Roland Oil Co. v. R. R. Comm’n of Texas, 2015 Tex. App. LEXIS 1906 (Tex. App. B Austin, 2015)

Roland has been an operator in the North Charlotte Field in Atascosa County, Texas, since 1994. There are 31 wells drilled on the lease since the early 1950s, some of which were inactive. Under Rule 14, Adry or inactive wells@ are to be plugged either within one year or, in the case of Adelinquent inactive wells,@ immediately unless the wells are restored to active production. Failure to comply with these requirements can cause the RRC to prevent an operator from producing any wells on the lease.

Further, under former rule 14, inactive wells more than 25 years old needed to be tested as to their fluid level and mechanical integrity. The RRC found that Roland had been delinquent since 1994 in the required testing and, in February of 2006, barred Roland from producing any of the wells on the Lease. Roland ceased production from May 2006 - August 2006, after which it completed the testing the RRC required. When Roland completed the necessary testing to RRC=s satisfaction, the RRC lifted its order.

A mineral owner determined that the lease had lapsed and alerted the RRC, which rescinded the lifting of its order. Roland made two claims. First that its continued production was excused by the force majeure provision of the Unit Agreement and, second, that its continued testing of the wells as required was AUnit Operations@ that continued the lease.

First, the RRC determined, and the court of appeals affirmed, the common law requirement for a force majeure condition was that performance became impossible or impracticable as a result of an event or effect that the party could not have anticipated or controlled. Since the RRC=s order was not beyond Roland=s control, the force majeure clause did not prevent the termination of the lease.

Lastly, since Roland=s actions were not designed to restore production, its activities did not constitute activities sufficient to keep the lease. The Unit Agreement language that the operations be conducted Afor or on account of the development and operation of the United Formation for the production of Unitized Substances@ required the work to be done with the purpose and intent of restoring production, which the RRC and the court said was lacking here.