Texas Wesleyan Law Review

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Nate Holland

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Lessors brought a declaratory judgment action seeking to terminate several oil and gas leases executed in 2002 and 2003. The leases' habendum clause provided for a primary term of one year and a secondary term continuing so long as lessee produced oil or gas, there were production operations on the leasehold, or lessee tendered delay rental payments. Assignee-lessees made delay rental payments but did not make any efforts to drill any wells on the leaseholds. The trial court granted summary judgment for lessors on the grounds that leases would not be construed to create a perpetual term unless the intention is clear and unequivocal. The Superior Court initially noted that an oil and gas lease conveys an inchoate interest that becomes vested as a fee simple determinable upon production. The court then affirmed, holding that delay rental payments could not hold the leases during the secondary terms, relying heavily on the rationale that the purpose of a lease is to promote the development of the leasehold. The court additionally held that to find that a lease can be held indefinitely by delay rental payments was inconsistent with the nature of a lease as a fee simple determinable, because it only becomes such a vested interest when production in paying quantities is achieved.



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