## Facts

- In July 1973, Great Plains Petroleum, Inc. (GPPI) obtained a federal oil-and-gas lease covering a tract of public land for a 10-year primary term and “so long thereafter as” oil or gas was produced in paying quantities.
- The lease was beyond its primary term when its last producing well ceased production in October 1987.
- The Bureau of Land Management (BLM), Montana State Office, had records showing no production from the lease after October 1987.
- On April 11, 1988, BLM notified GPPI in writing that production had ceased and that the lease would terminate if production did not restart within 60 days.
- GPPI told BLM that the well was still capable of producing, but that GPPI had filed for bankruptcy and was attempting to restart production.
- GPPI did not restart production within the 60-day period and did not formally respond to BLM’s notice within that timeframe.
- BLM declared the lease terminated, and GPPI appealed to the Interior Board of Land Appeals (IBLA).

## Issues

1. Whether a federal oil-and-gas lease held past its primary term terminates when production ceases and the lessee does not restart production within the 60-day period stated in BLM’s notice.
2. Whether a lessee’s statement that a well is capable of producing in paying quantities, without restarting production within the notice period, prevents termination.
3. Whether the lessee’s bankruptcy and related financial difficulty prevent termination of the lease for nonproduction.

## Decision

- IBLA affirmed BLM’s determination that the lease terminated after production ceased and was not restarted within the 60-day period identified in BLM’s notice.
- IBLA rejected GPPI’s reliance on asserted well capability where production was not restarted within the allotted time.
- IBLA concluded that GPPI’s bankruptcy status did not keep the lease in effect in the absence of resumed production.

## Legal Principles

- A federal oil-and-gas lease with a habendum clause extending the lease “so long thereafter as” oil or gas is produced in paying quantities continues beyond the primary term only while the required production continues.
- When production in paying quantities stops after the primary term, the lease is subject to termination if production is not timely restored consistent with the lease terms and applicable Department of the Interior administration.
- A lessee’s claim that a well could produce is not a substitute for actual production when the lease is held only by production.
- Bankruptcy or financial hardship does not excuse the production requirement for maintaining a federal oil-and-gas lease beyond its primary term.

## Conclusion

In *In re Great Plains Petroleum, Inc.*, IBLA upheld BLM’s termination of GPPI’s federal oil-and-gas lease because production stopped after the primary term and was not restarted within the 60 days stated in BLM’s notice; neither claimed well capability nor GPPI’s bankruptcy prevented termination absent timely resumed production.


In re Great Plains Petroleum, Inc., 117 IBLA 130 (1990)