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