14
Yale, at p. 11.
If an owner refuses to sign a division order that contains only the provisions specified in the law (including the indemnity clause), the payor is authorized to withhold payment without interest until such a division order is signed.
12
See, 52 O.S. § 581.1 et. seq.
13
See, 52 O.S. § 570.1 et. seq.
Double or Nothing: Texas Supreme Court Clarifies Effect of Double Payment Under Lease Savings Clause
In reversing the court of appeals’ decision, the Texas Supreme Court did not regard the notation on the second savings clause payment as evidencing an intent by the parties to modify or amend the savings clause. The notations on the payments were too vague to be considered a lease modification that reset the deadline for future payments, and to construe the second payment in such a manner would penalize the lessee for what the Texas Supreme Court regarded as sufficient payment for two years of constructive production under the leases. As a result, the Texas Supreme Court reversed the court of appeals’ judgment and reinstated the trial court’s take- nothing judgment.
In a per curiam decision in Scout Energy Mgmt., LLC, et al. v. Taylor Props. , No. 23-1014, 2024 Tex. LEXIS 1169 (Dec. 31, 2024), the Supreme Court of Texas addressed whether a lessee’s payments pursuant to a savings clause in oil and gas leases over two successive months secured two years of constructive production. The savings clause of the oil and gas leases provided that “[W]here gas from a well producing gas only is not sold or used, Lessee may pay as royalty $50.00 per well per year, and upon such payment it will be considered that gas is being produced within the meaning of [the habendum clause] . . . .” The lessor claimed that a notation on the second payment reset the period of constructive production under the savings clause such that the leases were continued for only a one-year period from the date of the second payment. When the successor lessee attempted to issue another payment under the savings clause, the lessor sued for trespass and requested a declaration that the leases had terminated. The trial court found the savings clause ambiguous but nonetheless ruled in the lessee’s favor that each payment served as constructive production for a one- year period and the leases had not terminated. The court of appeals construed the savings clause as unambiguous but agreed with the trial court’s analysis of the savings clause — each payment entitled the lessee to a full year of constructive production, and payments for future years could be made without cutting short the period secured by a prior payment. However, the court of appeals held that the leases terminated one year from the date of the second payment because a notation on the second issued payment secured constructive production for a new 12-month period designated by the payment.
The Author:
Evan G. Conard Member Steptoe & Johnson PLLC
evan.conard@steptoe-johnson.com Evan is a member of the Steptoe & Johnson Energy Litigation Team in
the Charleston, WV office. Previously, Evan worked for a West Virginia-based law firm handling various energy related matters and also worked as an in-house attorney for a coal operator and natural gas exploration and production company, where he engaged first-hand with the company’s asset development plans advising on legal matters affecting operations and providing other guidance to facilitate development of the Marcellus and Utica shale formations in the Appalachian Basin. He has defended oil and gas operators in litigation involving contract disputes, leases, condemnation proceedings, and right of access.
27
G rowth T hrough E ducat i on - A pr i l / M ay / J une 2025
Made with FlippingBook Annual report maker