pjc-oil-and-gas-2022-lib

PJC 303.15

L ESSOR -L ESSEE I SSUES

PJC 303.15 Question and Instruction on Failure to Commence Operations before End of Primary Term

QUESTION ______ Did Larry Lessee fail to [ commence/engage in ] drilling or reworking opera tions on or before [ date primary term expired ]? “Drilling or reworking operations” means actual work or operations in which an ordinarily competent operator, under the same or similar circum stances, would engage in a good-faith effort with due diligence to cause a well or wells to produce oil or gas in paying quantities. Answer “Yes” or “No.” Answer: _______________ COMMENT When to use. PJC 303.15 should be used when there is a fact issue about whether the lessee’s activity before the expiration of the primary term satisfied express lease requirements, generally found in an operations savings clause, that the lessee com mence operations. Source of question. PJC 303.15 is derived from Ridge Oil Co. v. Guinn Invest ments, Inc. , 148 S.W.3d 143, 158–60 (Tex. 2004); Rogers v. Osborn , 261 S.W.2d 311, 314 (Tex. 1953); Valence Operating Co. v. Anadarko Petroleum Corp. , 303 S.W.3d 435, 441 (Tex. App.—Texarkana 2010, no pet.); Bargsley v. Pryor Petroleum Corp. , 196 S.W.3d 823, 826–27 (Tex. App.—Eastland 2006, pet. denied); Utley v. Marathon Oil Co. , 31 S.W.3d 274, 278–79 (Tex. App.—Waco 2000, no writ); and Cox v. Stow ers , 786 S.W.2d 102, 105 (Tex. App.—Amarillo 1990, no writ). What constitutes drilling operations. In Ridge Oil Co. , 148 S.W.3d 143, the supreme court recognized that the staking of a well and obtaining a drilling permit, without further activity, were not “operations” as a matter of law. Ridge Oil Co. , 148 S.W.3d at 158–59. However, the court also discussed several cases in which acts, including making a well location, bringing equipment to the location, digging pits, drilling water wells, and erecting a derrick, followed by continuous operations, consti tuted “operations.” See Ridge Oil Co. , 148 S.W.3d at 158–59. PJC 303.15 should be modified if “operations” are defined in the lease. For a discussion of whether the dis pute should be submitted to the jury, see Valence Operating Co. , 303 S.W.3d at 440– 41.

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