, 1980, order of the Mining Board was invalid, and thus the Newkirks requested the court to declare that order void and declare the rights of the parties accordingly. Count II alleged that there had been no production of oil or gas from the north 30 acres of the tract before May 4, 1981. In this count, the Newkirks sought a declaration that the Lucases' reservation of mineral interests had expired by its own terms. In count III, the Newkirks demanded damages from Bigard and the Lucases for removing oil and gas from the north 30 acres of the tract even though, as alleged, they were aware that the integration order of the Mining Board was invalid. Based upon the same removal of oil and gas, the Newkirks sought damages in count IV from the Lucases for breach of warranties contained in the 1961 deed.

The Lucases, Bigard, and all defendants claiming interests through their lease (the Lucas-Bigard defendants) filed a motion to dismiss the Newkirks' complaint in its entirety. This motion asserted that the complaint constituted an impermissible collateral attack on the order of the Mining Board. Defendant Evilsizer employed similar reasoning in his separate motion ...


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