Krabbe v. Anadarko Petroleum Corp.

46 S.W.3d 308, 151 Oil & Gas Rep. 51, 2001 Tex. App. LEXIS 1045, 2001 WL 227379
CourtCourt of Appeals of Texas
DecidedFebruary 15, 2001
Docket07-99-0456-CV
StatusPublished
Cited by52 cases

This text of 46 S.W.3d 308 (Krabbe v. Anadarko Petroleum Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Krabbe v. Anadarko Petroleum Corp., 46 S.W.3d 308, 151 Oil & Gas Rep. 51, 2001 Tex. App. LEXIS 1045, 2001 WL 227379 (Tex. Ct. App. 2001).

Opinion

JOHNSON, Justice.

Appellants Harry Kenneth Krabbe and others 1 (collectively, Krabbe), as oil and gas lessors, sued appellee Anadarko Petroleum Corporation (Anadarko), lessee, for a declaratory judgment that the lease terminated due to two periods of time during which production ceased. The trial court entered judgment declaring the lease valid and awarded Anadarko attorneys’ fees. Appellants contend that the trial court erred by (1) finding that the two periods of cessation in production were excused under the temporary cessation of production doctrine; and (2) awarding attorneys’ fees to Anadarko. We affirm.

BACKGROUND

In May, 1926, Montie Rockwell and her husband executed an oil and gas lease on the west half of the south half of Section 102, Block 46, H & TC Ry. Co. Survey, in Potter County, Texas, to John P. Mathis. In May, 1930, the Rockwells leased the east half of the south half of section 102 to Mathis. Both leases contained the following habendum clause language:

It is agreed that this lease shall remain in force for a term of five years from this date, and as long thereafter as oil or gas, or either of them is produced from said land by the lessee.

The leases did not contain a shut-in clause, a cessation of production clause, or any other savings provision.

By agreement dated April 30, 1935, the two leases were consolidated. The consolidation agreement provided in part that:

... [e]aeh of said two leases covering the said 320 acre tract of land shall remain in full force and effect for a term of so long as natural gas is produced from said well or so long as oil or natural gas is produced from any additional well or wells which lessee, its successors or assigns, may hereafter drill and complete upon the said 320 acre tract.

After a series of conveyances, Anadarko acquired the consolidated lease.

Two wells maintained the lease. The Rockwell 1-102 was the first well drilled on the lease, and it was completed in 1931 in the Brown Dolomite formation. Production from this well maintained the lease into the secondary term. A second well, the Rockwell B1R, was completed in 1961 in the Red Cave formation.

During the relevant time frames at issue, 1985 and 1986, gas produced from these two wells was sold to Cabot Corporation (Cabot) after passing through meters close to the wellhead. The gas was gathered and transported to Cabot’s Turkey Creek processing plant through separate pipelines. The B1R gas was transported through the Masterson Loop line, which was controlled by Westar Transmission Company and later by Cabot. Gas from 1-102 was transported through the Panhandle 10-inch line, which was leased from Panhandle Eastern Pipeline Company (PEPL) by Pioneer Corporation and later by Cabot. PEPL, Anadarko’s predecessor *312 in interest, and Anadarko were corporate subsidiaries of Panhandle Eastern Corporation, a holding company, during the time periods in question.

Gas from B1R and 1-102 was sold under separate contracts in order to separate the types of gas produced. The 1-102 produced what was called “old” gas under federal guidelines, while the B1R produced what was referred to as “new” gas. Wes-tar, then later Cabot, purchased the B1R “new” gas. In 1964, Pioneer/Westar 2 entered into a contract with Panhandle Eastern Exploration Company (PEEC) to purchase “old” gas from the Brown Dolomite wells, including 1-102.

The 1964 gas contract had a 20-year term. In 1984, Cabot acquired Pioneer’s rights under both the 1964 gas contract and an agreement whereby Pioneer leased the Panhandle 10-inch gathering and transportation line from PEPL.

Both the 1964 “old” gas contract between PEEC and Westar, and the lease for the Panhandle 10-inch line between PEPL and Pioneer came up for redeter-mination in 1984. Contract negotiations extended beyond the July 14, 1984, expiration date. In September, 1984, representatives of PEEC and Westar agreed to new pricing terms on the Brown Dolomite wells. Subsequently, Westar advised PEEC that Cabot was purchasing Wes-tar’s assets and taking over its contracts. PEEC thereupon attempted to confirm the gas price negotiated with Westar and confirm extension of the 1964 gas contract. Cabot did not approve the price and extension terms previously agreed to between PEEC and Westar.

Although the 1964 contract had arguably expired, Cabot continued to take gas from the Brown Dolomite wells, which included 1-102, through the Panhandle 10-inch line. The parties continued negotiations concerning a new gas price, but negotiations were unsuccessful. For a period of 19 months, from May 17, 1985, until January,1987, gas was not produced from 1-102. On December 31, 1985, PEEC filed suit against Cabot, alleging that the 1964 gas contract had been extended with a price redetermination. The parties settled in January, 1987, and production from 1-102 resumed.

Although the 1-102 well did not have production for approximately 19 months, production from the B1R well would maintain the Rockwell lease. For a period of 92 days during August, September, and October of 1985, however, there was no production from B1R. During August and October, the Turkey Creek plant did not process any gas. In September, approximately 11,884 mcf was delivered from some Brown Dolomite wells into the gathering system, and to the Turkey Creek plant. This amount was approximately one and one-half percent of the normal amount processed at Turkey Creek during September. During this 92-day period, mechanical work was performed at the Turkey Creek Plant, including overhauling compressors, installing a high-pressure inlet gas scrubber, replacing header piping, and improving the emergency shutdown system. As previously noted, the gas gathered from B1R went to the Turkey Creek plant, which was operated by Cabot. There was no evidence that the Turkey Creek plant was terminating operations, or that Cabot intended to forego taking gas from the wells serviced by the Masterson Loop line.

By letter dated May 6, 1986, Cabot notified Anadarko that the Turkey Creek Plant would not be operating from May 13, 1986, through June, 1986. For a period of *313 61 days during May and June of 1986, there again was no production from B1R.

A three-day bench trial concluded on June 3, 1999. The trial court ruled that the lease did not terminate due to the temporary cessations of production coming within the temporary cessation of production doctrine. Among the trial court’s findings of fact and conclusions of law were the following:

Findings of Fact
10. There was a total and continuous cessation of production of oil and gas from the Rockwell B1R well beginning no later than August 1, 1985 and continuing through no later than October 31,1985.
11. There was a total and continuous cessation of production of oil or gas from the Rockwell B1R well beginning no later than May 1, 1986 and continuing through no later than June 30,1986.
20.

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46 S.W.3d 308, 151 Oil & Gas Rep. 51, 2001 Tex. App. LEXIS 1045, 2001 WL 227379, Counsel Stack Legal Research, https://law.counselstack.com/opinion/krabbe-v-anadarko-petroleum-corp-texapp-2001.