Face Challenges Confidently

061 Exploracion De La Estrella Soloataria Incorporation v. Birdwell

Thursday, September 3rd, 2015

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of some significance to you.
Exploracion De La Estrella v. Birdwell, 858 S.W.2d 549 (Tex. App.–Eastland 1993, no writ) construes the effect of executing division orders after a lease has terminated. The land owners executed division orders on forms provided by Permian (the Crude purchaser) after the cessation of production. The division orders contained no express language granting an estate in land or any express language reviving the lease. Exploracion contended that by executing the division orders the land owners revived the lease.
Held: The lease was not revived. The court followed earlier appellate level authority in finding that execution of division orders will not revive a terminated lease unless there is (1) an express grant of an estate in land, or (2) detrimental reliance on the part of lessee.
Thus, lessees cannot safely rely upon a plain vanilla division order to revive a terminated (or questionable) lease. Lessors cannot safely execute a plain vanilla division order, if they may contend the lease has terminated. The case does not consider the effect of the Texas Division Order Statue which provides in §91.403(h) that:

“The execution of a division order between a royalty owner and lessee or between a royalty owner and a party other than lessee shall not change or relieve the lessee’s specific, expressed or implied obligations under an oil and gas lease, including any obligation to market production as a reasonably prudent lessee. Any provision of a division order between payee and its lessee which is in contradiction with any provision of an oil and gas lease is invalid to the extent of the contradiction.”