EnerQuest Oil & Gas, LLC v. Plains Exploration & Production Co.
United States District Court for the Western District of Texas
981 F. Supp. 2d 575 (2013)
EnerQuest Oil & Gas, LLC (EnerQuest) (plaintiff) acquired mineral leases from mineral owners (defendants). The leases had two-year primary terms and could be maintained as long as minerals covered under the leases were being produced in paying quantities. The leases contained a royalty provision providing that if the wells were still capable of producing minerals but were shut in (i.e., temporarily closed), or if paid production had not occurred for a consecutive 90-day period, EnerQuest could pay shut-in royalties on or before the end of the 90-day period to keep the leases in effect. The royalty provisions also provided that if the leases were “otherwise being maintained by the payment of [delay] rentals,” no shut-in royalty would be due until 90 days after the end of the lease term. The royalty provision’s mention of delay rentals (i.e., periodic payments to postpone oil-and-gas exploration during the primary lease term) was apparently inadvertent because the leases otherwise contained only a few scattered references to rentals and no drilling or delay-rental clauses. EnerQuest purportedly prepaid all delay rentals for the two-year term when the leases were executed. However, the leases did not state that EnerQuest had prepaid any delay rentals. Instead, the top right corner of each page contained the notation “Paid Up,” which EnerQuest contended was an industry term reflecting delay-rental prepayment. EnerQuest never produced minerals under the leases during the primary term, and the mineral owners notified EnerQuest that the leases had terminated. EnerQuest paid shut-in royalties a few days later, asserting that the delay-rental prepayment gave EnerQuest an additional 90 days after the rental period ended to tender the royalties. However, the mineral owners proceeded to sign new mineral leases with someone else. Plains Exploration & Production Company (PXP) and EOG Resources, Inc. (EOG) (defendants) subsequently obtained the new leases. EnerQuest sued PXP, EOG, and the mineral owners for breach of lease and trespass. During discovery, an EOG employee testified that paid-up leases are leases under which the lessee pays a bonus (i.e., a payment in addition to royalties and rent to incentivize the lessor to sign the lease), not rentals, to hold the lease during the primary term. The parties cross-moved for summary judgment.
Rule of Law
Holding and Reasoning (Ezra, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 710,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 710,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 44,600 briefs, keyed to 983 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.