pjc-oil-and-gas-2022-lib

L ESSOR -L ESSEE I SSUES

PJC 303.19

PJC 303.19 Question on Cessation of Production QUESTION ______ Did production of [ oil/gas ] from the lease in question cease? Answer “Yes” or “No.” Answer: _______________

COMMENT When to use. PJC 303.19 should be used when there is a dispute about whether there has been a complete cessation of production of oil or gas, rather than a cessation of production in “paying quantities.” (See PJC 303.20 for questions and instructions on cessation of production in paying quantities). Complete cessation is generally in issue when the lessee is relying on a “cessation of production” savings clause. See Ridenour v. Herrington , 47 S.W.3d 117, 121–22 (Tex. App.—Waco 2001, pet. denied); Bachler v. Rosenthal , 798 S.W.2d 646, 649–50 (Tex. App.—Austin 1990, writ denied) (holding that reasonably prudent operator test for paying quantities is not applicable with a physical cessation of production). Source of question. PJC 303.19 is derived from Watson v. Rochmill , 155 S.W.2d 783, 784 (Tex. 1941), and Bachler , 798 S.W.2d at 649–50. Cessation on pooled units. Absent specific language in the lease to the contrary, the lessor must show that all wells located on the land covered by the lease or pooled therewith ceased to produce, because generally production on one tract will operate to perpetuate the lease as to all tracts covered by or pooled with the lease. Matthews v. Sun Oil Co. , 425 S.W.2d 330, 333 (Tex. 1968); Southland Royalty Co. v. Humble Oil & Refining Co. , 249 S.W.2d 914, 916 (Tex. 1952); Sabre Oil & Gas Corp. v. Gibson , 72 S.W.3d 812, 818–19 (Tex. App.—Eastland 2002, pet. denied). Date of cessation of production. If the jury answers “Yes” to PJC 303.19, see PJC 303.21 for a question regarding the date of the cessation.

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