## Facts

- Landowners (including Frank and Morris Braslau) conveyed multiple *term royalty* interests for 15 years “and so long thereafter as oil or gas was produced from the lands described.”
- The subject lands were included in the Frank Braslau Gas Unit in Live Oak County, Texas, operated by Atlantic Richfield Company (ARCO).
- ARCO drilled Unit Well No. 1, completed in several zones (A–D); production during and after the primary term came from Sands B and D.
- In 1972, production from Sand D became marginal, and the well was ultimately lost due to mechanical failure (casing collapse).
- Production ceased on November 13, 1972, and no unit production occurred for 103 days.
- During the nonproduction period, the operator continued reworking and drilling activities with diligence and good faith.
- ARCO obtained permission to drill a replacement well about 700 feet away on the same land; Unit Well No. 2 was completed in Zone C.
- Well No. 2 began commercial production on February 24, 1973, roughly 20 days after expiration of the last 15-year primary term under the various royalty instruments.
- Amoco Production Company and other term royalty owners sought a declaration that the term royalties had not terminated; the grantors/landowners contended the interests ended when production stopped after the primary term.

## Issues

1. Whether a 103-day cessation of production after the primary term, caused by mechanical failure and followed by diligent efforts to restore production, was a temporary cessation that did not terminate term royalty interests.
2. Whether resumption of production from a different zone and a new well on the same described lands satisfied the instruments’ requirement that oil or gas be “produced from the lands described.”

## Decision

- The Supreme Court of Texas reversed the court of civil appeals and affirmed the trial court’s judgment for the term royalty owners.
- The Court held the 103-day stoppage was a temporary cessation of production, not a permanent cessation.
- The Court held the term royalty interests did not expire because production was restored within a reasonable time through diligent, good-faith operations.
- The Court rejected the view that production had to resume from the same well or the same producing formation to maintain the term royalties.

## Legal Principles

- A term royalty interest that continues “so long thereafter as oil or gas is produced from the lands described” is not terminated by a temporary cessation of production occurring after the primary term.
- Temporary cessation is assessed by considering the cause of the stoppage, the operator’s diligence and good faith in attempting to restore production, and whether production resumed within a reasonable time.
- When the continuation clause is keyed to production “from the lands described,” production from another well or formation on those lands can satisfy the continuation requirement.
- Termination occurs upon a permanent cessation of production after the primary term; a short, remediable interruption with prompt remedial operations is not treated as permanent.

## Conclusion

The Texas Supreme Court held that the term royalty interests remained in force because the post–primary term production gap, caused by mechanical failure, was temporary and was cured within a reasonable time through diligent efforts that restored production from a replacement well on the same described lands, even though the new production came from a different zone.


Amoco Prod. Co. v. Braslau, 561 S.W.2d 805 (Tex. 1978)