Locke Lord Obtains Texas Supreme Court Verdict Upholding BP America Production Co. Lease

Susan Kidwell (Austin) represented BP America Production Co. as the company received a favorable judgment in the Texas Supreme Court in a dispute over termination of a natural gas lease. Red Deer Resources LLC alleged that BP’s lease had terminated and should be canceled because it was not capable of paying production when it was shut in, as Texas law requires in a shut-in situation. Production from the well had ceased a few weeks before the well was turned off and shut-in royalty timely paid. Red Deer based its claim on the day the well was turned off, although gas had not been sold or used from the well for several weeks. In a unanimous opinion, the court found that Red Deer failed to submit the controlling issue – i.e., whether the well was capable of producing in paying quantities when the last gas was used or sold on the lease, not when the well was turned off. Thus, the Court held that the jury charge would not support termination and it rendered judgment that Red Deer take nothing.
Posted May 8, 2017