563 S.W.3d 449
Tex. App.2018Background
- Endeavor held a large oil-and-gas lease (primary term ended July 21, 2009) with a continuous-development clause requiring commencement of operations for each successive well within 150 days of completion of the prior well, or non-dedicated acreage would terminate.
- The lease's accumulation provision stated: Lessee may “accumulate unused days in any 150-day term during the continuous development program in order to extend the next allowed 150-day term between the completion of one well and the drilling of a subsequent well.”
- Endeavor drilled 12 wells during the post-primary continuous-development program; the 12th well was completed December 27, 2014, and no further well was commenced within 300 days thereafter.
- Endeavor argued it had accumulated 227 unused days from earlier wells and thus could wait 377 days (150 + 227) before starting the 13th well; Energen argued unused days could only extend the immediately subsequent 150-day term (i.e., days from well N only extend the next well N+1).
- Trial court granted Energen’s partial summary judgment interpreting the accumulation clause to apply only to the immediately next 150-day term, held the lease terminated as to non-dedicated acreage on July 1, 2015, and found Endeavor committed a good-faith trespass by drilling the 13th well after termination.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Construction of the accumulation provision (can unused days be banked across multiple future terms?) | Endeavor: unused days may be amassed across the program and used later to extend any future 150-day term ("pennies in a jar"). | Energen: unused days from a given 150-day term may only extend the immediately next allowed 150-day term. | Court: Energen; "next" means immediately following, so unused days may only extend the next well's 150-day term. |
| Forfeiture / special limitation argument (did the clause effect an uncompensated forfeiture?) | Endeavor: Energen's construction causes forfeiture of most leased acreage and should not be read as a special limitation. | Energen: The provision is a clear special limitation; failure to comply effects partial termination consistent with the lease terms. | Court: No forfeiture; clause is a clear special limitation and the partial termination was valid. |
Key Cases Cited
- Travelers Ins. Co. v. Joachim, 315 S.W.3d 860 (Tex. 2010) (standard of review for summary judgment)
- Tittizer v. Union Gas Corp., 171 S.W.3d 857 (Tex. 2005) (leases are contracts; interpret contract terms to effect parties’ intent)
- Endeavor Energy Res., L.P. v. Discovery Operating, Inc., 554 S.W.3d 586 (Tex. 2018) (interpretation principles for mineral leases; continuous-development clause purpose)
- Samson Expl., LLC v. T.S. Reed Props., Inc., 521 S.W.3d 766 (Tex. 2017) (unambiguous contract interpretation is a question of law)
- Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. 2002) (contract construction principles)
- Royal Indem. Co. v. Marshall, 388 S.W.2d 176 (Tex. 1965) (courts enforce plain, definite, unambiguous contractual language)
- Rogers v. Osborn, 261 S.W.2d 311 (Tex. 1953) (continuous-development requires no gap in operations)