Face Challenges Confidently

025 Cox v. Stowers

Wednesday, September 2nd, 2015

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
Cox v. Stowers, 786 S.W.2d 102 (Tex. App.–Amarillo 1990, no writ), involved a dispute over the proper interpretation of the term “reworking operations” within a 60-day continuous operations clause of a lease. The lease clause provided:

If after discovery of oil or gas the production thereof should cease from any cause, this lease shall not terminate if lessee commences additional drilling or reworking operations within sixty (60) days thereafter. . . .

It was undisputed that the only well on the lease was a gas well and, except for minimal amounts of production in January, April, and May 1985, no gas was produced from the well from December 1984, until March or April of 1986. The only witness was the lessee. Summarized, Stowers testified that the well had ceased to produce in December 1984 and that the fluid treatment process followed by him, based upon his considerable experience, was the correct method in treating and restoring the well to production. He also testified that the waiting periods and procedures followed by him were necessary in the course of that treatment.
Held: The term “reworking operations,” as used in the instant clause, means 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 or gas in paying quantities. It is significant that the testimony of the lessee Stowers was uncontroverted, that he testified that something was done each month, and that he testified that the treatment and delays were the only proper treatment.
The case is important because prior to its holding no Texas court had specifically defined “reworking operations” as used in clauses to preserve an oil or gas lease. The good news is, we have a definition; the bad news is, it’s a fact question. It would be a mistake for lessees to assume that this case stands for the proposition that a 60-day clause can be easily extended into a 16-month clause. The testimony in this case was uncontroverted and supported in some detail the conclusion that lessee continuously, and in good faith, pursued the only appropriate procedure to restore production. One odd footnote is the Court’s use of the phrase “ordinarily competent operator,” instead of the more commonly seen “ordinarily prudent operator.” The latter is the usual standard imposed in measuring the lessee’s duty under various lease covenants. There is nothing in the opinion to explain whether this is or is hot a different standard.