Snow Oil & Gas, Inc v. Garcia Richard

CourtNew Mexico Court of Appeals
DecidedJune 4, 2026
StatusUnpublished

This text of Snow Oil & Gas, Inc v. Garcia Richard (Snow Oil & Gas, Inc v. Garcia Richard) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Snow Oil & Gas, Inc v. Garcia Richard, (N.M. Ct. App. 2026).

Opinion

This decision of the New Mexico Court of Appeals was not selected for publication in the New Mexico Appellate Reports. Refer to Rule 12-405 NMRA for restrictions on the citation of unpublished decisions. Electronic decisions may contain computer- generated errors or other deviations from the official version filed by the Court of Appeals.

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

No. A-1-CA-42387

IN RE: STATE LAND OFFICE OIL AND GAS LEASE NO. L00423, ASSIGNMENT NO. 0001,

and

IN RE: EDDY GK STATE COMM WELL #2 COMMUNITIZATION AGREEMENT,

SNOW OIL AND GAS, INC.,

Appellant-Respondent/Appellee,

v.

STEPHANIE GARCIA RICHARD, Commissioner of Public Lands of the State of New Mexico,

Appellee-Petitioner/Appellant.

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY Maria Sanchez-Gagne, District Court Judge

Shaheen Law NM LLC Sharon T. Shaheen Santa Fe, NM

Spencer Fane LLP Angela E. Harris Santa Fe, NM

for Appellee

New Mexico State Land Office John L. Sullivan, Senior Counsel Ari Biernoff, General Counsel Santa Fe, NM

for Appellant

MEMORANDUM OPINION

HENDERSON, Judge.

{1} This case arises out of an administrative contest decision where the Commissioner of Public Lands, Stephanie Garcia Richard (Commissioner), determined that a state oil and gas lease (Lease) owned by Snow Oil & Gas, Inc. (Snow) had expired. Following Snow’s appeal of that decision to district court, the Commissioner now appeals the district court’s order remanding the matter for reinstatement of Snow’s Lease. On appeal, the Commissioner argues: (1) the decision that the Lease expired was supported by substantial evidence and was made according to established law; (2) the Commissioner was not required to accept late or alleged overpayments to reinstate the Lease; and (3) Snow had no property interest in the expired Lease from which to assert a due process or takings claim. We agree. Accordingly, we reverse and remand to the district court for entry of an order affirming the Commissioner’s final order.

BACKGROUND

Relevant Lease Provisions

{2} An explanation of relevant provisions from Snow’s Lease No. L-423-11 is necessary to understand this appeal.2 The Lease was issued in 1967 and assigned to Snow in March 1991. Like most oil and gas leases, it contains a habendum clause and a savings clause. A habendum clause establishes that a lease will continue after its primary term so long as oil or gas is produced in paying quantities. See Maralex Res., Inc. v. Gilbreath, 2003-NMSC-023, ¶ 9, 134 N.M. 308, 76 P.3d 626. A savings clause, often called the shut-in royalty clause, however, allows a lessee to avoid automatic termination in the case of temporary nonproduction if a well is still capable of producing gas in paying quantities and the lessee makes annual shut-in payments to substitute for royalty payments. See id. ¶¶ 10-11.

{3} In this case, the habendum clause sets out that Snow’s Lease is “[f]or a primary term of five years from the date hereof, and as long thereafter as oil and gas in paying

1The original Lease was numbered L-423 and upon assignment it was renumbered to L-423-1. Documents in the record also refer to the Lease as L0-0423-0001. 2Snow’s Lease is a state oil and gas lease originally made in accordance with the statutory lease form prescribed by Chapter 189, Section 1 of New Mexico Laws of 1967. In 1978, a previous lessee and the then-commissioner stipulated to amending the Lease to adopt the revised statutory form in accordance with Chapter 70, Section 1 of New Mexico Laws of 1972. The current statutory lease form is found at NMSA 1978, Section 19-10-4.1 (1985). These terms do not differ from the relevant provisions in the original Lease. quantities, or either of them, is produced.” The savings, or shut-in, clause further establishes:

This [L]ease shall not expire at the end of either the primary or secondary term hereof if there is a well capable of producing gas in paying quantities located upon some part of the lands embraced herein where such well is shut-in due to the inability of the lessee to obtain a pipeline connection or to market the gas therefrom; provided, however, the owner of this [L]ease as to the lands upon which such well is located shall pay an annual royalty equal to the annual rental payable by such owner under the terms of this [L]ease but not less than one hundred dollars ($100) per well per year, said royalty to be paid on or before the annual rental paying date next ensuing after the expiration of ninety days from the date said well was shut-in and on or before said rental date thereafter. The payment of said annual royalty shall be considered for all purposes the same as if gas were being produced in paying quantities and upon the commencement of marketing of gas from said well or wells the royalty paid for the lease year in which the gas is first marketed shall be credited upon the royalty payable hereunder to the lessor for such year. The provisions of this section shall also apply where gas is being marketed from said leasehold premises and through no fault of the lessee, the pipeline connection or market is lost or ceases, in which case this [L]ease shall not expire so long as said annual royalty is paid as herein provided. Notwithstanding the provisions of this section to the contrary, this [L]ease shall not be continued after ten years from the date hereof for any period of more than five years by the payment of said annual royalty.

The parties agree that shut-in payments are due annually on the 21st day of November the day the Lease became effective.

{4} Separate from the habendum clause, the Lease also contains a cancellation clause setting out the following:

Upon failure or default of the lessee or any assignee to comply with any of the provisions or covenants hereof, the lessor is hereby authorized to cancel this lease and such cancellation shall extend to and include all rights hereunder as to the whole of the tract so claimed, or possessed by the lessee or assignee so defaulting . . . provided, however that before any such cancellation shall be made, the lessor shall mail to the lessee, or assignee so defaulting, by registered or certified mail, addressed to the post-office address of such lessee or assignee as shown by the records of the state land office, a notice of intention of cancellation specifying the default for which cancellation is to be made, and if within thirty days from the date of mailing said notice the said lessee or assignee shall remedy the default specified in said notice, cancellation shall not be made. This provision reflects the cancellation requirements set forth in NMSA 1978, Section 19-10-20 (1945), requiring notice and opportunity to cure before a state oil and gas lease is cancelled for nonpayment of rentals or nonperformance.

{5} In addition to the Lease, Snow’s two wells, Eddy GK State Com Well 1 (Eddy GK 1) and Eddy GK State Com Well 2 (Eddy GK 2), are subject to communitization agreements with connected lands Snow leased from the federal government. Communitization agreements pool together lands leased under multiple leases so that production of oil and gas in paying quantities from any part of the pooled area is considered production from each tract included in the agreement. See NMSA 1978, § 19-10-53 (1955); Kysar v. Amoco Prod. Co., 2004-NMSC-025, ¶¶ 21-23, 135 N.M. 767, 93 P.3d 1272 (explaining the purpose and effect of communitization agreements).

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Snow Oil & Gas, Inc v. Garcia Richard, Counsel Stack Legal Research, https://law.counselstack.com/opinion/snow-oil-gas-inc-v-garcia-richard-nmctapp-2026.