pjc-oil-and-gas-2022-lib

L ESSOR -L ESSEE I SSUES

PJC 303.16

PJC 303.16 Question and Instruction on Failure to Commence Operations after Cessation of Production QUESTION ______ Did Larry Lessee fail to commence additional drilling or reworking opera tions within [ indicate number of days specified in lease ] days after the well ceased to produce [ oil/gas ] [ in paying quantities ]? “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 303.16 should be used when the lease specifies a period of time of nonproduction after which the lease terminates unless the lessee commences additional operations. Such language is generally found in a “cessation of production” savings clause. The cessation may be actual physical cessation or cessation in paying quantities. Clifton v. Koontz , 325 S.W.2d 684, 690 (Tex. 1959); Bachler v. Rosenthal , 798 S.W.2d 646, 648–49 (Tex. App.—Austin 1990, writ denied). For questions and instructions on cessation of production in paying quantities, see PJC 303.20. The above question and its instructions should conform to the language of the lease regard ing the applicable time period, the event from which the time period is measured, any limitation on the applicability of the savings clause (e.g., whether the operation must be before the discovery of oil or gas or whether production ceased after the discovery of oil or gas), and any specific definitions of the operations required. See, e.g., Stano lind Oil & Gas Co. v. Newman Bros. Drilling Co. , 305 S.W.2d 169 (Tex. 1957); Rog ers v. Osborn , 261 S.W.2d 311 (Tex. 1953). Finally, further instructions or additional questions may be needed to determine what actions constitute “drilling operations” or “reworking operations” if such terms are defined in the lease. Source of question and instruction. PJC 303.16 is derived from Ridge Oil Co. v. Guinn Investments, Inc. , 148 S.W.3d 143, 158–60 (Tex. 2004); Rogers , 261 S.W.2d at 314; Crystal River Oil & Gas, LLC v. Patton , 510 S.W.3d 226 (Tex. App.—Eastland 2016, no pet.); 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 (Tex. App.—Eastland 2006, pet. denied); Utley v. Marathon Oil Co. , 31

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