## Facts

- On March 18, 1966, Breaux (lessor) executed an oil and gas lease to Apache Oil Corporation (lessee).
- The lease had a one-year primary term ending March 18, 1967, and would continue only if Apache (a) commenced operations for drilling a well on or before that date or (b) timely paid the stated rentals.
- Before the primary-term deadline, the Commissioner of Conservation issued an order creating a gas unit affecting the leased lands, and a later order amended the unit.
- On March 16 or 17, 1967, Apache began building a road (and related surface improvements) to reach the planned well location and to prepare the site for drilling.
- The road work was completed on March 18, 1967.
- Apache contended that drilling equipment was moved to the location on March 18; Breaux contended that the first drilling equipment arrived only after March 18.
- Actual, physical drilling began March 22, 1967.
- Breaux sued to cancel the lease, alleging Apache failed to commence drilling operations within the primary term (and did not keep the lease alive by rental payment), and also sought to contest the conservation orders as part of the cancellation suit.
- The trial court granted summary judgment for Apache; Breaux appealed.

## Issues

1. Whether Apache “commenced operations for the drilling of a well” within the lease’s primary term when it completed substantial access-road and location work by March 18, 1967, but began actual drilling on March 22, 1967.
2. Whether the lessor could contest the validity of the Commissioner of Conservation’s unit order (and amended order) within this lease-cancellation suit, rather than by the statutory procedure in East Baton Rouge Parish.

## Decision

- The court affirmed the summary judgment in favor of Apache and refused to cancel the lease.
- The court held that the undisputed surface work completed by March 18—done in good faith as part of a continuous plan to drill—constituted commencement of drilling operations under the lease, even though the well was drilled a few days later.
- The court held that the disagreement about whether drilling equipment arrived by March 18 did not create a genuine issue of material fact, because commencement did not depend on the rig being on site by the deadline where substantial preparatory work had already begun and drilling followed promptly.
- The court held that any attempt to test the validity of a conservation order had to be brought by the direct action and venue specified by La. R.S. 30:12 (East Baton Rouge Parish), and could not be raised collaterally in this cancellation suit.

## Legal Principles

- “Commencement of operations for the drilling of a well” in an oil and gas lease can be satisfied by substantial, good-faith preparatory work that is directly connected to drilling (such as building access roads and preparing the well site), when followed by a continued course of operations leading to drilling without unreasonable delay.
- For summary judgment purposes, a factual dispute is not material if, even accepting the opponent’s version, the undisputed conduct still meets the legal standard (here, commencement based on substantial pre-drilling operations).
- Under La. R.S. 30:12, a party seeking to test the validity of an order of the Commissioner of Conservation must do so by direct proceeding in the 19th Judicial District Court for East Baton Rouge Parish; other courts may not entertain a collateral attack on such orders in a separate suit.

## Conclusion

The appellate court held the lease remained in effect because Apache’s timely, substantial road and location work amounted to commencement of drilling operations under the lease and was followed shortly by actual drilling, and it also ruled that the lessor could not litigate the validity of the conservation unit orders in this lease-cancellation action because La. R.S. 30:12 requires a direct challenge in East Baton Rouge Parish.


Breaux v. Apache Oil Corporation, 240 So.2d 589 (1970)