669 S.W.3d 796
Tex.2023Background
- In 2014 Lessors granted MRC a ~4,000-acre lease (MRC Lease). MRC drilled five wells; the last (Totum) was spudded Nov. 22, 2016.
- Under a Continuous Drilling Program, MRC had to spud a new well within 180 days of the last spud to prevent termination — giving a May 21, 2017 deadline to spud the next well.
- MRC’s operations group later mis-scheduled the Toot #211 well for June 2 and miscalculated the lease expiration as June 19; the error was discovered after May 21, so MRC missed the May 21 deadline.
- MRC invoked the lease’s force majeure clause based on an April 21 wellbore instability on a different lease that allegedly delayed Rig 295 by ~30 hours; MRC served force majeure notices June 13 (53 days after the event and after the lease would have terminated).
- The Lessors (and Point Energy) acquired new leases in early June. MRC sued for declaratory relief and tortious interference; the trial court held the force majeure clause did not save the lease, declared termination effective May 22, 2017, and entered take-nothing on tortious-interference claims.
- The court of appeals reversed on the force majeure and tort claims; the Texas Supreme Court reversed the court of appeals, held the force majeure clause did not save the lease, rendered partial take-nothing relief on tort claims, and remanded unresolved retained-acreage/related tort issues.
Issues
| Issue | Plaintiff's Argument (MRC) | Defendant's Argument (Point Energy) | Held |
|---|---|---|---|
| Whether the force majeure clause extended the lease | April 21 off-lease wellbore instability delayed MRC’s operations and thus, per the clause, the lease "remained in force" and MRC had 90 days to resume | The event was off-lease, did not cause missing the May 21 deadline (scheduling error did), was within MRC’s control/foreseeable, and thus cannot trigger the clause | The Court held the clause requires a delay that relates to lease-preserving operations/deadlines; a 30-hour slowdown of an operation already scheduled after the deadline does not qualify — force majeure did not save the lease. |
| Whether retained production-unit acreage is 160 or 320 acres | MRC: production-unit size should be 320 acres (+10% tolerance) for horizontal wells meeting the wellbore-length test | Point Energy: MRC’s wells do not meet the >5,000-ft lateral threshold and/or MRC failed the written-designation requirement, so units are 160 acres (+10%) | The Court reversed the court of appeals on termination and remanded the acreage issue to the court of appeals for consideration consistent with this opinion. |
| Tortious interference based on alleged perpetuation of the lease (primary theory) | Point Energy’s dealings in June interfered with an existing, saved lease (because force majeure applied) | Point Energy: lease had terminated before their new leases; no valid contract to interfere with | Because force majeure did not save the lease, the Court rendered judgment that MRC takes nothing on tortious-interference claims to the extent they depend on the lease having been perpetuated past May 21, 2017. |
| Tortious interference based on retained-acreage interest (secondary theory) | Even if the main lease terminated, MRC retained an interest in production units and Point Energy’s conduct interfered with those rights | Point Energy denies legally cognizable retained rights in the size MRC claims | The Court remanded the secondary tortious-interference issue (to the court of appeals) because its resolution depends on the remanded production-unit/acreage determination. |
Key Cases Cited
- Rosetta Res. Operating, LP v. Martin, 645 S.W.3d 212 (Tex. 2022) (standard of review for summary judgment and lease construction)
- Endeavor Energy Res., L.P. v. Discovery Operating, Inc., 554 S.W.3d 586 (Tex. 2018) (interpretation of retained-acreage clauses and contract-construction principles)
- BP Am. Prod. Co. v. Red Deer Res., LLC, 526 S.W.3d 389 (Tex. 2017) (savings clauses and lease termination doctrine)
- Burlington Res. Oil & Gas Co. v. Tex. Crude Energy, LLC, 573 S.W.3d 198 (Tex. 2019) (parties free to contract for unconventional results)
- URI, Inc. v. Kleberg County, 543 S.W.3d 755 (Tex. 2018) (context and purpose guide textual interpretation)
- Nettye Engler Energy, LP v. BlueStone Nat. Res. II, LLC, 639 S.W.3d 682 (Tex. 2022) (contracts with certain and definite meaning are interpreted as a matter of law)