## Facts

- A landowner conveyed land in Creek County, Oklahoma, reserving an undivided 9/10 interest in the oil, gas, and minerals in a described 40-acre tract and retaining the right to enter and use the surface as reasonably necessary to drill and market production.
- The grantee later conveyed the land to Lizzie Allen, who owned the surface and the remaining undivided 1/10 mineral interest.
- The reserving grantor assigned its reserved 9/10 mineral interest through a chain of transfers that ultimately vested in Skelly Oil Company, which undertook development and production operations.
- Skelly drilled wells and produced oil, selling the produced oil to Prairie Oil & Gas Company.
- Allen did not consent to the development arrangement and demanded delivery of, or payment for, 1/10 of the oil (or its value); Prairie refused.
- Allen sued Prairie for conversion; the case was removed to federal court and Skelly was joined as a defendant.
- The trial court treated Skelly as a trespasser and awarded Allen the full value of her 1/10 share without deducting development and operating expenses.

## Issues

1. Whether the holder of a reserved 9/10 mineral interest (and its assignee) is a trespasser against the 1/10 mineral owner when it enters to drill and produce without that owner’s consent.
2. If the parties are mineral cotenants, whether the nonparticipating cotenant may recover a pro rata share of gross production value or is limited to a pro rata share of net proceeds after reasonable development and operating costs.

## Decision

- The court reversed and remanded.
- Skelly, as successor to the reserved 9/10 mineral interest, was a tenant in common with Allen in the mineral estate and therefore was not a trespasser by entering and producing.
- Allen’s remedy was an accounting between cotenants, not conversion damages measured by the gross value of her fractional share.
- Allen was entitled to 1/10 of the net value of production after deduction of reasonable and necessary development and operating expenses incurred in good faith.

## Legal Principles

- A fractional reservation of an undivided mineral interest creates a tenancy in common among holders of undivided interests in the same mineral estate.
- A mineral cotenant may enter and develop the common property without obtaining consent from all other cotenants, subject to a duty to account.
- In accounting between cotenants, the developing cotenant is entitled to credit for reasonable and necessary costs of development and operation; the nondeveloping cotenant receives a proportional share of net profits, not gross proceeds.
- Where development is undertaken under a cotenant’s valid title and in good faith, the appropriate remedy for the nonparticipating cotenant is accounting rather than treating production and sale as conversion.

## Conclusion

The court held that the 9/10 mineral owner’s assignee could lawfully develop as a cotenant and must account to the 1/10 cotenant only for a proportional share of net proceeds after reasonable production costs, requiring reversal of a gross-value recovery.


Prairie Oil & Gas Co. v. Allen, 2 F.2d 566 (8th Cir. 1924)