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Blackmon v. XTO Energy, Inc.

Court of Appeals of Texas, Tenth District, Waco

December 10, 2008, Opinion Delivered; December 10, 2008, Opinion Filed

No. 10-07-00345-CV

Opinion

 [*602]  David Blackmon, Rebecca Blackmon Reed, and Jay Harlan (collectively the "Blackmons") filed a declaratory judgment action against XTO Energy, Inc. alleging that an oil and gas lease held by XTO had expired because the well was shut in. The Blackmons also sought an accounting for allegedly unpaid royalties. The court granted XTO's summary-judgment motion premised primarily on the grounds that: (1) the lease did not terminate because the well remained capable of producing  [**2] in paying quantities while it was shut in; and (2) the Blackmons' predecessors-in-interest had previously sold their royalty interests and so the Blackmons were not owed any royalty payments. The court denied the Blackmons' competing motion for partial summary judgment.

The Blackmons contend in six issues that the court erred by granting XTO's summary-judgment motion and denying their own because: (1) the well was not capable of producing in paying quantities; (2) XTO failed to properly pay the royalties owed them; (3) XTO failed to establish a limitations title to the mineral interests in question; (4) their conduct in executing a subsequent division order and accepting subsequent royalty payments did not revive or ratify the lease; (5) a four-year limitations statute applies because this is a suit on a debt; and (6) the court abused its discretion by failing to exclude certain summary-judgment evidence.

We will affirm.

Background

The Blackmons' predecessors-in-interest, Hollis and Helga Blackmon and Barbara Thaemar, executed an oil, gas and mineral lease in favor of Wessely Energy Corporation in January 1983. This lease covered two adjoining tracts of land identified in the lease as:  [**3] (1) a 33.5-acre tract in Section 8 of the Maria de la Concepcion Marquez Grant, A-25 (Tract 1); and (2) a 101.5-acre tract in the same Section 8 (Tract 2). 2 Wessely Energy pooled Tract 1 with other lands in the Biggs # 1 Gas Unit in 1984. Production from the Biggs # 1 Well in this unit held the lease beyond its primary term, but production ceased at this well in April 1997 because the third party (Texas Utilities Fuel Company) which had been purchasing the gas produced  [*603]  from this well refused to continue because the the carbon dioxide content was greater than three percent, which was contrary to the specifications of the purchase contract. No royalty payments were made to the Blackmons' predecessors-in-interest while the well was shut in. XTO's predecessor-in-interest installed an amine processing unit in September 1998 which removed the excess carbon dioxide from the gas, and production resumed.

Production in Paying Quantities

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276 S.W.3d 600 *; 2008 Tex. App. LEXIS 9209 **; 169 Oil & Gas Rep. 299

DAVID BLACKMON, REBECCA BLACKMON REED, AND JAY HARLAN, Appellants v. XTO ENERGY, INC., Appellee

Prior History:  [**1] From the 82nd District Court, Robertson County, Texas. Trial Court No. 05-07-17,292-CV.

Disposition: Affirmed.

CORE TERMS

lease, royalty, shut-in, paying quantities, capable of producing, terminate, oil, lessee, costs, royalty payment, special limitation, processing, covenant, wellhead, lessor, Tract, shut, expiration, marketing, primary term, summary-judgment, provisions, installed, mineral, amine

Energy & Utilities Law, Leases & Licenses, General Overview, Natural Gas Industry, Pipelines & Transportation, Oil & Petroleum Products, Processing & Refining, Royalties, Habendum Clauses, Contracts Law, Contract Interpretation, Real Property Law, Estates, Future Interests, Right of Entry, Breach, Breach of Contract Actions, Contract Conditions & Provisions, Business & Corporate Compliance, Contracts Law, Conditions Subsequent, Federal Oil & Gas Leases, Extensions & Terminations, Abandonment & Termination, Shut In Royalty Clauses, Civil Procedure, Remedies, Damages, Monetary Damages