## Facts

- Mississippi Code § 6132-21(c) required wells to be drilled in accordance with Mississippi State Oil and Gas Board rules and the Board’s spacing pattern for the relevant pool, subject to limited exceptions.
- The statute authorized the Board, when granting an exception, to take action to offset any advantage the exception might give the operator over other producers, while also limiting reduced allowables for certain exceptions involving units partly outside the productive horizon when minimum productive acreage was shown.
- The Board had adopted General Rule 14, which barred intentional directional deviation from a well’s original course without prior Board authorization, except deviations needed to straighten the hole or address mechanical difficulties.
- General Rule 14 required Board approval of a directionally deviated well as completed and allowed the Board to assess allowable penalties to adjust inequities caused by directional drilling.
- James W. Harris obtained permission to drill an exception well in the Smackover Sands field to roughly 12,000 feet, where the standard daily allowable at that depth was about 400 barrels of oil per day.
- While drilling, Harris learned the hole was drifting toward a dry hole and intentionally changed the well’s direction by roughly 180 degrees, steering the bottom-hole location toward adjoining drilling units owned or leased by J. E. Stack, Jr., and others.
- In its new location, Harris’s well would drain hydrocarbons from Stack’s adjacent units, creating an advantage tied to the directional deviation.
- The Board approved the well as completed but, invoking General Rule 14 and its statutory authority to offset advantages, reduced Harris’s daily allowable from about 400 barrels to 150 barrels.
- Harris appealed to the Circuit Court of Hinds County, which set aside the Board’s reduction after concluding § 6132-21(c) barred the Board from reducing the daily allowable of an exception well.
- Stack and other adjacent-interest owners appealed to the Mississippi Supreme Court, seeking reinstatement of the Board’s order.

## Issues

1. Whether Mississippi Code § 6132-21(c) makes an exception well immune from the Mississippi State Oil and Gas Board’s authority under General Rule 14 to reduce daily allowables as a penalty for intentional directional deviation and resulting drainage.
2. Whether the statute’s “no reduced daily production allowable” language for certain exceptions prevents the Board from imposing an allowable reduction aimed at equalizing advantages created by directional drilling.

## Decision

- The Mississippi Supreme Court reversed the circuit court.
- The Court held that § 6132-21(c) does not render exception wells immune from General Rule 14’s allowable-penalty provisions.
- The Court reinstated the Board’s order limiting Harris’s allowable to 150 barrels per day.

## Legal Principles

- A conservation statute requiring wells to be drilled under Board rules is read to preserve the Board’s general rulemaking and enforcement power, including rules governing directional drilling and allowables.
- The statutory provision authorizing the Board to offset any advantage obtained by drilling an exception supports Board action that equalizes production opportunities among neighboring operators.
- The statute’s limitation on reduced allowables for certain exception wells is not a blanket bar; it applies only within the specific conditions stated in the statute (including the type of exception and the showing of minimum productive acreage).
- A Board rule that prohibits unauthorized intentional deviation and permits allowable penalties to correct inequities is consistent with the statutory scheme when used to address drainage and unfair advantage from directional drilling.
- Courts will not treat an exception permit as a shield against otherwise valid Board regulation of production levels when the Board acts within statutory authority to prevent waste and preserve correlative rights.

## Conclusion

The Mississippi Supreme Court ruled that § 6132-21(c) does not give an exception well automatic immunity from General Rule 14. Because Harris intentionally directionally deviated his well in a way that advantaged him by draining adjacent units, the Board could reduce his daily allowable to offset that advantage, and the Board’s 150-barrel allowable order was reinstated.


Stack v. Harris, 242 So. 2d 857, 38 O. & G.R. 1 (1970)