## Facts

- Successors to the original lessor sued lessees/operators over three long-running oil and gas leases (two leases treated together as “Pool 1” and a separate lease as “Pool 2”), each continuing “so long as” gas was produced.
- Over decades, the leases experienced intermittent cessations of production; the last alleged cessation occurred about 14 years before suit for Pool 1 and about 29 years before suit for Pool 2.
- Lessees/operators continued drilling/operating wells, producing and marketing gas, and paying royalties; the lessors’ successors accepted royalties throughout.
- In 1998, lessors’ successors claimed the leases had terminated during historical nonproduction periods and sought to quiet title plus trespass, conversion, fraud damages, and attorney’s fees.
- Lessees/operators contended production requirements were satisfied (or excused) and, alternatively, that any post-termination operations matured into title by adverse possession.

## Issues

1. Whether the leases terminated due to intermittent periods of nonproduction.
2. Assuming termination, whether continued drilling and production for the statutory period vested the operators with title to the mineral estates by adverse possession.
3. Whether adverse possession could run absent explicit notice that the operators repudiated the lessors’ title, where royalties continued to be paid and accepted.

## Decision

- The Texas Supreme Court assumed, without deciding, that the leases terminated for lack of production.
- The Court held that, even if termination occurred, the operators acquired fee simple determinable interests in the mineral estates by adverse possession as a matter of law.
- The Court rejected a requirement that the operators give special “repudiation” notice to start limitations running.
- The Court reversed the court of appeals and rendered judgment for the operators, eliminating the lessors’ quiet-title relief, damages, and attorney’s fees awards.

## Legal Principles

- In Texas, a typical oil and gas “lease” is a conveyance of a fee simple determinable in the minerals to the lessee, with the lessor retaining a possibility of reverter (and royalty if reserved).
- A severed mineral estate may be adversely possessed through actual possession, which, for oil and gas, is shown by drilling, producing, and marketing minerals.
- Under the ten-year limitations statute, long-term, open, continuous production operations can satisfy adverse possession elements against the record owner, even where the parties continued to treat the arrangement as a lease and royalties were paid and accepted.
- Adverse possession in this setting does not require an additional, categorical repudiation notice beyond conduct establishing actual, visible, and hostile possession.

## Conclusion

The Texas Supreme Court resolved the consolidated dispute on limitations grounds, holding that operators who continued producing for well beyond ten years after an assumed lease termination acquired the same mineral estate by adverse possession, and that continued royalty payments did not impose a special repudiation-notice requirement before limitations could run.


Natural Gas Pipeline Co. of Am. v. Pool, 124 S.W.3d 188 (Tex. 2003)