THE TEMPORARV CESSATION DOCTRINE: A PRACTICAL RESPONSE TO
AN IDEOLOGICAL DILEMMA
Bruce M. Kramer·
I.
INTRODUCTION. • . • . • • . . • • . . . • . . • • • • • • • • • • • . • • . . . • • . . •.
519
II.
THE HISTORICAL DIFFERENCES BETWEEN A FEE SIMPLE
DETERMINABLE AND A FEE SIMPLE ABSOLUTE ••. '. • . • • • ••
520
III.
THE CAST OF THE DIE: TEXAS OPTS FOR THE FEE
SIMPLE DETERMINABLE. . . • • . • • • . • • • • . • • • . • • . • • • . • • • . ••
IV.
V.
VI.
THE AUTOMATIC TERMINATION FALLOUT-SOME EARLV
SECOND THOUGHTS. • • • • • . • • • • . • • • • • • • • • • • • • • • • • • • • • ••
WATSON
v. RoeHMIU:
THE ENIGMA CONTINUES ••.••.••
THE MODERN ERA-4MOCO PRODUCTION CO. V. BRIISLAU
VII.
THE LESSOR INTERFERENCE RULE ••••.•••.•••.••••••••
VIII.
THE EFFECT OF SAVINGS CLAUSES OF THE TCOP
DOCTRINE ••.•••.••.••.•••••••••••••••••••••••••••••••
IX.
CONCLUSION. • • • . . • • . . • • • • • • • . • • • • • • • • • • • • • • • • • • . • • ••
I.
522
527
530
538
544
545
549
INTRODUCTION
It has been well ingrained in Texas oil and gas law that the typical
habendum clause in a lease creates a fee simple determinable estate
insofar as the secondary term is concerned.· This position has created some substantial practical difficulties regarding activities and
actions taken by lessors and lessees after the expiration of the primary term. The qualities that separate a fee simple determinable
from its sibling, the fee simple subject to a condition subsequent,
are important in determining whether or not a lease has terminated
when there has been a cessation of production in the secondary
term. 2
• Professor of Law, Texas Tech University School of Law.
I See gmeraU, Walker, Fee Simple Ownmhip of Oil and Gas in Texas, 7 TEXAS L. REV. 125,
128 (1928). Stephens County v. Mid-Kansas Oil Be Gas Co., 118 Tex. 160,254 S.W. 290
(1928), is considered the decision which committed Texas law to the fee simple determinable status for leases in the secondary term.
This article will refer to the estate as a fee simple determinable rather than some of its
other known aliases such as a base fee, qualified fee, or most confusingly, fee simple on a
conditional limitation. For example, Professor Moynihan called all defeasible fee simple
estates "qualifed fees." C. MOYNIHAN, INTRODUCrtON TO THE LAw OF REAL PROPERTY 8288 (2d ed. 1988).
"The differences between fee simple determinables and fee simples subject to a condition subsequent also impact the way a court may view such other standard leasehold
provisions as judicial ascertainment and force majeure clauses. The general rule is that
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This article will explore the historical development of the fee simple determinable rule, its subsequent application to activities in the
secondary term and the difficult doctrinal fit between the concept of
temporary cessation of production and the rule. The primary emphasis will be on Texas cases, but comparisons with other jurisdictions and their treatment of the temporary cessation doctrine will be
made. In addition, cases involving defeasible term interest~ will also
be explored since Texas courts have essentially treated the leasehold habendum clause and the similar defeasible term deed granting clause the same.'
If there is someth;ing to be learned from the developments in this
field, it is that the common law is a wondrous machine. It is able to
adapt to changing times and changing circumstances in a manner
which best refle~ts .th~ needs and concerns of society. Nothing better illustrates this adaptability than the development of the temporary cessation doctrine developed to overcome the many
shortcomings in the fee simple determinable rule adopted for the
interpretation of the habendum clause of an oil and gas lease.
II.
THE HISTORICAL- DIFFERENCES BETWEEN A FEE SIMPLE
DETERMINABLE AND A FEE SIMPLE ABSOLUTE
The modem doctrinal difficulties with the temporary cessation of
production doctrine are a direct result of a common law rule that
was developed in 11th and 12th century medieval England.4 The
differences set out nearly 1000 years ago still maintain a fierce grip
a judicial ascertainment or notice and demand clause will not convert the limitation of a
fee simple determinable into a fee simple subject to a condition subsequent. See cases
cited at 4 H. WILLIAMS &: C. MEYERS. OIL AND GAS LAw § 682.2 (1989). See, e.g., Waggoner &: Zeller Oil Co. v. Deike, 508 S.W.2d 163 (Tex. Civ. App.-Austin 1974, writ
ref'd n.r.e.); Lynch v. Southern Coast Drilling Co., 442 S.W.2d 804 (Tex. Civ. App.San Antonio 1969, no writ). There is little litigation regarding the effect of the force
majeure clause on the habendum clause, but a recent Arkansas decision held that the
clause only applied to covenantal obligations which would not make it applicable to the
habendum clause. Gordon v. Crown Cent. Petroleum Co., 284 Ark. 94, 679 S.W.2d 192
(1984); see generaUy H. WILLIAMS &: C. MEYERS, supra note 2, § 683.2; see also E. KUNTZ,
LAw OF OIL AND GAS § 26.8 (1989); Hazlett, Effect of Temporary Cessation of Production on
Leases and Terms Royalties, 10 SOUTHWEST LEGAL FOUND. OIL &: GAS INST. 201 (1959).
'The Texas approach is reflected in Amoco Prod. Co. v. Braslau, 561 S.W.2d 805
(Tex. 1978). The opposing ~iew which treats term deeds and leases differently is followed in Oklahoma. Fransen v. Eckhardt, 711 P.2d 926 (Okla. 1985); Beatty v. Baxter,
208 Okla. 686, 258 P.2d 626 (1953).
<For a discussion of the origin of the estate concept in property law, see, COKE ON
LITTLETON (1628); W. HOLDSWORTH, A HISTORY OF ENGLISH LAw (1926); F. POLLOCK &:
F. MAITLAND, HISTORY OF ENGLISH LAw (2d ed. 1898).
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on the law of property in general, and the law of oil and gas specifically. 5 The key distinction between the fee simple determinable and
the fee simple subject to a condition subsequent relates to the difference between a limitation and a condition. The fee simple determinable estate is created by language that is durational in nature. 6
The estate contains within itself the seeds of its own termination. 7
Thus, in the classic law school hypothetical: 0 to A so long as demon
rum is not sold, A has a fee simple determinable estate and 0 has a
possibility of reverter. When demon rum is sold on Blackacte, 0
becomes the owner of the fee simple absolute estate automatically
and A becomes an instantaneous trespasser on O's present possessory estate.
To contrast with the durational or .speciallimitation language of
the fee simple determinable', the fee simple subject to a condition
subsequent involves'the use of langUage creating conditions. The
conditions do not operate to automatically terminate the estate, but
merely provide the owner of the future interest with the power to
terminate should the condition be violated. 8 Therefore, a grant
from 0 to A on condition that demon rum not be sold, and if sold, 0
shall have the power to terminate A's interest creates a fee simple
subject to a condition subsequent, with 0 retaining a power of termination or a right of entry.9 Should demon rum be sold on the
premises in this case, A has a continued right of possession until 0
exercises his power to terminate A's present possessory estate.
A.W. Walker, Jr., a prominent oil and gas attorney and legal commentator, expressed the differences as follows:
The difference between th~m as to their operative effect is
well established and ordinarily presents little difficulty. A
limitation in its generi«;: sense is any provision delimiting
the duration of an estate . ... The operative effect of the
'The Oklahoma Supreme Court. in breaking away from the fee simple determinable
rule in Stewart v. Amerada Hess Corp.• 604 P.2d 854 (Okla. 1979), still clung to the
estate concept by calling the leasehold estate in the secondary term a fee simple subject
to a condition subsequent.
6T. BERGIN Be P. HASKELL. PREFACE TO ESTATES IN LAND AND FuroRE INTERESTS 50 (2d
ed. 1984).
•Walker, The Nature of the Property interests Created by an Oil and Gas Lease in Texas, 7
TEXAS L. REV. 5!J9, 540-41 (1929).
61d. at 542. BERGIN Be HASKELL, supra note 6. at 48-50.
9 Another important distinction is that possibilities of reverter can arise by operation
of law; that is, if durational language.is used in describing the defeasible fee simple
estate, no express language is required to reserve to the grantor the possibility of reverter. On the other hand, courts will not create a right of entry or a power of termination unless the grantor has specifically reserved one. For a recent application of this
rule. see Wood v. Board of County Commissioners. 759 P.2d 1250 (Wyo. 1988).
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occurrence of the event named in a clause of . . . special
limitation is . . . : the estate granted automatically terminates without the necessity of any affirmative action on the
part of the grantor. or lessor. and. in fact. even without his
knowledge or against his express wishes.
The happening of the event named in a clause of condition subsequent. does not ipso facto terminate the estate
granted ... but merely gives the grantor. or lessor. the option of terminating the estate . . . . The estate continues
after the happening of the event until the grantor. or lessor. takes affirmative steps to bring the estate to an end. 1O
The owner of the possibility of reverter may not waive his right to
reclaim the possessory interest. It occurs instantaneously upon the
happening of the limitation by operation oflaw. 1I The owner of the
. power of termination. however. may waive his right to terminate the
possessory estate. 12 Perhaps the most important common law distinction between the two estates was that a condition subsequent
was treated as a forfeiture provision. while a limitation was considered to be the natural expiration of the vested estate}' In theory.
this has tremendous ramifications for the oil and gas lessee who has
entered the secondary term of his lease.
III.
THE CAST OF THE DIE: TEXAS OPTS FOR THE FEE SIMPLE
DETERMINABLE
Texas from an early date committed itself to the absolute ownership theory for oil and gas. In Texas Co. v. Daugherty.14 the Texas
Supreme Court treated both oil and gas in place and the oil and gas
leasehold estate as a corporeal or possessory property interest subject to ad valorem taxation. 15 However. this early decision did not
treat the leasehold estate as a fee simple determinable. 16 In fact. the
court used language clearly suggesting that. as to some aspects. the
leases in question transferred a fee simple subject to a condition
Walker, The Nature of the Property Interests Created By an Oil and Gas Lease in Texas, 8
L. REV. 483, 484-85 (1930).
II Continued occupation by the prior owner of the fee simple determinable estate
would be a trespass. It would also trigger the running of the statute of limitations for
adverse possession. Under certain circumstances the prior owner of the fee simple determinable would be treated as an occupant at sufferance rather than as a trespasser. R.
CUNNINGHAM, W. STOEBUCK & D. WHITMAN, THE LAw OF PROPERlY 44-49 (1984).
IVId. at 47-48.
"Walker, supra note 10, at 486.
14
107 Tex. 226, 176 S.W. 717 (1915).
'"Id. at 718, 722.
WId. at 718-19.
10
TEXAS
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TEMPORARY CESSATION DOCTRINE
523
subsequent estate to the lessee. 17 The lease did contain a habendum clause which would keep the lease alive as long as oil or gas was
produced in paying quantities. 18 The court, however, was not referring to the habendum clause but to the requirement that the lessee
begin certain operations within a specified period of time. 19 While
this might have led the Texas courts to treat the habendum clause as
a clause of condition and not a clause of limitation, that avenue was
foreclosed some eight years later.
Mter Daugherty, there were several decisions which suggested that
the habendum clause of a lease would not create an automatically
terminating fee simple determinable estate. In Masterson v. Amarillo
Oil CO.,20 the issue was the validity of a lease which had a standard
habendum clause requiring production in paying quantities after a
three year primary term. 21 The Amarillo Court of Civil Appeals, in
a somewhat confused opinion, treated the lessor's suit for cancellation as an action to declare a forfeiture. 22 If the lease created a fee
simple determinable estate, then the action is not an equitable action for a forfeiture but merely a legal action in trespass to regain
possession. 25 Likewise, post-limitation actions by the lessee cannot
raise issues of estoppel or waiver, since the transferred estate has
expired by its own terms. 24 Yet the court suggested that the actions
of both the lessee and lessor in the secondary term were relevant
and might lead to a finding that the lessor had waived his right to
declare a forfeiture. 25 Again, if production had ceased in the secondary term, the lessee's estate has automatically terminated and there
"The court said:
A fee may pass by deed upon a condition subsequent to the same extent as
though the condition did not exist, subject to the contingency of being defeated according to the condition. And here, if any property was conveyed,
there was a present grant but liable to be defeated by the grantee's failure to
perform the requirement in respect to beginning operations . . . . The grant
amounted to a defeasible title in fee to the oil and gas in the ground . . ..
Id. at 719.
'Old. at 717.
,oThe fee simple determinable estate is also used to describe the I.essee's interest during the primary term under an "unless" lease. 3 H. WILLIAMS & C. MEYERS, supra note 2,
§ 606. This could have led to treating the habendum clause as a clause of condition and
not a clause of limitation. However, in 1923 the Texas Supreme Court firmly embraced
the fee simple determinable doctrine.
•9253 S.W. 908 (Tex. Civ. App.-Amarillo 1923, writ dism'd).
>lId. at 909.
..Id. at 914-15.
"The court at one point, however, noted that oil and gas leases are "an exception to
the rule that equity abhors a forfeiture." Id.
"R. CUNNINGHAM, W. STOEBUCK & D. WHITMAN, supra note II, at 55-57.
"Masterson, 253 S.W. at 915.
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would be nothing to waive. 26 Notwithstanding these prior holdings,
the Texas Supreme Court opted to treat the habendum clause as
creating a fee simple determinable estate.
The fountainhead decision was Stephens County v. Mid-Kansas Oil fS
Gas CO.27 As with the Daugherty case which committed Texas to the
ownership in place theory, Stephens County involved ad valorem taxation of oil and gas. Here, the county was seeking to separately tax
the leasehold interest. 28 The lease contained the following habendum clause:
[I]n case natural gas or petroleum are discovered on said
premises that this lease shall continue in full force and effect so long as any of these are produced in paying quanti•
ties
.... 29
Most of the decision is spent reaffirming Daugherty and the principle
that Texas is committed to the corporeal concept of ownership of oil
and gas in place. 50 The court might have merely found that the
leasehold estate carved out 'of the corPoreal oil and gas in place was
an interest subject to the ad valorem tax. However, the court went
on to describe the "precise nature of the title created by the
instruments.... "51
The court had no trouble labelling the interest a fee simple, since
it was potentially infinite in duration. 52 The key conclusion, however, was that it was a defeasible fee interest which would "immediately terminate" upon its cessation of use for oil and gas
production. 55 While not conclusive, it appears that the court was
influenced by the use of the durational language in the habendum
clause, "so long as:' which clearly suggested that upon cessation of
use or production the estate would end by its own terms. 54 While
16See also Benavides v. Hunt, 79 Tex. 383, 15 S.W. 396 (1891).
·'113 Tex. 160,254 S.W. 290 (1923). The pre-Stephens County decisions are chronicled
at Walker, The Nature olthe Property Interests Created by an Oil and Gas Case in Texas, 7 TEX. L.
REV. I (1929).
··Stephens County, 254 S.W. at 290.
t9Id.
"'Id. at 292.
·'Id. at 295. The court should not be faulted for this attempt to clarify the nature of
the leasehold estate. The court thought the issue quite obvious and without the benefit
of hindsight cannot be blamed for failing to recognize the difficulties its choice created.
·'Id.
"'Id.
""Id. The court cited Kent's Commentaries, a leading and well-respected tome of the
common law and the first edition of Tiffany on Real Property.
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not clearly labelling the lessor's reserved future interest as a possibility of reverter, the court concluded that she would retain "the
possibility of reacquiring the absolute fee-simple titles . . . ."85
The court chose the fee simple determinable estate from several
options. Since the court was ostensibly attempting to ascertain the
intent of the parties to the lease, it might have made a more searching inquiry into the specific language of the habendum and other
clauses. It could have labelled the interest a fee simple subject to a
condition subsequent or a profit a prendre. The lease could have
contained language of limitation or language of condition. Yet, after Stephens County, many practitioners presumed that all standard
habendum clauses created fee simple determinable estates for lessees once the primary term expired. 86
For property lawyers especially, the label had great significance.
The estate system had been in placefor·hundreds of years.87 While
some estates·had been legislatively pUt to rest, such as the fee tail
and the fee simple conditional,88 no ne.w estates had been created
since the Statute of Uses. Thus, attorneys may have been reluctant
to attempt to draft a different habendum clause that would not create a fee simple determinable estate.
This hesitancy to draft around the fee simple determinable doctrine may have been unwarranted. In Kincaid v. Gulf Oil Co., 89 a recent case involving the delay rental obligations under an "unless"
lease, the San Antonio Court of Appeals held that the parties were
free to create an interest other than.a'fee·simple determinable if the
Uld.
"This presumption could have been expected. After all, the common law had essentially dosed the door on new estates after the passage of.the Statute of Uses in J536.
The freehold estates that were in existence then were the only ones that a court would
recognize i~ the absence of a legislative decree to the contrary.
Mr. A.W. Walker, Jr. stated the following about the adoption of the fee simple determinable rule:
[T]he court somewhat arbitrarily determined that in all ordinary leases the parties must have intended a present conveyance of the oil and gas in place and,
since the estate might last forever, subject to certain limitations which might
never happen, the lessee's estate could only be denominated a determinable
fee. Undoubtedly some leases are worded to evidence (just such] an intention
. . . . On the other hand, some leases do not on their face purport to be a
present conveyance of the oil and gas . . . .
Walker, supra note 27, at 9-10. The courts, however; have recently found that the parties
can create, in essence, new estates in the context of oil and gas leases if they dearly
express their intention in the lease. See supra notes 29-45 and accompanying text.
57 See supra note 4 and accompanying text.
118R. CUNNINCHAM, W. STOEBUCK & D. WHITMAN, supra note II, at 62-66.
•9675 S.W.2d 250 (Tex. App.-San Antonio 1984, writ ref'd n.r.e.).
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express language of the lease clearly evinced such an intent.4o In
Kincaid, the parties had negotiated a delay rental clause which provided that a bona fide attempt by the lessee to make proper delay
rental payments would be sufficient to maintain the lease, even if the
payments were untimely or otherwise erroneous, as long as the payment was corrected within thirty days of the lessee being notified by
the lessor of the error.41 In Texas, the unless lease usually creates a
fee simple determinable estate which is automatically terminated
upon a failure to make a proper payment.42 The San Antonio Court
of Appeals did not treat the agreement as an invalid attempt to create a new common law estate. Instead, it focused on the concept
that the fee simple determinable doctrine applies to the standard
form delay rental clause.43 The court stated:
It is well settled that with the usual "unless" lease, a failure
of the lessee either to begin a well or to pay the delay rentals, ipso facto terminates the lease on the date set out for the
action and the estate reverts to the lessor without the necessity of re-entry, declaration of forfeiture or legal
action. 44
The delay rental payment is thus like production in the secondary
term; if neither is achieved the leasehold fee simple determinable
estate automatically terminates. The court could have concluded
that the limitation language used in the lease's delay rental clause
was inconsistent with the additional provisions allowing for good
faith compliance as well as a notice and cure time period. Instead,
the court found that the parties had intended to alleviate the harsh
results of the fee simple determinable doctrine and that the clear
intent of the parties would control.45 While the court unnecessarily
confuses its holding by continuing to refer to the "unless" lease as a
limitation, clearly the result allows the parties to create an estate
which was not recognized by the common law, but one that is enforceable nonetheless. 46 Similar reasoning should also apply in the
habendum clause situation so that parties who wanted to avoid some
<Old at 256.
<'Id. at 252-53.
"This has been the rule since 1929. W.T. Waggoner Estate v. Sigler Oil Co., 118
Tex. 509, 19 S.W.2d 27 (1929).
"Kincaid, 675 S.W.2d at 255.
«Id
"Id. at 256. For a similar result, see Woolley v. Standard Oil Co. of Texas, 230 F.2d
97 (5th Cir. 1956).
<6Kincaid, 675 S.W.2d at 256-57.
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of the harsh results of the fee simple determinable doctrine on secondary term activities could do so by making that intent clear in negotiating the express language of the habendum clause of their
lease.
IV.
THE AUTOMATIC TERMINATION FALLOUT-SOME EARLY
SECOND THOUGHTS
In theory, once the fee simple determinable rationale has been
applied to the standard habendum clause, when production ceases
in the secondary term the estate has automatically terminated and
the lessor is once again the owner of the fee simple absolute. 47 This
particularly harsh result occurs regardless of the reason for the cessation of production. In the absence of leasehold language to the
contrary, any cessation, be it mechanical failure, force majeure, governmental regulation, loss of market or economic advantage, would
terminate the lease.48 Likewise, the intent of the lessee to produce
as well as her good or bad faith would be irrelevant under the fee
simple determinable rationale.
This intolerable result could not be sustained, notwithstanding
the Stephens County holding. Therefore, it was not surprising that
within a matter of years the nascent temporary cessation of production (TCOP) doctrine was born out of necessity. In Scarborough v.
"Professor Kuntz has identified three different theoretical approaches to a cessation
of production which have been followed in the producing states. The first approach
treats the achievement of production as a vesting event which eliminates the automatic
termination feature of the habendum clause. Therefore, the lessee can only lose his
lease by abandonment or an equitable action in forfeiture. A second theory treats the
discovery of oil and gas in paying quantities as the limitation and imposes thereafter a
duty to reasonably market, also eliminating the automatic termination effect of a cessation of production. Finally, there are those states, including Texas, which treat the production requirements of the habendum clause as a continuing limitation so that a
cessation of production at any time during the secondary term automatically terminates
the leasehold estate. See E. KUNTZ, supra note 2, § 26.8(a).
48There were some early cases which began to make a distinction between temporary
and permanent cessations of production, but most involved primary term activities of
lessees. The general rule was stated that "a temporary cessation of development or
operations [under an oil and gas lease] would not, as a matter of law, constitute an
abandonment," Wisconsin-Texas Oil Co. v. Clutter, 268 S.W. 921, 922 (Tex. Comm'n
App. 1925, holding approved); see also Munsey v. Mamet Oi18c Gas Co., 113 Tex. 212,
254 S.W. 311 (1923); Fisher v. Crescent Oil Co., 178 S.W. 905 (Tex. Civ. App.Amarillo 1915, no writ).
The parties could, of course, negotiate specific savings provisions to avoid the automatic termination features of the secondary term. In time, savings provisions became
part of many oil and gas leases. Additionally, the parties were free to negotiate different
habendum clause language. This second option has apparently never taken hold as
most habendum clauses use standard language continuing the fee simple determinable
tradition.
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New Domain Oil & Gas CO,•• 49 a classic TCOP fact situation was
presented. Th~ lease had a five-year pri~ary tenn with a standard
habendum clause. 5o Close to the anniversary date the lessee
brought in a gas well and produced it for several months. 51 In the
secondary tenn. the gas well ceased producing as water was leaking
into the bottom of the casing. 52 No reason was given for the water
intrusion. but the lessee engaged in various attempts to regain production. 55 While the reworking efforts were ongoing. lessee drilled
anothe~ well which eventually produced oil in paying quantities. 54 A
three to four month period expired during the secondary term in
which there was no production. 55 The court was well aware that the
issue before it was whether the lease had been tenninated by the
nearly four month actual cessation of production in the secondary
tenn.
The court clearly treated the ,leasehold estate as a fee simple detenninable. 56 The issue should therefore have been an objective
one: whether production in paying quantities had ceased. regardless of the cause. 57 The court recognized. in one respect. the nature
of the fee simple detenninable estate by admitting that if the limitation occurred. no effort or expenditure of the lessee would be effective to bring the lease back to life. 58 However. the court was not
49
276 S.W. 3!H (Tex. Civ. App.-EI Paso 1925. writ dism'd w.oJ.).
In Texas Pac. Coal Be Oil Co. v. Bruce, 233 S.W. 535 (Tex. Civ. App.-Fort Worth
1921, no writ), the court also endorsed the TCOP doctrine where production ceased
because the operator had been unable to get a pump to work properly. Even though the
lease contained a standard habendum clause, the good faith efforts of the lessee to
regain production were found sufficient to keep the lease alive even though under the
fee simple determinable rationale the lease should have automatically terminated.
"'New Domain Oil, 276 S.W. at 331.
.
&lId. at 331-32.
"Id. at 333.
"'Id.
M!d.
""Id. at 332. The court's failure to apply the fee simple determinable rationale is made
clear when it discusses the tremendous expenses incurred by the two working interest
owners in reworking the gas well and in drilling the oil well.
""Id. at 335 (citing Texas Co. v. Davis, 113 Tex. 321, 254 S.W. 3M, reh'goverruled, 113
Tex. 336, 255 S.W. 601 (1923); Robinson v.Jacobs, 113 Tex. 231, 254 S.W. 309 (1923);
Munsey v. Marnet Oil Be Gas Co., 113 Tex. 212, 254 S.W. 311 (1923».
"It is beyond the scope of this article to discuss exactly what constitutes production in
paying quantities. Whether an arithmetic or reasonable prudent operator standard is
used, the issue is still one that can be objectively decided. Intent and good or bad faith
are not particularly relevant. See, e.g., 3 H. WILLIAMS Be C. MEYERS, supra note 2, § 604.5.
"New Domain Oil, 276 S.W. at 335. Thus, from an early date the problem ofratification or revivor has plagued a court in dealing with post-cessation actions of lessors and
lessees. This court intimated that should production have ceased, revivor would not
have been possible. See generally H. WILUAMS Be C. MEYERS, supra note 2, § 340.04.
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TEMPORARY CESSATION DOCTRINE
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willing to accept the harsh realities of the fee simple determinable
doctrine. The court's analysis again confused the jurisprudence because it considered the issue as one'involving a forfeiture. 59 Since
fee simple determinable estates do not involve forfeitures, the court
should have interpreted the limitation as involving only permanent
cessations of production. If the limitation is so defined, then the
automatic termination effects are not triggered by a temporary cessation of production. 60
The court, in defining "temporary cessation ofpn;>duction," created some substantial inconsistencies with the automatic termination rule that it had previously recognized. 61 The court noted that
the cessation must be unforeseen and unavoidable,62 thus suggesting that cessations caused by the lessee's own negligence would
not be a temporary cessation. Likewise, a voluntary cessation of
production by the lessee would also not fall under the temporary
cessation doctrine. 63
The most serious inconsistency created is in regard to post-cessation activities. If the lease tenilinates for lack of production no effort or expenditures by the lessee can revive it.64 However, in the
netherworld of temporary cessation, the good faith actions of the
lessee, the money'expended, and the resumption of production
within a reasonable time may all be relevant in determining whether
the cessation is permanent or temporary. 65 This period of uncertainty for the lessee potentially subjects him to liability as a bad faith
trespasser, should a court determine that the cessation was not temporary.66 By including the forfeiture term, the court also suggests
that other equitable defenses would be available, although in theory
this is not a forfeiture proceeding.
The court did not treat as significant the fact that the second well
which reached producing ~tatus in July 1920, had been commenced
"'New Domain Oil, 276 S.W. at S35.
60The court said:
"[where] the cause of cessation of production was thereafter necessarily unforeseen and unavoidable, and where the lessees in good faith used reasonable
diligence to resume production, and at great outlay of money, and did, within a
reasonable time, in view of the conditions disclosed by the record, resume production, a forfeiture for temporary cessation of production without fault of lessees should not be allowed as a matter oflaw.
New Domain Oil, 276 S.W. at SS6.
'
61 Itt at 331.
62Id. at 3S6.
"'Su, e.g., Hunter v. Clarkson, 428 P.2d 210 (Okla. 1967).
M New Domain Oil, 276 S.W. at 335.
6'Id. at S36.
GOld.
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while the gas well was still producing. 67 Nonetheless, the court did
not restrict the resumption of production to the existing well bore.68
The length of the cessation is undoubtedly a key factor, although
what is a reasonable time will depend on the nature of the cessation
and how long it takes to resume production.69 If new wells can be
drilled, as they were here, the period of time may be longer than the
three and one half months of non-production that actually occurred
in this case. 70
V.
WATSON v. ROCHMILL: THE ENIGMA CONTINUES
In Watson v. Rochmill,71 the modern era of the TCOP doctrine was
entered. The lease involved had a standard habendum clause following a three-year primary term. 72 A producing well propelled the
lease into the secondary ten:n. 73 Between May of 1932 and January
of 1935, no oil was produced because there was no market for the
low gravity oil, and the lessee chose not to make some needed repairs in order to resume production. 74 During this period the lessee
expended some eight thousand dollars to maintain the well. 75 In
January 1935, a market for the oil was found and production
resumed. 76
Under traditional fee simple determinable analysis, the lease automatically terminated when there was a cessation of production in
O'/d.
"/d.
""Id.
,oln a case decided within a year of New Domain Oil, the EI Paso Court of Civil Appeals
in dictum found that an eight month cessation of production and development activities
was not a temporary cessation. Adams v. Bennett, 282 S.W. 909 (Tex. Civ. App.-EI
Paso 1926, writ dism'd w.oJ.). Notwithstanding the emergence of the TCOP doctrine, a
number of cases decided after New Domain Oil continued to emphasize the automatic
termination aspect of the production requirement of the standard habendum clause.
See, e.g., Heard v. Nichols, 293 S.W. 805 (Tex. Comm'n App.--San Antonio 1927,
judgm't adopted); Stephenson v. Calliham, 289 S.W. 158 (Tex. Civ. App.--San Antonio
1926, no writ).
In addition to the secondary term cases, the law relating to "unless" leases and activities during the primary term was also developing in a somewhat inconsistent manner.
While recognizing that certain obligations of the lessee constituted a limitation on the
estate transferred, the Texas courts also created certain exceptions so that the automatic
termination feature of the fee simple determinable would not be triggered. See, e.g.,
Mon-Tex Corp. v. Poteet, 118 Tex. 546, 19 S.W.2d 32 (1929); W.T. Waggoner Estate v.
Sigler Oil Co., 118 Tex. 509, 19 S.W.2d 27 (1929).
'1137 Tex. 565, 155 S.W.2d 783 (1941).
../d. at 783·84.
,s/d. at 784.
'Old.
"/d.
,o/d.
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TEMPORARY CESSATION DOCTRINE
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the secondary term. 77 The court recognized the application of the
automatic termination rule with its "strict" result, but added:
The strictness of the above rule has been modified where
there is only temporary cessation of production due to sudden stoppage of the well or some mechanical breakdown of
the equipment used in connection therewith, or the like.
Under such circumstances there are authorities which hold
that the lessee is entitled to a reasonable time in which to
remedy the defect and resume production. 78
The court's later rejection of the lessee's claim of estoppel clearly
suggests that the automatic termination concept still applies in full
force so that post-termination events cannot be used to create an
estoppel. The lessee was charged with the knowledge that the lease
had terminated by its own durational terms, and therefore, the
lessee could not have reasonably relied on the lessor's conduct to its
detriment. 79 Thus, Watson both reaffirms the fee simple determinable and TCOP doctrines.
The court refines the TCOP doctrine in several ways. The opinion
sets up only three ways in which a court could find a TCOP. The
first way is due to some sudden stoppage of the well. The second
way is due to some mechanical breakdown of the equipment, and
the third and the most troubling way is due to "or the like."80 Scarborough v. New Domain Oil & Gas Co. suggested that voluntary actions
to stop production would not trigger a temporary cessation.8) Watson offers no similar requirement, so after Watson it might be unclear
as to whether a foreseeable or avoidable mechanical breakdown
could lead to only a temporary cessation.
New Domain Oil also required the operator to seek to regain production in good faith and in a reasonable time period.82 Watson, on
the other hand, merely refers to regaining production within a reasonable time. 88 No mention is made in Watson that the operator
must act in good faith. These tests are obviously different and require different elements of proof. The good faith analysis looks to
"ld.
7°ld. at 784 (citing Scarborough v. New Domain Oil &: Gas Co., 276 S.W. 331 (Tex.
Civ. App.-EI Paso 1925, writ dism'd w.o.j.); Texas Pac. Coal &: Oil Co. v. Bratton, 239
S.W. 688 (Tex. Civ. App.-Fort Worth 1921, no writ». Bratton appears to adopt the socalled discovery rule for interpreting habendum clauses which has since been rejected in
Texas.
79Watson, 155 S.W.2d at 785.
SOld. at 784.
O'New Domain Oil, 276 S.W. 331.
o·ld.
""Watson, 155 S.W.2d at 784.
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the lessee's intention to regain production, while the time analysis
places an outer limit on the length of a temporary cessation.
The Watson court did not deal with this potential conflict, because
it found that the cessation was not caused by one of the three cognizable TCOP events. 84 Here, the cause for the cessation was the lack
of a market, which did not fit the first two categories and was not
sufficiently "like" them to trigger the TCOP doctrine. 85 The facts
also showed a several year hiatus in production which, by itself, may
have been an unreasonable period of time, although the court did
not find that the length of time itself warranted a finding of permanent cessation. 86
In Watson, it was clear that when the lessee left the well in a nonproducible status due to market conditions the lease automatically
terminated. 87 It is unclear whether that termination occurred on the
date the well actually ceased production or shortly thereafter. This
lack of clarity in the TCOP doctrine creates some problems when
determining the point automatic termination occurs. Under the automatic termination rule, all parties know, or should know, when the
lease terminates. 88 Under the TCOP doctrine, the date of termination cannot be 'known without the benefit of hindsight, especially if
the issue relates to the reasonableness of the operator in regaining
production. 89 Nonetheless, Watson became an oft-cited case, laying
the foundation for later TCOP findings, not only in lease termination cases, but also in cases involving defeasible term deeds.
The uncertainty. caused by the application of the TCOP doctrine
is not the sole source of discomfort for lessees operating wells in the
secondary term. The concept of what constitutes production in paying quantities as developed in Texas, in addition, does not lend itself to easy results. 90 As with the ~e~ermination of the relevant time
"Id.
··Id.
"Id.
.7Id.
.BOld. at 785.
88/d.
""See, e.g.• Clifton v. Koontz, 160 Tex. 82, 525 S.W.2d 684 (1959); Garcia v. King, 159
Tex. 578, 164 S.W.2d 509 (1942).
Additional uncertainty is caused by the problem of initially defining when there is a
cessation in production. While a physical cessation might trigger the beginning of the
temporary period, the court in Ballanfonte v. Kimbell, 575 S.W.2d 119 (Tex. Civ.
App.-Foft Worth 1965, writ ref'd n.r.e.), suggested that the question is not to be answered by resort to grammatical rules but by resort to legal rules. In the context of a
case determining whether the proper time frame to resolve the issue of whether there
was production in paying quantities, the court suggested that under certain circumstances a cessation of production for days or even weeks would ~ot necessarily mean
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TEMPORARY CESSATION DOCTRINE
533
frame in which to judge whether there is production in paying quantities, there can be no set time frame for determining when a cessation of production crosses the magic line between temporary and
permanent. The Texas Supreme Court has recognized the difficulty
of pinning down these time limits, but believes that these are essentially ad hoc determinations which will, by definition, cause some
uncertainty regarding the ownership of the estates in question. 91
Giles v. McKanna followed the three (or two) pronged Watson approach, namely that only mechanical fai~ure or sudden stoppage can
trigger the TCOP doctrine.92 The case involved a state lease where
production had ceased for over two years.95
The apparent cause of the cessation was a lack of market and the
low gravity of the oil being produced. 94 The court found that the
lease had automatically terminated, since the cessation was not
caused by either a mechanical failure or sudden stoppage.95 The
court implied that a lengthy cessaticm may not be a temporary cessation, even if the cause fell within the Watson categories.
It is an obvious requirement that before the TCOP doctrine can
be invoked there must be production. In several cases following
Watson some effort was made to use the TCOP doctrine as a means
of having Texas adopt the discovery rule rather than the discovery
plus actual production rule for the habendum clause. This was
clearly rejected in Morrison v. Swaim,96 in which the court treated the
lease as a classic fee simple determinable which could not be extended into the primary term without actual production, even where
the reservoir had been discovered and the lessee, in good faith and
using diligent efforts was trying to produce the hydrocarbons. 97
that there was not production in paying quantities. A similar analysis might be applied
in the TCOP case so that some periods of physical cessation might not trigger a finding
of even a TCOP and the time frame for requiring the appropriate lessee response might
be lengthened.
91The Texas Supreme Court in Clifton stated that "[t]here can be no arbitrary period
for determining the question of whether or not a lease has terminated for the additional
reason that there are various causes for slowing up of production, or a temporary cessation of production, which the courts have held to be justifiable." Clifton, 325 S.W.2d at
690.
""Giles v. McKanna, 200 S.W.2d 709 (Tex. Civ. App.-Austin 1947, writ ref'd n.r.e.).
95fd. at 710.
""fd.
95fd. at 711.
""220 S.W.2d 493 (Tex. Civ. App.-Eastland 1949, writ ref'd n.r.e.); see also Union Oil
Co. v. Ogden, 278 S.W.2d 246 (Tex. Civ. App.....:.EI Paso 1955, writ ref'd n.r.e.) (reaffirming die commitment to the automatic termination rule of Watson and its predecessors unless the lessee could show a temporary cessation).
97 Morrison, 220 S.W.2d at 493.
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The expansion of the TCOP doctrine after Watson shifted from
the lease to the defeasible term deed arena. In Midwest Oil Corp. v.
Winsauer,98 a fifteen-year defeasible term royalty deed was involved.99 Production had extended beyond the anniversary date
when, due to litigation and mechanical breakdowns, there was a cessation of production for nearly six months. IOO As an initial matter,
the Texas Supreme Court treated the habendum clause of a lease
and the analogous clause in a defeasible term deed as the same. 101
It labelled both the term interest and the leasehold interest as fee
simple determinables. 102 In another important conceptual development, the Winsauer court also concluded that the TCOP doctrine was
"necessarily implied" in a standard oil and gas lease. lo, This language would suggest that the TCOP doctrine is an offshoot of the
implied covenant doctrine, although the Texas Supreme Court does
not elaborate on why it is necessary to imply a TCOP clause where
the parties were quite free to negotiate savings provisions that
would deal with problems of temporary cessation. I04
The court in Winsauer quoted extensively from both New Domain
Oil and Watson, thus continuing the inconsistencies between those
decisions in regard to what elements are required to show that the
cessation was only temporary. In Winsauer, ongoing litigation was
the cause of the mechanical breakdown because the litigation caused
the well to be shut in and not properly maintained. lOS While
mechanical breakdowns are a proper consideration under Watson, .
litigation delay is not. 106 The court also reiterated the New Domain
Oil discussion of unforeseeability and unavoidability which was left
out of Watson. I07 Both parties stipulated that the operator had
regained production in a diligent manner, so that part of the TCOP
doctrine had been met. I08 The lessee was able to prove that the
""Midwest Oil Corp. v. Winsauer, 159 Tex. 560, 323 S.W.2d 944 (1959).
99ld. at 944.
100 ld. at 945.
IOlld. Oklahoma treats defeasible term deeds and leasehold habendum clauses differently. See cases cited in supra note 3.
10> ld. at 948.
losld. at 946.
""'The analogy to implied covenants was followed by the Texas Supreme Court in
Samano v. Sun Oil Co., 621 S.W.2d 580 (Tex. 1981), a case involving express savings
clauses. For a complete discussion of Samano, see infra Section VIII.
lOS Winsauer, 323 S.W.2d at 945.
100 Litigation or the threat of litigation, as well as a lockout by the lessor, are separate
exceptions from the rule of automatic termination. The lessor interference rule is discussed in irifra Section VII.
I07Winsauer, 323 S.W.2d at 947.
1O"1d. at 946.
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TEMPORARY CESSATION DOCTRINE
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litigation was the cause of the mechanical breakdown which led to
the cessation of production. 109 The court does embrace implicitly
the concept that the limitation contained in the defeasible term deed
is not triggered by anything other than a permanent cessation. I 10
As such, once the court determines that the cessation was temporary, the fee simple determinable estate never terminated and continues to exist until such time as production permanently ceases. I I I
A second term deed case, Stuart v. Pundt, I 12 followed shortly after
Winsauer. Here there was a five month cessation of production
caused by collapsed casing. ll1.1 There was no mention in the opinion
as to whether the collapse was avoidable or foreseeable. Nonetheless, the court found that the diligent efforts to drill a new well were
sufficient evidence that only a temporary cessation had occurred,
and therefore, the estate had not automatically terminated. I 14
At least one case has raised the possibility that a voluntary reworking operation, not itself caused by a sudden stoppage or
mechanical breakdown, may still trigger the TCOP doctrine. In Fick
v. Wilson,115 the lessee chose to rework a well which had been marginally producing oil. I16 The reworking operations took only two
days but a pump which was to be installed was not placed into operation for some three to four months. 117 The installation was
delayed because electricity was not available at the wellsite. 118 The
lack ofelectricity was due to the lessee's failure to pay accrued utility
bills. 1l9
Under either New Domain-Oil or Watson, the TCOP doctrine should
not have been applied. The delay was neither unforeseeable nor
unavoidable under New Domain Oil, and there was neither a sudden
stoppage nor mechanical breakdown under Watson. Yet the court
found that the TCOP doctrine should apply possibly under the "or
the like" reason stated in Watson. 120 In addition, it should be clear
that a reasonable or diligent operator would not allow the electricity
to be turned off for failure to pay, and then wait for nearly four
1091d. at 945.
1I°1d. at 948.
·1I/d.
"2338 S.W.2d 167 (Tex. Civ. App.-San Antonio 1960, writ ref'd).
"'Id. at 168.
"·Id. at 169.
"'349 S.W.2d 622 (Tex. Civ. App.-Texarkana 1961, writ ref'd n.r.e.).
1I°1d.
"'Id. at 623-24.
"HId. at 623.
"Old.
120 Id. at 625.
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months to have it turned back on. If the TCOP doctrine is to be a
narrow exception to the general rule of automatic termination, this
case goes too far. The result is much more in keeping with the fee
simple subject to a condition subsequent rationale which allows any
reason to be offered to justify the lack of production. However, the
Texas approach seems to be more restrictive of the TCOP
doctrine} 2I
In Lynch v. Southern Coast Drilling Co., 122 the court explored at
length the fee simple determinable concept and the TCOP .doctrine. 12S The lease contained a standard habendum clause but also
included a provision that stated:
Title to minerals vested in grantee under this grant shall
not end or revert to grantor until there is a complete, absolute and intentional abandonment by grantee of each and
all of the purposes, expressed or implied, of this grant
124
This provision would seemingly be directly contrary to the normal
effect of the habendum clause. The lessee argued that since the lessor had not shown an intentional abandonment of the lease, it continued on in the secondary term although there was admittedly no
production or other operations for some four months. 125
The court nonetheless identified the lessee's interest as a fee simple determinable, the limitation being production in the secondary
term}26 Once the limitation occurs, the lessor has the possessory
.21 A recent check of Shepard's Citations indicates that Fielr. has not been cited in any
subsequent Texas case. There is only one very early Texas case which supports the
general proposition that an attempt to increase production through reworking operations which leads to a cessation of production can constitute a TCOP. Flato v. Weil, 4
S.W.2d 992 (Tex. Civ. App.-8an Antonio 1928, no writ). Several other jurisdictions
reach a similar result but the Oklahoma cases are not really on point since the discovery
plus attempts to market or produce rule governs the habendum clause in that state. See,
e.g., Reynolds v. McNeill, 218 Ark. 453, 236 S.W.2d 723 (1951); Durkee v. Hazan, 452
P.2d 803 (Okla. 1968). Indiana has enacted a statute which terminates all leases one
year from the last rental payment or from a cessation of operations. Barr v. Sun Exploration Co., 436 N.E.2d 821 (Ind. App. 1982). Where an operator has ceased production
in order to begin an enhanced recovery project a Kansas court has found that under the
facts of thai case there was a permanent cessation of production notwithstanding the
intent of the operator to restore and increase production. Wrestler v. Colt, 7 Kan. App.
2d 553, 644 P.2d 1342 (1982).
"'442 S.W.2d 804 (Tex. Civ. App.-8an Antonio 1969, no writ).
••• Lynch also dealt with the interplay between express savings provisions relating to
cessations of production in the secondary term and the TCOP doctrine. That issue will
be discussed in infra Section VIII.
.
'''Lynch, 442 S.W.2d at 806.
'''ld.
,.ald.
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TEMPORARY CESSATION DOCTRINE
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estate but no cause of action against the lessee for breach of any
contractual duty.127 The court resolved the conflict between the intent requirement of the abandonment clause and'the automatic termination of the fee simple qeterminable estate by giving precedence
to the nature of the fee simple determinable estate. 128 Once cessation of production was proven, the limitation terminated the lessee's
estate by its own terms and no proof of intent to abandon was required. 129 The court reserved the question of whether the abandonment provision would be enforceable under other circumstances,
but concluded that once a permanent cessation of production' was
proven the leasehold estate had terminated. llsa
The court in dictum noted that:
Theoretically, at least, neither ":lnavoidable delays or accidents, acts of God, unfavorable economic conditions, nor
financial difficulties of the less~e will save the lessee's interest where there is a cessation of production. However, the
rule . . . has been softened . . . so that interruption due to
temporary mechanical difficulties does not terminate the
lease if the lessee is endeavoring diligently to restore
production.J sl
While not citing Watson,IS2 the court only allowed limited access to
the TCOP doctrine by requiring the lessee to show temporary
mechanical difficulties and a diligent effort to restore production. ISS
The importance of using reasonable diligence to regain production was one of the key issues in Nalco Oil & Gas Inc. v. Tartan Resources Corp.IS4 The operator claimed that art eight-month cessation
of production was only temporary; and therefore, the acreage surrounding the well would not have reverted to the lessor under the
1·'The court also rejected the lessee's claim that a notice and cure provision in the
lease precluded a finding that the lease had expired since no notice had been given. Id.
at 807. Once the limitation had occurred the estate was over and no notice was required. See also Stephenson v. Calliham, 289 S.W. 158 (Tex. Civ. App.-San Antonio
1926, no writ).
'··Lynch, 442 S.W.2d at 808-09.
29
'
Id.
'110 Id. at 809.
1S1/d. at 808 (citing Scarborough v. New Domain Oil Be Gas Co., 276 S.W. 331 (Tex.
Civ. App.-EI Paso 1925, writ dism'd w.o.j.».
"·137 Tex. 565, 155 S.W.2d 783 (1941).
"'Lynch, 442 S.W.2d at 808.
'''522 S.W.2d 703 (Tex. Civ. App.-Corpus Christi 1975, writ ref'd n.r.e.). The parties agreed that production had ceased for a period in excess of sixty days since there
was only minimal production for a sixteen month period. Id.
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habendum clause. ISS Mter noting the automatic termination doctrine was the applicable rule and that the TCOP doctrine was the
exception, the court explored the parameters of what a TCOP is. ls6
It cited Watson for the proposition that only mechanical breakdowns,
sudden stoppages, or "other similar circumstances" could lead to a
TCOP.J S7 This is probably no more than a rewording of the original awkward phrase used in Watson, but such rewording might show
a willingness to expand the doctrine beyond the two listed causes.
Here, a depletion of the reservoir caused cessation of production.J s8
At that point, the court's analysis could have stopped, since neither
of the two named circumstances had arisen. Yet the court went on
to discuss the lessee's attempt to rework the well which eventually
led to production from a different sand.J s9 The court implies that
had the reworking led to production at an earlier date, since the
second reservoir was known to exist, the TCOP doctrine may have
been applicable. However, again such implication would call for an
expansion of the doctrine to include avoidable or foreseeable cessations and the treatment of the exhaustion of a reservoir as a "similar
circumstance." Because there was an unexplained delay of several
months before tapping into this second reservoir, the court concluded that the cessation of production was caused by market conditions and therefore was not justifiable under the TCOP doctrine. 14o
The cases after Watson created some problems for doctrinal purists. Should the TCOP doctrine be extended when the cause of the
cessation is neither a mechanical breakdown nor a sudden stoppage? Should the earlier concepts of avoidability and foreseeability
playa role in determining what types of cessations are temporary?
If one thing was clear, it was that the operator mush be reasonable
and very diligent in attempting to regain production once it had
ceased, whatever the cause.
VI.
THE MODERN ERA-AMOCO PRODUCTION CO. V. BRASLAU
The Texas Supreme Court ushered in the modern era for the
TCOP doctrine with its decision in Amoco Production Co. v. Braslau. 141
'''Id. at 105. For other definitions, see Rogers v. Osborn, 152 Tex. 540, 261 S.W.2d
311, 313-14 (1953) and Phillips Petroleum Co. v. Rudd, 226 S.W.2d 464, 466 (Tex. Civ.
App.-Texarkana 1949, no writ).
'""Nafco, 522 S.W.2d at 709.
"7/d.
"·Id.
"Old.
4
• °Id.
41
•
561 S.W.2d 805 (Tex. 1978).
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TEMPORARY CESSATION DOCTRINE
539
This was a defeasible term deed case. A multiple completion well
had exhausted two of the four potential producing reservoirs. 142
Production ceased and work was immediately begun to move up the
wellbore and recomplete in the two remaining productive zones. 148
Mechanical difficulties were encountered and the casing collapsed. 144 The operator obtained Railroad Commission approval to
drill a new well into the two remaining sands. 145 Production ceased
for a three-month period. 146
The court reaffirmed the view that the defeasible term owner possesses a fee simple determinable estate which automatically terminates upon the cessation of production, once the deed is past the
term-for-years period. 147 Relying on Winsauer and Stuart for the
TCOP doctrine, the court concluded that mechanical difficulties encountered in reworking operations can trigger the TCOP doctrine
as long as the operator is diligent in regaining production, even if
production is achieved through the drilling of a new wellbore. 148
The court did not decide whether the TCOP doctrine would apply
for a new well which encountered a reservoir that had not previously
been discovered. The emphasis that the court placed on the diligence of the operator, however, would suggest that regardless of
whether the reservoir is known or not, the TCOP doctrine would
apply,149
Braslau, Watson, and Winsauer form the doctrinal basis for the
TCOP doctrine. A recent federal case, Cobb v. Natural Gas Pipeline
Co. of America, 150 applied those cases and further refined the TCOP
doctrine. The lessors sought declaratory relief and damages for
production that they alleged had been achieved after the lease terminated. 151 They alleged that in either of three different periods
there was a cessation of production that under Watson automatically
terminated the lease,152 The trial court found that there was a
42
/d. at 807.
'··Id.
'··Id. The opinion does not indicate whether the breakdown was foreseeable, avoidable or caused by the operator's negligence. Under Watson and New Domain Oil, those
would be relevant issues.
45
'
/d.
'·"Id.
'''Id. at 809.
'·"Id.
"old. at 809-10.
"'°897 F.2d 1307 (5th Cir. 1990).
'·'Id. at 1308.
'·'Id. at 1309. Two of the periods of non-production lasted 9 months and another
lasted 3 months. Id. at 1308.
'
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permanent cessation of production in 1974 that automatically terminated the lease. 15s
In interpreting the Watson, Winsauer, and Braslau cases, the court
applied the test that the TCOP doctrine can only be triggered by
Watson s trilogy of a "sudden stoppage of t~e well or some mechanical breakdown ... or the like:'I54 In addition, the court required
the lessee to remedy the problem within a "reasonable time:'155
The court also applied a diligence test to the lessee's actions following the cessatiQn of productioI},l56 Finally, the court analogized the
TCOP doctrine to implied covenants. IS? The TCOP doctrine is implied in a lease just as covenants are implied.
In TCOP cases, once the lessor shows a period of non-production, the lessee has the burden of prod4cing evidence that the cessation of production was only temporary,l58 In Cobb, the lessee
presented expert testimony that sought to explain the lack of production in the three periods as being caused by a lack of sufficient
pressure in the pipeline from the well to the main pipeline system. 159 These conclusions were based on circumstantial evidence
since the expert was not personally involved in the pipeline
problems during any of the three periods of non-production. l60
This lack of pressure was more of a chronic problem than a classic
mechanical breakdown, but the Fifth Circuit did not explore that
potential weakness in the lessee's TCOP claim,l61
The trial co,urt rejected the lessee's evidence as having no probative value, but the Fifth Circuit founq that it satisfied the lessee's
burden of producing evidence. 162 Since the lessor offered no
evidence in rebuttal, there was no other evidence in the record to
'''Id.
'''Id. at 1309 (citing Watson v. Rochmill. 137 Tex. 565. 155 S.W.2d 783. 784 (1941».
'""Id. The court did not .require the lessee to use reasonable techniques but merely
required that production be resumed within a reasonable time. It did. however. note
that what is a reasonable time may depend on the lessee's efforts to rehabilitate the well.
See also. Midwest Oil Corp. v. Winsauer. 159 Tex. 560. 323 S.W.2d 944 (1959); Beatty v.
Baxter. 208 Okla. 686. 258 P.2d 626 (1953).
''''Cobb. 897 F.2d at 1309.
·&Tld.
·&8See infra Section VIII for a discussion of how savings clauses impact the TCOP doctrine; see also supra notes 98·106 and accompanying text for a discussion of Winsauer and
the implied covenant analogy.
'....Cobb. 897 F.2d at 1309.
• 60 Id. at 1310-11. The expert correlated production information from the three wells
that fed the lateral pipeline with information about the installation and use of compression equipment.
'G'Id.
.Gtld. at 1312.
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explain the cessations of production. 165 Treating the lack of pres~
sure as a mechanical breakdown, the Fifth Circuit concluded that the
first part of the TCOP test had been proven. l64
On the time issue, the court looked not only at the issue of how
long it took to resume production, but also the issue of prudent or
diligent operation. 165 Although language earlier in the opinion focused solely on the issue of resuming production, the court ultimately concluded that there was no evidence to show tack of
diligence by the lessee. 1OO It is important to note that the court applied an objective standard of diligent operation. Good faith of the
operator is apparently not required although it is mentioned in several of the early TCOP cases. In this case, there was a two month
delay in reworking operations and a nine month cessation of production. 167 The court thus concluded that the lessee was entitled to
a judgment that the lease had never expired. l68
Another recent case, Bradley v. Avery,l69 applied the Braslau doctrine and raised the additional issue of lease revivor or ratification.
A lease was being kept alive by production from a sin;gle well which
without warning ceased producing in August of 1982. 170 The lessee
never established at trial the exact cause of the cessation. 171 The
leasehold interest was assigned after August and reworking operations were begun in late September. 172 The reworking operations
led to the regaining of production in October. 175 The trial court
found that the TCOP doctrine was applicable and therefore the
lease had not terminated. 174
Because the lease was old, it used an atypicai habendum clause. 175
The clause provided that the.lease,.would last "so long as Lessee
""'Id.
.Mld.
1t1"1d.
Itl" Id.
16'Id. In Beatty v. Baxter, 208 Okla. 686, 258 P.2d 626 (1953), there was a twenty-one
month delay in resuming production while in Midwest Oil Corp. v. Winsauw, 159 Tex. 560,
323 S.W.2d 944 (1959), there was a six month delay.
1661d.
""'746 S.W.2d 341 (Tex. App.-Austin 1988, no writ). For a complete discussion of
ratification and revivor, see H. WILLIAMS &: C. MEYERS, supra not~ 2, § 340.04; Miller,
Lease Preservation and Maintenance: The Defenses of Estoppe~ Revivor and Ratification, STATE
BAR. OF TEXAS ADVANCED INSTITUTE ON OIL AND GAS LAw.
""Bradley, 746 S.W.2d at 342.
171 Id. at 343.
..2/d. at 342.
.."Id. at 343.
..4/d.
.."Id. at 342.
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shall continue to produce oil and gas ... but the failure of Lessee to
continue production without interruption from any such wells ... shall
terminate this Lease."176 While the court looked at the additional
language, it did not treat the clause any differently from the standard habendum clause which creates a fee simple determinable
estate.I 77
The court also noted that the TCOP doctrine would apply
notwithstanding the "without interruption" language; it felt that the
lessee had not sustained its burden of proof of showing that the cessation was caused by either a sudden stoppage or mechanical breakdown. 178 The trial court made a specific finding that the cause of
the cessation was "uncertain." 179 This decision placed great emphasis on that finding, although one could have easily found some
evidence in the record to show a sudden stoppage. Neither Braslau
nor Watson require both a mechanical breakdown and a sudden
stoppage; either event may lead to a finding of a TCOP in these
cases. The court of appeals ignored the fact that the well had been
producing for years and that the operator was diligent in regaining
production. 180 The TCOP doctrine was developed to soften the
harsh tones of the fee simple determinable doctrine. The doctrine
was designed to benefit the lessee who is the victim of events beyond his control. A well which has been producing for years may
continue to produce for years or may suddenly stop. The Watson
court chose to allow the lease to continue under those circumstances. 181 Such allowance provided some relief to the lessee but
did not eviscerate the automatic termination aspect of the fee simple
determinable rule. 182
The issue of ratification or revivor was raised in Bradley because
the lessors executed a division order after production had been
regained. 183 Ratification theoretically applies to an action which is
related to an instrument which was never valid. Revivor, on the
other hand, refers to an action which resuscitates a once valid, but
•7S Id. at 343 (emphasis in original). The lease had been kept alive for almost sixty
years by continuous production.
177Id.
178Id.
.79Id.
'80 Id. at 342.
'8' Watson v. Rochmill, 137 Tex. 565, 155 S.W.2d 783 (1941).
'8'Compare the result in Bradley with Somm v. Schwartz, 344 N.W.2d 73 (N.D. 1984) (the
court allowed the lease to continue under the TCOP doctrine even though the cessation
was caused by a problem common to the industry in the field).
'8'Bradley, 746 S.W.2d at 343.
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now terminated, instrument. l84 Since the execution of the division
order took place after a valid lease had terminated, it had to be a
revivor in order to be effective. 18s In order to have an effective
revivor, there must be a clear expression of intent to create a new
estate. 186 The division orders made no reference to the lease or to a
legal description of the leased premises. 187 As such, they did not
manifest a clear intent to create a new leasehold estate, since an adequate description of the estate is essential to its creation. 188
Related to the issue of revivor is the concept of estoppel. Under
the automatic termination rule, once the leasehold estate terminates
it will be very difficult for the lessee to prove that any actions of the
lessor constitute an estoppel. 189 The court in Watson found no estoppel where the lessor stood passively by and did nothing as the
lessee expended substantial sums of money on reworking the well
after production had stopped,1°° A recent case applied the Watson
rationale to the acceptance of late advance royalty payments by the
lessor where the primary term expired without any production,191
The Braslau decision continues the Watson treatment of leasehold
and defeasible term interests as fee simple determinables. 192 The
case also continues the narrow exception carved out for the TCOP
doctrine by limiting its application to those cases where the lessee
can prove a sudden stoppage or a mechanical breakdown along with
a reasonable and diligent effort to regain production,19s While several cases have appeared to liberalize the TCOP doctrine, Texas has
remained reasonably steadfast to the fee simple determinable doctrine and its rather harsh results.
"USee, e.g., Westbrook v. Atlantic Richfield Co., 502 S.W.2d 551 (Tex. 1974); H. WILLIAMS Be C. MEYERS, supra note 2, § 340.04.
IS' Bradley, 746 S.W.2d at 344.
I88The revivor doctrine is based in part on the legal fiction that a new estate is created
because the old estate has terminated and revested in the former future interest owners.
H. WILLIAMS Be C. MEYERS, supra note 2, § 340.04.
IS7 Bradley, 746 S.W.2d at 344.
'''See also McVey v. Hill, 691 S.W.2d 67 (Tex. App.-Austin 1985, writ ref'd n.r.e.).
I89Watson v. Rochmill, 137 Tex. 565, 155 S.W.2d 783 (1941).
looId.
'9' Clark v. Perez, 679 S.W.2d 710 (Tex. App.-8an Antonio 1984, no writ). The court
used the fee simple determinable rule to find that the lease automatically expired at the
end of the five year primary term, so that actions taken by the lessor after that period of
time could not have been reasonably relied upon by the lessee. Id. at 714. One could
argue that the revivor doctrine may apply, and a number of cases have confused the two
doctrines. See, e.g., Westbrook v. Atlantic Richfield Co., 502 S.W.2d 551 (Tex. 1973);
Bradley v. Avery, 746 S.W.2d 341 (Tex. App.-Austin 1988, no writ).
I92Amoco Prod. Co. v. Braslau, 561 S.W.2d 805, 808 (Tex. 1978).
I9SId. at 809-10.
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VII.
[Vol. 4~:5l9
THE LESSOR INTERFERENCE RULE
In addition to the mechanical and physical factors which dominate
the area of the' TCOP doctrine, the courts have carved out another
exception to the fee simple determinable doctrine. Such exception
applies when there is either no production or a cessation of production in the secondary term. In Casey v. Western Oil Ci Gas Inc., 194 both
the traditional TCOP doctrine and the lessor interference rule were
applied by the court to sustain the continuing validity of the lease,
even though production had ceased during secondary term. 195 The
pipeline's refusal to take the gas until the operator installed a gas
compressor unit caused a stoppage in production. 196 This stoppage
for non-mechanical reasons, lasted two months. 197 The operator attempted to remedy the situation, but three electric motors were stolen from the leasehold premises during that period. 198 The parties
also presented evidence that the operator was renegotiating his gas
sales contract with the pipeline, which expired some thirty days
prior to the cessation of production. l99 Watson and Braslau seemingly require that the operator show that a sudden stoppage or a
mechanical breakdown caused the cessation. Here, no evidence existed that either factor was the cause, unless lessee could argue that
the thefts were a form of breakdown. The parties also raised a question about the lack of evidence showing reasonable and diligent efforts to regain production. 2°O While the court presumed that those
elements were proven, it included the additional element of good
faith, something that the Wats()n and Braslau cases had omitted. 201
The court nonetheless approved the trial court's application of the
TCOP doctrine. 202
''''611 S.W.2d 676 (Tex. Civ. App.-Eastland 1981, writ ref'd n.r.e.).
Id. at 679.
'HId. at 678.
1117 Id.
I!I8Id.
'WId.
-Id. at 679.
llO'id.
-ld. The case is also troubling because the trial court made several conclusions of
law that were erroneous. The trial court found that the operator had not abandoned the
lease. Id. at 678-79. Abandonment is a non-issue in these cases since the lessee's interest is subject to automatic termination in the event of non-production. Secondly, the
trial court also found that no forfeiture resulted. ld. at 679. Again, this is not an action
for fQrfeiture since a fee simple determinable estate is involved. The appeals court refused to overrule the appellant's claim that the trial court decision was based on an
erroneous theory of law. Id. at 630. The court trea~ed the forfeiture language essentiallyas surplusage and surmised that the trial court was in reality applying classic TCOP
and fee simple determinable doctrines. Id.
19'
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With this expansion of- the causal factors that can trigger the
TCOP doctrine, the court was faced with an additional year of nonproduction caused by the lessor's top leasing activities and lockout
practices.20S Where an operator has been physically ejected from
the leasehold premises, the limitation of actual production is essentially suspended for the period of time the operator cannot get on
the premises.204 Physical ouster is not required in order to receive
the benefits of the lessor interference rule. 205 A repudiation by the
lessor will suspend the obligations of the lessee pending the judicial
resolution of the controversy.206
VIII. THE EFFECT OF SAVINGS CLAUSES ON THE TCOP DOCTRINE
Since most modem leases have various types of savings provisions
designed to maintain the lease in the secondary term even when
there is no production,207 it was not suprising that litigation arose
regarding their impact on the TCOP doctrine. In Samano v. Sun Oil
CO.,208 the Texas Supreme Court, in a six to three decision, found
where the parties have negotiated a specific cessation of production
clause the terms of the clause will preempt the application of the
TCOP doctrine. 209 Samano involved a lease which provided that it
'105Id. at 678.
-See also Kothmann v. Boley, 158 Tex. 56, 308 S.W.2d I, 8 (1957); Humphrey v.
Seale, 716 S.W.2d 620 (Tex. App.-Corpus Christi 1986, no writ); Morgan v. Fox, 536
S.W.2d 644 (Tex. Civ. App.-Corpus Christi 1976, writ ref'd n.r.e.).
'105H. WILLIAMS Be C. MEYERS, supra note 2, § 404.7; see also Rougon v. Chevron,
U.S.A., Inc., 575 F. Supp. 95 (M.D. La. 1983); NRG Exploration, Inc. v. Rauch, 671
S.W.2d 649 (Tex. Civ. App.-Austin 1984, writ ref'd n.r.e.).
.....Tar Heel Energy Corp. v. Menking, 621 S.W.2d 450 (Tex. Civ. App.-Corpus
Christi 1981, no writ); see also Massey v. Davis, 650 S.W.2d 551 (Tex. App.-Eastland
1983, writ ref'd n.r.e.).
'107H. WILLIAMS Be C. MEYERS, supra note 2, §§ 611-35.
-621 S.W.2d 580 (Tex. 1981). While Samano was pending before the Texas Supreme
Court, the Eastland Court of Civil Appeals decided Shelton v. Taylor, 615 S.W.2d 912
(Tex. Civ. App.-Eastland 1981, no writ) and reached a contrary result. The court factually distinguished the Samano Court of Civil Appeals decision which also treated the
savings provision as precluding the TCOP doctrine. Id. at 915. The distinction was
based on the savings provision in the Samano lease being in the habendum clause, while
in the She/ttm lease the savings clause was an independent provision of the lease. That
factual distinction should have no legal significance especially in light of the earlier analogy of the TCOP doctrine to implied covenants. Where the parties agree that a specific
period will determine the continued existence of a lease, that period should govern.
The Shelttm decision should not be treated as good law given the later Texas Supreme
Court opinion in Samano. If there had been no savings provision, the facts in Shelkm
would have justified the application of the TCOP doctrine since the total loss of production was for only two months while the lease changed hands and reworking operations
.
were completed. Id.
-Samano, 621 S.W.2d at 584.
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would last "as long THEREAFTER as oil, gas or other mineral is
produced from said land, or as long THEREAFTER as Lessee shall
conduct drilling or re-working operations thereon with no cessation
of more than sixty consecutive days .. :'210 The facts show there
was a cessation of production and a subsequent period of seventythree days where the lessee took no action. 211
The lessee argued that the seventy-three day period fell under the
TCOP doctrine of WaLfon and Braslau and that this cessation met all
of the requirements of both cases. The court disagreed, finding that
the TCOP doctrine did not apply where the parties have expressed
their intent to limit the duration of the lease to a specified period or
periods of time. 212 The court treated the sixty day period as a second limitation on the duration of the leasehold estate. 21 !! Ifproduction in paying quantities was secured to propel the lease into the
secondary term, the lease would have two limitations governing its
duration. 214 The first limitation was continued production and the
second was this sixty-day period in which to re-start operations
designed to regain production. 215 At the end of this sixty-day period, the lease would automatically terminate as the limitation would
come into play.216
In Fike v. Riddle,217 the court unnecessarily confused the issue of
TCOP and the application of a continuous operations clause. 218
The wells in question had ceased operating for three and one half
months because the prior operator had removed the rods, tubing,
and pumping units immediately prior to their seizure in order to
satisfy a judgment debt. 219 The lease contained a ninety-day
210/d. at 581.
211
/d.
212/d. The court did note the TCOP doctrine. but only mentioned mechanical breakdown as a condition to its application. ignoring the sudden stoppage or similar circumstance causes. /d.
21./d. at 584.
21. /d. at 582. .
215/d.
216The dissent argued that the TCOP doctrine and any express provisions operated
indepedently so that there was a question of fact in this case whether Sun had operated
in a diligent and reasonable manner to regain production after production had ceased.
/d. at 587-88 (Denton).• dissenting); see also Geo-Western Petroleum Dev., Inc. v. Mitchell, 717 S.W.2d 734 (Tex. App.-Waco 1986, no writ). Ceo-Western also confirms the
automatic termination feature of the savings provision. Once the limitation has occurred, the lease terminates by its own terms, and therefore, the action is not one sounding in forfeiture. See also Woodson Oil Co. v. Pruett, 281 S.W.2d 159 (Tex. Civ. App.San Antonio 1955, writ ref'd n.r.e.).
217
677 S.W.2d 722 (Tex. App.-Tyler 1984, no writ).
2" /d. at 725-26.
219/d. at 724.
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547
continuous operations· clause which allowed the lessee to resume
drilling operations within ninety days from the cessation of production. 220 The successor in interest to the operator took over one
hundred days from the admitted cessation to rework the well. 221
The court should have applied a straightforward interpretation of
Samano. Where the parties have created a savings provision which
acts as a limitation, the lease automatically terminates if that limitation is violated. 222 The court instead suggested that the ninety-day
savings clause only applied to a temporary cessation of production. 223 The clause applied on its face to all cessations of production, including permanent cessations and created, in essence, a third
period of ninety days in which to resume reworking or drilling operations until such time as production in paying quantities is attained. 224 After S(lmano, the TCOP doctrine clearly does not survive
an express savings clause. The court should not have suggested
that only temporary cessations which meet the mechanical breakdown or sudden stoppage requirements trigger the clause. Any cessation, including market failure, lessee's negligence, or exhaustion
of the reservoir, would trigger the ninety day clause. It is a mistake
to limit these clauses to the class of cessations that are labelled
temporary.225
Notwithstanding Fike, several cases have returned to the language
of Samano which treats the savings provision that extended the lease
as a second limitations period, which if violated automatically terminates the leasehold estate. For example, in Bachler v. Rosenthal,226
the lessors claimed that the lease had terminated because no reworking operations had taken place within the sixty-day period authorized by the lease. 227 The court clearly found that the savings
provision operated as a limitation on the estate.228 If the lessee
did not comply with the requirements, the lease automatically
no Id.
at 725.
The trial court was reported to have concluded that the lease terminated "because
of temporary cessation of production and failure of appellants to resume and continuously prosecute drilling or reworking operations," Fike, 677 S.W.2d at 723. As this
paper has explored a temporary cessation of production. if found, will not lead to a
termination of the lease.
·2ISamano v. Sun Oil Co., 621 S.W.2d 580, 584 (rex. 1981).
mFiAe, 677 S.W.2d at 725.
21.
••old.
'''See also Massey v. Davis, 650 S.W.2d 551 (rex. App.-Eastland 1983, writ ref'd
n.r.e.).
216
798 S.W.2d 646 (rex. App.-Austin 1990, writ denied).
217 Id. at 648.
226ld. at 650.
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tenninated. 229 Therefore, the court rejected the lessee's claim that
the court should apply the reasonable and prudent operator standard to detennine whether or not there was production in paying
quantities. 230 Once there is a total cessation of physical production
for a period in excess of that pennitted by the savings clause, the
leasehold estate automatically'tenninates, regardless of whether a
reasoriable and prudent operator would continue to rework the well
and regain production. 231
Where leases do contain savings provisions, one major definitional problem is what constitutes reworking operations so as to
trigger the application of the savings clause and thu's keep the lease
alive without production. In Cox v. Stowers,232 the court had to determine whether the lessee had commenced "additional drilling or reworking operations" within the sixty-day period authorized by the
lease. 233 Without a finding that the clause was complied with, the
lease would automatically tenninate under Watson. 234
The court defined "reworking operations" as follows: "any and all
actual acts, work or operations in which an ordinarily competent operator, under the same or similar circumstances, would engage in a
good faith effort to ,cause a: well or wells to produce oil and gas in
paying quantities."235 The court upheld the trial court's finding that
the lessee had met this test through his continuing if not successful,
attempts at regaining production. 236
•...Seealso Geo-Western Petroleum Dev.• Inc. v. Mitchell, 717 S.W.2d 734 (Tex. App.Waco 1986, no writ); Sunray DX Oil Co. v. Texaco, Inc.• 417 S.W.2d 424 (Tex. Civ.
App.-EI Paso 1967, writ ref'd n.r.e.). Several cases have clearly found that the action
to terminate the lease is not a forfeiture where the lessee has not engaged in reworking
operations within the allowed time limit. Bachler. 798 S.W.2d at 650; Ceo-Western Petroleum. 717 S.W.2d at 736; Woodson Oil Co. v. Pruett. 281 S.W.2d 159 (Tex. Civ. App.San Antonio 1955. writ ref'd n.r.e.).
••..Bachler. 798 S.W.2d at 649-50. In determining whether or not the habendum clause
has been complied with, Texas courts have used a reasonable and prudent operator
standard to determine whether or not there is production in paying quantities. See, e.g.•
Clifton v. Koontz, 160 Tex. 82. 325 S.W.2d 684 (1959); Garcia v. King. 139 Tex. 578,
164 S.W.2d 509 (1,942). The reasonable and prudent operator test is appropriately applied to determine if production ceases. so as to 'trigger the running of the savings provision. However. it is not applied to determine whether the savings provision has been
complied with.
UI Bachler. 798 S.W.2d at 650.
'''786 S.W.2d 102 (Tex. App.-Amarillo 1990, no writ).
···/d. at 103.
'''The parties agreed that production had ceased for a period in excess of sixty days
since there was only minimal production for a sixteen month period. /d. at 103.
·"'/d. at 105. For other definitions. see Rogers v. Osborn, 152 Tex. 540. 261 S.W.2d
311,313-14 (1953) and Phillips Petroleum Co. v. Rudd, 226 S.W.2d 464.466 (Tex. Civ.
App.-Texarkana 1949. no writ).
···Cox. 786 S.W.2d at 106.
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This definition of reworking operations contains both an objective
and subjective test. The lessee must not only be diligent, but also
act in good faith. The objective standard is perfectly appropriate
and easily explainable to the trier of fact. The subjective standard
requires the parties to explore the mental state of the operator and
to go behind the actual decision to ascertain whether such decision
was reached with a pure heart. The objective test would be sufficient to protect the interests of all parties, although many of the
cases which have dealt with the issue have injected the subjective
good faith test into the definition .9f rew~rking operations. 2s7
IX.
CONCLUSION
In dealing with TCOP cases, normally three variables exist that
the courts will consider. The first variable is the cause of the cessation. The second variable is the length of time that is needed to
restore production, and the third variable is the diligence or reasonableness of the effort of the lessee. 2s8 In Texas, cases have emphasized the first and third variables.
In Texas, starting with New Domain Oil, limits were placed on the
causes of the cessation which would trigger the suspension of the
automatic termination rule. New Domain Oil stands for the proposition that the exception would not swallow up the rule. Watson set
out in clear terms that sudden stoppage and mechanical breakdown
causes are the triggering mechanisms for the TCOP doctrine. With
few exceptions, Texas, as have several other jurisdictions, has refused to extend the TCOP doctrine to cases that have involved improvement of operations,2s9 price fluctuations -and/or financial
difficulties,240 exhaustion of producing formation,241 or governmental regulation. 242
.07 See cases cited supra note 235.
•""See generally E. KUNTZ, supra note 2, § 26.8
""Id. at § 26.8(0; see, e.g., Reynolds v. McNeill, 218 Ark. 453, 236 S.W.2d 723 (1951);
Belden v. Tri-Star Producing Co., 106 Ill. App. 3d 192, 43-? N.E.2d 927 (1982).
Fick v. Wilson, 349 S.W.2d 622 (Tex. Civ. App.-TeXarkana 1961, writ ref'd n.r.e.), is
the nOlable exception to the rule that Texas will not consider volunlary efforts on behalf
of the lessee to increase or improve production that happen to cause a cessation to
trigger the TCOP doctrine. See also Flato v. Weil, 4 S.W.2d 992 (Tex. Civ. App.-San
Antonio 1928, writ ref'd n.r.e.).
'·"E. KUNTZ, supra note 2, § 26.8(h); see also Collins v. Mt. Pleasant Oil Be Gas Co., 85
Kan.483, 118 P. 54 (1911); Lamb v. Vansyckle, 205 Ky. 597, 266 S.W. 253 (1924).
WE. KUNTZ, supra note 2, § 26.8(i). See also Reynolds, 218 Ark. 453, 236 S.W.2d 723.
But if. Sunray DX Oil Co. v. Texaco, Inc., 417 S.W.2d 424 (Tex. Civ. App.-EI Paso
1967, writ ref'd n.r.e.).
···E. KUNTZ. supra note 2, § 26.8(j).
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When the first variable is so limited and used in conjunction with
the objective, reasonable, and diligent effort test, the TCOP doctrine properly balances the interests of the lessee with those of the
lessor. The diligent lessee who is caught unaware and takes immediate steps to rectify the problem should not lose his investment.
The lessor who is interested in production does not lose his income
stream while the lessee may cease production for the lessee's sole
benefit.
While many states have attempted to deal with the harsh consequences of the fee simple determinable rule by overruling it, as was
done in Oklahoma, or by modifying the interpretation of the habendum clause to only require discovery plus reasonable attempts at
marketing, Texas has remained committed to the rule. The TCOP
doctrine was developed to deal with the practical effects of applying
the doctrine to an enterprise where continuous production is not
physically or economically possible. The rule should not be applied
so as to terminate a leasehold estate where the lessee has invested
substantial sums of money because the well was shut in for a day.
Texas has chosen to modify the rule, but only in a limited way.
While the case law has jumped around somewhat, the Watson approach coupled with the New Domain Oil elements of unforeseeability
and unavoidability should provide the common law of Texas with
additional years of good service. Lessees should not be able to
claim a TCOP where they could have avoided any cessation by taking remedial actions at an earlier date. Efforts to secure new production, be it a new well or merely a different reservoir produced
through the same well bore, should be rewarded if for some unforeseen stoppage or breakdown the efforts have not yet borne fruit.
While the TCOP doctrine adds some uncertainty to the law, it does
so in order to provide the lessee, and ultimately the lessor, with
some needed protection from the results of applying a thousandyear-old concept to the modem oil and gas industry. As stated at
the beginning, the common law is a wonderful machine. It changes
as societal needs change; it becomes flexible when flexibility is desired; but it remains true to some basic values so as to provide a
stability that is necessary for the acceptance of the law as the rules
that govern societal conduct.
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