2. The cause for shutting-in the oil wells, and thus totally ceasing lease/unit production, is an overabundance of/lack of demand for oil, as discussed above. No mechanical issues concerning the wells which are shut-in is involved nor is there a mechanical issue relating to the pipeline connection to which the wells are connected etc. 3. The current and anticipated total cessation of the production of oil in Texas, where not based on mechanical issues with the well(s) or pipeline(s), is due to market factors beyond the immediate control of the respective lessees. The Legal Principles: 1. “A lease’s habendum clause defines the mineral estate’s duration. Gulf Oil Corp. v. Southland Royalty Co., 496 S.W.2d 547, 552 (Tex. 1973). For instance, a typical habendum clause states that the lease lasts for a relatively short fixed term of years (primary term) and then “as long thereafter as oil, gas or other mineral is produced” (secondary term). See, e.g., Reid, 337 S.W.2d at 269 n.1; see also 1 Smith & Weaver, Texas Law of Oil & Gas § 4.3 (1996). In Texas, such a habendum clause requires actual production in paying quantities. Reid, 337 S.W.2d at 269-70; Garcia v. King, 164 S.W.2d 509, 512 (Tex. 1942). Thus, a typical Texas lease that lasts “as long as oil or gas is produced” automatically terminates if actual production permanently ceases during the secondary term.” (Anadarko Petroleum Corp. v Thompson, 94 S.W.3d 550, 554 (Tex. 2003) emphasis added; Landover Production Company, LLC v. Endeavor Energy Resources, LP2014 WL 5563454 (Tex. App.—Eastland October 31, 2014, pet. denied)) 2. A “savings clause” is generally a provision in an oil and gas lease, in addition to the habendum clause, which allows a lessee, should production cease in the secondary term of the oil and gas lease, to commence additional drilling or reworking operations within a specified time period to “save” the lease. If drilling or reworking operations are commenced within the specified time period, and production in paying quantities is re-established, the fee simple determinable estate is thereafter preserved and the lease
continues to be in full force and effect. (Samano v. Sun Oil Co., 621 S.W.2d 580 (Tex. 1981))
3.
Engrafted onto this rule is the TCPD, best
summarized as follows:
“In order to avoid the harsh results brought about by automatic termination of an oil and gas lease that contains no such express savings clauses, courts have impressed upon such a lease a “necessarily implied” temporary cessation of production clause. Id. (citing Midwest Oil Corp. v. Winsauer, 323 S.W.2d 944, 946 (Tex. 1959)). Under the temporary cessation of production doctrine, the “automatic termination rule is relaxed if the lessee can prove that the cessation of production is temporary and is due to sudden stoppage of the well, some mechanical breakdown of the equipment used in connection therewith, ‘or the like.’” Id. (citing Amoco Prod. Co. v. Brauslau, 561 S.W.2d 805, 809–10 (Tex. 1978); Midwest Oil Corp., 323 S.W.2d at 947; and Watson, 155 S.W.2d at 784).” (Landover Production Company, LLC v. Endeavor Energy Resources, LP2014 WL 5563454 (Tex. App.— Eastland October 31, 2014, pet. denied) emphasis added; See also Krabbe v. Anadarko Petroleum Corp., 46 S.W.3d 308 (Tex.App. — 2001)) Thus, ONLY if a lease has a habendum clause COUPLED WITH the lack of a savings clause, can the TCPD be applied. ( Ridge Oil Co., Inc. v. Guinn Investments, Inc., 148 S.W.3d 143 (Tex. 2004); Krabbe v. Anadarko Petroleum Corp., 46 S.W.3d 308 (Tex. App. — 2001)) The implied TCPD does not apply when a lease contains explicit language which expresses a time limitation within which continued drilling or reworking operations must be conducted during the secondary term of the lease. ( Moore v. Jet Stream Investments, Ltd, 261 S.W.3d 412 (Tex.App. - 2008))
4. The TCPD has several components that the lessee has the burden of proving :
a. a.
The lease(s) under consideration does not contain a savings clause allowing
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G r o w t h T h r o u g h E d u c a t i o n - A p r i l / M a y / J u n e 2 0 2 0
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