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Pray v. Premier Petroleum, Inc.

Supreme Court of Kansas

April 29, 1983, Opinion Filed

No. 54,632


 [*352]   [**256]  This is an action to quiet title to real estate. The appeal is from the trial court's order quieting the title in favor of the landowner by holding an oil and gas lease thereon had terminated due to nonproduction.

Edna Pray is the landowner. In 1977 she entered into a contract for deed with Frank Carney pursuant to which Mr. Carney would purchase the land in question.

Previously, on August 7, 1973, Edna Pray and Premier Petroleum, Inc., had executed an oil and gas lease covering Pray's property. The lease contained the standard provisions with a primary term of two years "and as long thereafter as oil and gas, or either of them, is produced from said land by the lessee, or the premises are being developed or operated." The lease also contained a "shut-in" royalty clause which provided:

"The lessee shall pay lessor as royalty 1/8 of the proceeds [***4]  from the sale of gas as such at the mouth of the well where gas only is found and where such gas is not sold or used, lessee shall pay or tender annually at the end of each yearly period  [**257]  during which such gas is not sold or used as royalty, an amount equal to the delay rental provided in the next succeeding paragraph hereof, and while said royalty is so paid or tendered this lease shall be held as a producing lease under the above term paragraph hereof . . . ."

In January of 1974, during the primary term of the lease, Premier began drilling operations on the property. The well, Pray No. 1, was completed in March of 1974. On August 7, 1975, Premier filed an "Affidavit of Production" stating "a gas well producing or capable of producing gas in paying quantities" had been completed on the Pray property.

Premier's efforts to market the gas from Pray No. 1 were fruitless since it was the only gas well in the area and was three miles from a gas line. This prompted Premier to avail itself of the shut-in royalty provision. Each year through 1979 shut-in gas royalties were paid. In 1980 and 1981, however, Carney and Pray refused to accept the shut-in royalty payments.

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233 Kan. 351 *; 662 P.2d 255 **; 1983 Kan. LEXIS 298 ***; 76 Oil & Gas Rep. 449

Edna Pray and Frank Carney, Appellees, v. Premier Petroleum, Inc., Edwin Linquist, Carl Swan, and L. A. Watson, Appellants

Prior History:  [***1]  Appeal from Butler District Court; Page W. Benson, Judge.

Disposition: Reversed.


lease, paying quantities, shut-in, lessee, oil, royalty, habendum clause, pipeline, royalty clause, capable of producing, costs, drilling, oil and gas lease, primary term, gas well, transportation, quantities, producing, expenses, lessor

Contracts Law, Types of Contracts, Lease Agreements, General Overview, Energy & Utilities Law, Leases & Licenses, Habendum Clauses, Natural Gas Industry, Marketing & Transportation, Distribution & Sale, Federal Oil & Gas Leases, Extensions & Terminations, Abandonment & Termination, Assignment, Release & Surrender, Forfeiture Clauses, Pipelines & Transportation, Natural Gas Transportation, Pipelines, Discovery, Exploration & Recovery, Royalty Clauses, Savings Clauses, Shut In Royalty Clauses, Royalties, Leasehold Royalty Clauses