the lessee to remedy the cessation of production following the expiration of the primary term. (Watson v. Rochmill , 155 S.W.2d 783 (Tex. 1941); Bradley v. Avery, 746 S.W.2d 341 (Tex.App. — 1988)); and The cessation of production was due to a mechanical failure or breakdown of the well ie the well could not physically continue to produce. ( Landover Production Company, LLC v. Endeavor Energy Resources, LP2014 WL 5563454 (Tex. App.—Eastland October 31, 2014, pet. denied); Bradley v. Avery, 746 S.W.2d 341 (Tex.App. — 1988)) and The lessee acted with due diligence and remedied the physical cause of the temporary cessation of production and resumed the production of oil in paying quantities within a reasonable time. ( Landover Production Company, LLC v. Endeavor Energy Resources, LP2014 WL 5563454 (Tex. App.—Eastland October 31, 2014, pet. denied) emphasis added); Bradley v. Avery, 746 S.W.2d 341 (Tex. App. — 1988)); and The time period over which there was no production was temporary and NOT permanent. ( Krabbe v. Anadarko Petroleum Corp ., 46 S.W.3d 308 (Tex.App. — 2001); Bradley v. Avery, 746 S.W.2d 341 (Tex.App. — 1988)) If the foregoing evidentiary points are adequately proven to the trier of fact’s satisfaction, the TCPD may be applied and the lease found to be in force and effect despite the temporary cessation of production.
Saudi Arabia and Russia coupled with a large reduction in demand for aviation gas (world demand could drop as much as 70%) as well as gasoline (expected to be down some 50%). The declines in demand for aviation gas and gasoline are due, in significant part, to the corona virus. With demand down for aviation gas and gasoline, coupled with the Saudi Arabia/Russia overproduction of oil, presently in Texas there is a significant lack of a market for oil. This significant lack of an oil market is not only a Texas phenomenon but also a country wide and world- wide problem. The issue, simply put, is a lack of a market for oil in Texas, coupled with the shutting in, on a lease/ unit basis, whether voluntary or involuntary, all oil wells located thereon, a condition that can legally be classified as a temporary cessation of production under oil and gas leases which do not have a savings clause. Simple answer – NO. There are three cases from the 1940’s that specifically deal with a lack of a market and the applicability of the TCPD. The first case is Watson v. Rochmill, 155 S.W.2d 783 (Tex. 1941). The lease at issue in this case had a primary term of three (3) years and as long thereafter as oil or gas, or either of them was produced from the leased premises. An oil well was brought in but “due to the depression and the low gravity of the oil there was no market that would justify the operation of the well.” ( Watson v. Rochmill, 155 S.W.2d 783, 784 (Tex. 1941)) No oil was produced from May 21, 1932 until January 1935. The court held that the lack of an oil market coupled with the low gravity of the oil in no way prevented the operation of the well ie the cessation of production was not due to a mechanical failure of the well. The court held that since the cessation of production was a voluntary act of the lessee not due to any mechanical failure of the then producing well that the TCPD did not apply and the lease terminated as a matter of law. The second case dealing with the failure to produce and sell after the expiration of the lease’s primary term, this time sour gas instead of oil, is Stanolind Oil & Gas Co. v. Barnhill, 107 S.W.2d 746 (Tex.Civ.App. 1937). The lessee drilled and completed a well only
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The Bad News The present status of the market for oil today
is two words – Too Much! There is a significant overabundance of oil due to an ongoing dispute between
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