Oil and Gas Leases: Shut-in Gas Royalties Habendum Clauses: Capable of Producing in Paying Quantities

摘要

In 1986, Morrison executes an oil and gas lease on a 70-acre tract of land. The lease has a one-year primary term and may be extended as long as a well or wells are "capable of being produced from the premises." There is also a shut-in gas royalty clause providing for the payment of $100.00/month should a well be shut-in and not producing. A well is drilled in the primary term and produces sour gas. In 1988, the lessee sends Morrison a check for $1200 to cover the shut-in payments since no gas is being produced. No further shut-in payments are made. In 2000, Morrison sues the lessee for the amount of the unpaid shut-in royalties. The lessee argues that the lease terminated because there was neither a producing well nor a well capable of producing on the premises.