Wagner & Brown, Ltd. v. Sheppard

Jane Sheppard (plaintiff) owned a one-eighth mineral interest in a tract of land. Sheppard executed an oil and gas lease for the interest with C.W. Resources, Inc. (CWRI). Under the lease, CWRI was permitted to pool the lease with adjacent tracts of land. The pooling clause stated that CWRI had the right to pool “all or any part of the leased premises or interest therein.” The lease also stated that if royalties were not paid to Sheppard within 120 days of oil or gas being sold, the lease would terminate the next month. In accordance with the lease, CWRI signed a pooling agreement for the Sheppard tract. The pooling agreement stated that the parties were pooling the “leases and the lands . . . into a single pooled unit.” Wagner & Brown, Ltd. (Wagner) (defendant) was the operator of the pooled unit. Two wells began producing gas on the Sheppard tract. Proceeds from the production were split in accordance with the pooling agreement. However, Sheppard was not paid royalties within the first 120 days of production. Accordingly, her lease with CWRI terminated. Sheppard filed a motion for summary judgment with the trial court, seeking a determination that the termination of her lease with CWRI also terminated the pooling agreement that was entered into pursuant to the lease. The trial court granted Sheppard summary judgment. The court of appeals affirmed. CWRI appealed.