Co-author David Leonard

If perpetuation of a mineral lease beyond the primary term is contingent upon continuous operations, do traditional notions of “production in paying quantities” always matter? Spoiler: No.

In Thistle Creek Ranch, LLC v. Ironroc Energy Partners, LLC, an appellate court affirmed partial summary judgment in favor of lessee Ironroc Energy Partners under these odd clauses in the Kettler lease.

The habendum clause:

Unless sooner terminated …  this lease shall remain in force for a term of three (3) years from the date hereof, hereinafter called “primary term,” and as long thereafter as operations, hereinafter defined, are conducted upon said land with no cessation for more than ninety (90) consecutive days.

The lease defined “operations” as:

“ … any of the following: drilling, testing, completing, reworking, recompleting, deepening, plugging back or repairing of a well in search for or in any endeavor to obtain production of oil [or] gas, …  production of oil [or] gas, … whether or not in paying quantities.

The oddity, of course, is that the lease could be perpetuated by operations, whether or not there was production in paying quantities.
Continue Reading Lease Perpetuated Beyond Primary Term Without Production in Paying Quantities

Co-author Rusty Tucker

PPC Acquisition Co., LLC, et al. v. Delaware Basin Res., LLC, et al. addressed retained acreage clauses in three separate oil and gas leases covering the same 640-acre tract in Reeves County, Texas.

Did the lessees hold acreage under the leases based on one producing well, the Colt #1 that was completed in 2003? OR, did the lessees’ failure to drill additional wells, re-classification of the well from gas to oil, and failure to timely file a RRC Form P-15 with a limited acreage designation terminate the leases for all or part of the acreage?

The facts
Continue Reading Texas Court Parses Three Retained-Acreage Clauses – Part 1