Co-author Chance DeckerThe Texas Supreme Court has agreed to hear oral arguments in a dispute over an “accumulation” provision in a continuous development clause of an oil and gas lease. The case is Endeavor Energy Resources L.P. v. Energen Resources Corp. et al. Here’s the language:
…this lease shall terminate … [150] days
Quick answer: It depends on what the lease says. Last week featured a tug-of-war between a producer and the community in which it operates; this week in HJSA No. 3 LP v. Sundown Energy LP it’s the producer and the lessor.
HJSA owns the mineral estate under 30,540 acres in Ward County, Texas. Sundown is the lessee. After six years the lease could be maintained only as to individual tracts from which there was production in paying quantities and as to other tracts only if Sundown was engaged in a “continuous drilling program”.
Dueling lease provisions (emphasis mine)
Paragraph 7B says:
The first such continuous development well shall be spudded in on or before the sixth anniversary of the Effective Date, with no more than 120 days to elapse between completion or abandonment of operations on one well and the commencement of drilling operations on the next ensuing well.
Paragraph 18 is a 90-day temporary cessation clause that defines drilling operations as:
“ … actual operations … (spud-in with equipment capable of drilling to Lessee’s objective depth); reworking operations, including fracturing and acidizing; and reconditioning, … “.
Continue Reading Spudding? Reworking? What are “Operations” Under an Oil and Gas Lease?