- 31 -
80 T.C. 914, 941 (1983)). The record in the case at hand is
replete with similar indicia of indifference to profits on the
part of Stonehurst and its principals.
Petitioner’s expert, Charles M. Bowers (Bowers), a petroleum
engineer registered in Oklahoma, concluded that the Coburn report
was egregiously flawed in several ways. In Bowers’ view, the
most egregious flaw in the Coburn report was the assertion that
“commercial oil production can be obtained from the Bartlesville
Sand”. Because of the unique characteristics of Bartlesville
Sand,11 there would have had to have been previous oil production
in commercial quantities on the lease in order for the Coburn
report to make such an assertion without its being a gross
misrepresentation. The Coburn report referred to no evidence to
support its contentions about the likelihood of discovering oil
in commercial quantities. Furthermore, Mr. Heitzman testified at
trial that the maps he was shown indicated that the closest
proven Bartlesville Sand was 8 miles from the leasehold.12
Another egregious flaw in the Coburn report was its claim of
a 90-percent success rate for exploratory drilling. Likelihoods
of success on the order of 90 percent are associated with
developmental drilling, which the Memorandum itself defined as
11 See supra n.7.
12 Now repealed sec. 56(h)(6)(B), providing energy based
preference adjustments to the alternative minimum tax, defined
the minimum distance of an exploratory well from other wells as
1.25 miles or 800 feet in depth (the exploratory well being
deeper).
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011