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Pnp Petroleum I, LP v. Taylor

Court of Appeals of Texas, Fourth District, San Antonio

May 21, 2014, Delivered; May 21, 2014, Filed

No. 04-13-00445-CV

Opinion

REVERSED AND RENDERED

 [*727]  This appeal arises from a dispute over whether the term of an oil and gas lease was extended by a payment made by the lessee. After the parties concluded their negotiation of the lease terms, the lease provided that the lessee could pay a "shut-in well royalty payment" to extend the term of the lease "[i]f, at the expiration of the primary term there  [**2] is located on the leased premises a well or wells not producing oil/gas in paying quantities." After sustaining objections to the lessee's summary judgment evidence, and applying the generally accepted industry definition of "shut-in royalty" to the language of the lease, the trial court construed the lease as providing that the lessee could pay a "shut-in royalty payment" to extend the term of the lease "[i]f at the expiration of the primary term there is located on the leased premises a well or wells

notcapable of producing oil/gas in paying quantities." The issues raised on appeal challenge the trial court's sustaining of the objections to the summary judgment evidence and its construction of the lease. Because we conclude that the trial court erroneously sustained the objections to the summary judgment evidence and consequently erred in its construction of the lease, we reverse the trial court's judgment and render judgment that the term of the lease was extended by the lessee's payment.

Background

PNP Petroleum I, LP entered into an Oil and Gas Lease with Edna Earnest Taylor and Elizabeth Earnest Herbst. The lease was dated June 1, 2009, and had a one year primary term. The lease  [**3] stated that it would exist for the primary term and "as long thereafter as oil and/or gas in paying quantities is produced from and sold from the land subject to this lease." The lease further stated that its term was subject to the following specific savings clause which is the subject of the underlying dispute:

ii. SHUT-IN ROYALTY (Saving) If, at the expiration of the primary term there is located on the leased premises a well or wells not producing oil/gas in paying quantities, Lessee may pay as royalty a sum of money equal to Twenty ($20) dollars per proration acre associated with each well not producing. The shut-in well royalty payment will extend the term of this lease for a period of one (1) year. Lessee may extend this lease for one (1) additional year by the payment of a like sum of money. MAXIMUM SHUT-IN It is agreed that this lease cannot be maintained by the payment of shut-in royalty for a period of more than two (2) years beyond the expiration date of the primary term.

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438 S.W.3d 723 *; 2014 Tex. App. LEXIS 5402 **; 180 Oil & Gas Rep. 1049

PNP PETROLEUM I, LP, PNP Management, Inc., Philip Zaccaria, and Cibolo Energy Operating, Inc., Appellants v. Edna Earnest TAYLOR, Elizabeth Earnest Herbst, and U.S. Enercorp, Ltd., Appellees

Subsequent History: Petition for review denied by Taylor v. PNP Petroleum I, L.P., 2015 Tex. LEXIS 406 (Tex., May 1, 2015)

Prior History:  [**1] From the 81st Judicial District Court, Frio County, Texas. Trial Court No. 10-05-00167CVF. Honorable Donna S. Rayes, Judge Presiding.

Disposition: REVERSED AND RENDERED.

CORE TERMS

lease, trial court, reconsideration motion, summary judgment, shut-in, drafts, negotiations, paying quantities, sustaining, parties, royalty, terms of the lease, primary term, deletions, Lessee, expiration, ambiguous, exhibits, saving clause, hearsay, partial summary judgment, capable of producing, parol evidence rule, leased premises, trial court's ruling, circumstances, producing, stricken, surrounding circumstances, oil and gas lease

Civil Procedure, Summary Judgment, Entitlement as Matter of Law, Appropriateness, Appeals, Summary Judgment Review, Standards of Review, Standards of Review, De Novo Review, Motions for Summary Judgment, Cross Motions, Judgments, Relief From Judgments, Altering & Amending Judgments, Evidentiary Considerations, General Overview, Appealability, Opposing Materials, Timing of Motions & Responses, Constitutional Law, Fundamental Rights, Procedural Due Process, Scope of Protection, Pleading & Practice, Motion Practice, Appellate Briefs, Reviewability of Lower Court Decisions, Preservation for Review, Abuse of Discretion, Evidence, Burdens of Proof, Allocation, Admissibility, Procedural Matters, Rulings on Evidence, Contracts Law, Contract Interpretation, Ambiguities & Contra Proferentem, Parol Evidence, Intent, Relevance, Relevant Evidence, Types of Contracts, Lease Agreements, Questions of Fact & Law, Hearsay, Rule Components, Truth of Matter Asserted, Energy & Utilities Law, Leases & Licenses, Custom & Usage, Shut In Royalty Clauses