## Facts

- Louisiana’s conservation scheme allows the state to create pooled drilling or production units made up of multiple land tracts, requiring owners within a unit to share production of fugacious minerals taken from any tract in the unit.
- Conservation unit orders identify what substances (typically oil or gas) are covered and how production from a unit well is attributed for payment purposes.
- Texaco Producing, Inc. (Texaco) operated a well on its tract of land in Louisiana; neighboring tracts were owned by Ruth Knighton and other adjacent landowners (the neighbors).
- The Louisiana conservation agency issued Order 196-C, which applied to Texaco’s tract and the neighbors’ tracts; the order’s stated coverage focused on byproducts and pollutants from drilling for oil and gas.
- Texaco discovered and produced oil from its tract that the neighbors characterized as “nonperipatetic” (not migrating in a way that would justify correlative-rights pooling).
- The neighbors sued Texaco seeking a share of the profits from Texaco’s well based on their inclusion in the conservation unit created by Order 196-C.

## Issues

1. Whether Order 196-C and Louisiana conservation law required Texaco to share profits from nonperipatetic oil produced from Texaco’s tract with owners of other tracts included in the unit.
2. Whether a conservation unit order may be read to pool substances not identified as unitized minerals in the order, or otherwise expand sharing rights beyond what the order and conservation statutes provide.
3. Whether the neighbors were entitled to damages, an accounting, or other relief from Texaco based on an asserted unit-based right to participate in the well’s production.

## Decision

- The court entered judgment for Texaco.
- The court held that the neighbors were not entitled to a share of Texaco’s profits from the oil produced on Texaco’s tract based on Order 196-C and Louisiana conservation law.
- The court rejected the attempt to treat the unit order as creating pooling and payment rights for nonperipatetic oil outside the order’s stated coverage, and denied related requests for damages and an accounting.

## Legal Principles

- Louisiana conservation unitization is aimed at regulating extraction and protecting correlative rights for fugacious minerals, and it allocates production within the limits set by the governing unit order.
- A conservation unit order pools interests only as to the substances and scope identified in the order; courts will not treat a unit order as creating sharing rights for other substances by implication.
- Conservation regulation governs how production is allocated for payment within a unit; it does not operate as a general transfer of private mineral ownership or a catchall basis for profit sharing.
- A party seeking royalties or well profits must show a valid ownership or unit-allocation basis under the applicable instruments and orders; absent that showing, claims for accounting and damages fail.

## Conclusion

The court held that Order 196-C and Louisiana conservation law did not require Texaco to share profits from nonperipatetic oil produced on Texaco’s tract with neighboring owners whose lands were included in the unit, and it therefore denied the neighbors’ claims for additional payments and related relief.


Knighton v. Texaco Producing, 762 F. Supp. 686 (1991)