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Anadarko Petroleum Corp. v. Thompson

Supreme Court of Texas

March 6, 2002, Argued ; July 3, 2002, Delivered

NO. 01-0261

Opinion

 [*553]  JUSTICE BAKER delivered the opinion of the Court.

JUSTICE O'NEILL did not participate in this opinion.

In this case, we decide whether a gas mining lease terminated when actual production ceased longer than sixty days. The lease expressly states that it lasts for one year and "as long thereafter as gas is or can be produced." The lease also provides [**2]  that, if production ceases for any reason, the lease "shall not terminate provided lessee resumes operations for drilling a well within sixty (60) days from such cessation." The lessees began producing gas in 1936. However, in 1981 and again in 1985, actual production ceased longer than sixty days. The court of appeals held that these cessations terminated the lease. 60 S.W.3d 134, 141. We disagree. We conclude that a well that is capable of production sustains this particular lease even if actual production ceases longer than sixty days. Accordingly, we reverse the court of appeals' judgment and remand to the trial court for further proceedings consistent with this opinion.

I. BACKGROUND

In 1936, Thompson's and Anadarko's predecessors entered into a lease "for the purpose of mining and operating for and producing gas." The lease allows either production or the lessees' beginning drilling operations to maintain the lease beyond its one-year primary term.

Two provisions in the lease are pertinent here. The lease's "habendum clause" states:

This lease shall remain in force for a term of one (1) year and as long thereafter as gas is or can be produced.

The [**3]  lease also has a "cessation-of-production clause," which provides:

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94 S.W.3d 550 *; 2002 Tex. LEXIS 117 **; 45 Tex. Sup. J. 1039

ANADARKO PETROLEUM CORPORATION, PETITIONER v. PHILLIP THOMPSON, ET AL., RESPONDENTS

Prior History:  [**1]  ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE SEVENTH DISTRICT OF TEXAS.

Disposition: Reversed and remanded.

CORE TERMS

lease, actual production, habendum clause, cessation-of-production, court of appeals, ceases, terminated, lessee, paying quantities, capable of producing, cessation, drilling, habendum, sixty days, capability, mineral, parties, shut-in, oil, lasts, construing, producing, primary term, repairs, cases

Civil Procedure, Appeals, Standards of Review, De Novo Review, Contracts Law, Types of Contracts, Lease Agreements, General Overview, Contract Interpretation, Energy & Utilities Law, Leases & Licenses, Mining Industry, Mineral Leases, Real Property Law, Estates, Present Estates, Fee Simple Estates, Federal Oil & Gas Leases, Extensions & Terminations, Abandonment & Termination, Granting Clauses, Mining, Forfeiture Clauses, Habendum Clauses, Royalty Clauses, Royalties, Leasehold Royalty Clauses, Landlord & Tenant, Tenancies, Term Tenancies, Savings Clauses, Oil, Gas & Mineral Interests, Implied Covenants, Administration & Marketing, Natural Gas Industry, Marketing & Transportation, Marketability, Implied Duties