## Facts

- Lessors’ successors (the Holts) and lessees’ successors (the Sun Parties) disputed whether two 1947 Texas oil-and-gas leases remained in effect after production stopped.
- Each lease had a 10-year primary term and continued “as long thereafter as oil, gas or other mineral is produced,” or as long as drilling/reworking operations continued “with no cessation of more than sixty consecutive days until production results.”
- Each lease also contained a force majeure clause excusing interruptions caused by specified events, including “failure of carriers to transport or furnish facilities for transportation,” and any cause beyond the lessee’s control.
- Gas was sold and transported through a single pipeline purchaser/transporter, which took gas directly from the wells.
- After the leases were held by production beyond the primary term, the pipeline company shut down its transmission line for major renovations, stopping production for more than 60 consecutive days.
- The Holts asserted automatic termination under the habendum clause’s 60-day cessation language; the Sun Parties asserted the cessation was temporary and/or excused under the force majeure clause.

## Issues

1. Whether the pipeline shutdown caused a temporary cessation of production such that the leases did not terminate and the lessee had a reasonable time to restore production.
2. Whether the leases’ force majeure clauses excused the cessation because it resulted from a carrier’s failure to transport or another cause beyond the lessee’s control, preventing termination under the 60-day cessation language.

## Decision

- The court of appeals reversed the trial court’s judgment declaring the leases terminated and awarding post-termination damages.
- The court held the trial court failed to give proper effect to the leases’ force majeure provisions and the temporary-cessation doctrine in evaluating the production stoppage caused by the pipeline shutdown.
- The case was remanded for further proceedings consistent with the appellate court’s holdings.

## Legal Principles

- Force majeure in an oil-and-gas lease is primarily governed by the parties’ contract language; common-law doctrines apply only to fill gaps left by the lease.
- A lease held by production in the secondary term does not necessarily terminate upon a stoppage of production if the cessation is temporary and production is restored within a reasonable time with due diligence.
- A third-party pipeline company’s shutdown preventing transportation and sale of gas can fall within force majeure language excusing “failure of carriers to transport or furnish facilities for transportation” and causes beyond the lessee’s control.
- A habendum clause’s cessation-of-production language must be construed together with other lease provisions, including force majeure clauses that may suspend or excuse performance during qualifying interruptions.

## Conclusion

The appellate court concluded that nonproduction caused by a pipeline carrier’s renovation shutdown could not be used to terminate the leases under the habendum clause where the interruption was temporary and/or contractually excused by force majeure, and it reversed the termination declaration and damages award and remanded the case.


Sun Operating Ltd. P’ship v. Holt, 984 S.W.2d 277 (Tex. App.—Amarillo 1998)