Texas high court hears dispute over whether cotenant production can keep oil-and-gas leases alive

The Supreme Court of Texas heard argument in Cromwell v. Anadarko E&P Onshore on whether production by a cotenant can sustain a paid-up oil-and-gas lease beyond its primary term when the lease’s habendum clause uses passive language.

Mister Smith, counsel for the petitioner, told the court that the text of Mister Cromwell’s leases requires only that oil or gas be produced and stressed that production has occurred “at all relevant times.” Smith argued the court should give the lease language its plain grammatical meaning and decline to read the words “by the lessee” into the habendum clause. “His leases have been perpetuated,” Smith said, adding that Cromwell also sent checks to contribute to operating costs.

Miss Zamora, counsel for the respondent Anadarko, urged the opposite approach. She said precedent going back to Texas Company v. Davis requires that a lessee use the lease for its stated purpose and that a lessee who never intended to develop the property cannot hold the estate indefinitely. Zamora told the court…