Thistle Creek Ranch, LLC v. Ironroc Energy Partners, LLC
14-20-00347-CV
| Tex. App. | May 3, 2022Background
- Thistle Creek Ranch, LLC (lessor) and Ironroc Energy Partners, LLC (lessee) disputed whether two mineral leases (Kettler and Grotte) had terminated and whether Ironroc owed unpaid proceeds.
- The Kettler Lease’s habendum clause: three-year primary term, then "as long thereafter as operations are conducted" with no cessation over 90 consecutive days; "operations" expressly includes "production of oil, gas ... whether or not in paying quantities."
- Ironroc produced gas under the Kettler Lease with no >90-day cessation but conceded production had not been in paying quantities since at least March 2018.
- The trial court granted Ironroc partial summary judgment that the Kettler Lease had not terminated and at trial ruled Thistle Creek could not recover statutory damages or attorney’s fees under Tex. Nat. Res. Code §91.406; parties nonsuited/settled remaining claims and preserved appeal.
- At trial Thistle Creek conceded there were no net proceeds owing from the well; the trial court did quiet title in Thistle Creek’s favor as to the Grotte Lease but denied damages/fees for unpaid proceeds.
- The court of appeals affirmed both rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Kettler Lease terminated for lack of production | Kettler required "production in paying quantities" to extend beyond primary term; Ironroc failed to prove paying-quantities production for summary judgment | The lease’s habendum extends the lease so long as "operations" continue; operations definition explicitly includes production whether or not in paying quantities, and gas was produced without >90-day cessation | Lease did not terminate; summary judgment for Ironroc affirmed |
| Whether Thistle Creek is entitled to statutory damages ($200 minimum) and attorney’s fees under Tex. Nat. Res. Code §91.406 | Thistle Creek filed a suit to collect proceeds and got a favorable final judgment (quiet title on Grotte Lease), so it should recover statutory damages and attorneys’ fees under §91.406 | §91.406 awards fees/damages only when plaintiff obtains a judgment in the suit "to collect proceeds and interest"; Thistle Creek recovered no proceeds or damages on that claim | Denial of statutory damages and attorney’s fees affirmed; no award because the proceeds claim failed |
Key Cases Cited
- Sundown Energy LP v. HJSA No. 3, L.P., 622 S.W.3d 884 (Tex. 2021) (contract-construction principles govern mineral leases)
- Endeavor Energy Res., L.P. v. Discovery Operating Inc., 554 S.W.3d 586 (Tex. 2018) (give effect to parties’ written lease terms)
- Andarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. 2002) (standard rule that a secondary term requires actual production in paying quantities unless lease language alters that rule)
- BP Am. Prod. Co. v. Laddex, Ltd., 513 S.W.3d 476 (Tex. 2017) (two-pronged paying-quantities test: profit over operating expenses and reasonably prudent-operator analysis)
- Clifton v. Koontz, 325 S.W.2d 684 (Tex. 1959) (classic authority treating "produced" as meaning production in paying quantities)
- Ladd Petroleum Corp. v. Eagle Oil & Gas Co., 695 S.W.2d 99 (Tex. App.—Fort Worth 1985) (lease continued where its terms did not require production in paying quantities)
- Rogers v. Ricane Enters., Inc., 772 S.W.2d 76 (Tex. 1989) (breach of implied covenants typically gives monetary damages rather than automatic termination)
- Headington Oil Co., L.P. v. White, 287 S.W.3d 204 (Tex. App.—Houston [14th Dist.] 2009) (interpretation that attorney’s fees under §91.406 are available only when plaintiff obtains judgment on proceeds claim)