## Facts

- Two Mississippi diversity actions sought cancellation of oil and gas leases for alleged nonproduction at the end of their primary terms.
- In both cases, the Mississippi State Oil and Gas Board entered compulsory unitization/forced-pooling orders that included the plaintiffs’ tracts and designated a unit operator.
- In both cases, the designated operator drilled a well within the Board-created unit during the relevant timeframe, but no well was located on the plaintiffs’ specific lease tracts.
- **Tri M v. Getty:** Getty (successor to Skelly) held two leases with 10-year primary terms and standard continuation language tied to production from the land or acreage pooled therewith; plaintiffs acquired top leases shortly before primary-term expiration and sued to cancel Getty’s leases after no tract well existed when the primary terms ended.
- **Ridgway v. Shell:** Shell held a five-year lease; the Board approved a competing unitization petition (not Shell’s), included Shell’s leasehold in the unit, and designated another operator; plaintiffs sued to cancel after the primary term ended without a tract well.
- The district courts granted summary judgment for Getty and Shell, concluding the Board’s orders and unit drilling continued the leases; the appeals were consolidated.

## Issues

1. Whether a Mississippi compulsory pooling/unitization order, combined with drilling by the designated unit operator anywhere within the unit, continues an included oil and gas lease beyond its primary term when no well is drilled on the specific lease tract.
2. Whether the Board’s forced-pooling orders supersede inconsistent lease provisions so that unit-wide drilling/production satisfies lease continuation language referencing the land or acreage pooled therewith.
3. Whether lessors or top lessees may obtain cancellation for lack of tract-specific operations or production despite unit-wide drilling under a Board order.

## Decision

- The Fifth Circuit affirmed summary judgment for Getty and Shell.
- The court held that, under Mississippi law as predicted, a compulsory pooling/unitization order and drilling within the unit by the designated operator extend all leases included in the unit beyond their primary terms, even absent a well on a particular tract.
- The court concluded the Board’s orders control over conflicting contractual provisions concerning where operations or production must occur to maintain the lease.
- Because the original leases did not terminate, Tri M’s top leases did not become effective, and the Ridgway plaintiffs were not entitled to cancellation.

## Legal Principles

- Mississippi conservation statutes authorize the State Oil and Gas Board to create compulsory units to prevent waste and protect correlative rights; once established, unit operations and production are attributed to all tracts in the unit for lease-maintenance purposes.
- A Board-created compulsory unit functions as the operative “acreage pooled therewith” for standard lease continuation clauses, even if the lease’s pooling language contemplates voluntary pooling by the lessee.
- A compulsory pooling/unitization order supersedes inconsistent lease terms regarding tract-specific drilling or production requirements for continuation beyond the primary term.
- Where material facts about the lease terms, Board orders, and unit drilling are undisputed, the legal effect of compulsory pooling on lease continuation is appropriate for summary judgment.
- In diversity cases lacking controlling state high-court authority, a federal appellate court applies an Erie prediction grounded in statutory purposes, analogous state decisions, and prevailing approaches in other jurisdictions.

## Conclusion

The Fifth Circuit held that, under Mississippi law as predicted, compulsory unitization and drilling anywhere within the Board-created unit maintain all included leases beyond their primary terms, defeating lessors’ and top lessees’ attempts to cancel leases based solely on the absence of a well on the specific tracts.


Tri M Petroleum Co. v. Getty Oil Co.; Ridgway v. Shell Oil Co., 792 F.2d 558 (5th Cir. 1986)