pjc-oil-and-gas-2022-lib

PJC 303.18

L ESSOR -L ESSEE I SSUES

PJC 303.18 Question and Instruction on Failure to Commence Operations after Completion of Dry Hole QUESTION ______ Did Larry Lessee fail to commence additional drilling or reworking opera tions within [ indicate number of days specified in lease ] days after the [ prior ] well was completed as a dry hole? “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 303.18 should be used when the lessee is relying on the dry hole clause to maintain the lease. This question must conform to the language of the lease regarding the applicable time period and the event from which the time period is measured, such as the completion of a dry hole or other reasons for cessation of opera tions. Additionally, the controlling oil and gas lease may limit the applicability of the 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). See, e.g., Rogers v. Osborn , 261 S.W.2d 311, 313–14 (Tex. 1953); Stanolind Oil & Gas Co. v. Newman Bros. Drilling Co. , 305 S.W.2d 169, 174–75 (Tex. 1957). Finally, further instructions, revised instructions, or additional questions may be needed if underlying facts are in dispute. Source of question and instructions. PJC 303.18 is derived from Rogers , 261 S.W.2d at 313–14; Valence Operating Co. v. Anadarko Petroleum Corp. , 303 S.W.3d 435, 441 (Tex. App.—Texarkana 2010, no pet.); Utley v. Marathon Oil Co. , 31 S.W.3d 274, 278–79 (Tex. App.—Waco 2000, no writ); Cox v. Stowers , 786 S.W.2d 102, 105 (Tex. App.—Amarillo 1990, no writ); Whelan v. R. Lacy Inc. , 251 S.W.2d 175, 176 (Tex. App.—Texarkana 1952, writ ref'd n.r.e.) (recognizing that operations require dil igence); Phillips Petroleum v. Rudd , 226 S.W.2d 464, 466 (Tex. App.—Texarkana 1949, no writ); and Geier-Jackson, Inc. v. James , 160 F. Supp. 524, 529 (E.D. Tex. 1958). For examples of what might constitute “drilling operations” or “reworking operations,” see Bargsley v. Pryor Petroleum Corp. , 196 S.W.3d 823, 826–28 (Tex. App.—Eastland 2006, pet. denied).

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