Welsch v. Trivestco Energy Co.

No. 101,566

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

DEAN D. WELSCH,
Appellant,

v.

TRIVESTCO ENERGY COMPANY, et al.,
Appellees.

SYLLABUS BY THE COURT

1.
The concept underlying shut-in royalty clauses within oil and gas leases is to
enable a lessee, under appropriate circumstances, to keep a nonproducing lease in force
by the payment of the shut-in royalty, which payment is considered constructive
production. In this manner, the clause can modify and become an integral part of the
habendum clause, or extension clause, of the lease.

2.
The rights and obligations of those operating in the Kansas oil patch are governed
by the terms and conditions of specialized contracts, and each dispute arising in this
context can and should usually be resolved by the construction and application of such
contracts. This is particularly true in construing a shut-in royalty clause.

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3.
Reliable authorities recognize that an option to pay shut in gas royalties—in
contrast to an obligation to do so—can support cancellation where the optional royalties
are not timely paid.

4.
The phrase "may pay or tender" generally does not express any language of
obligation, but rather it expresses an option or permissive choice.

5.
Cherokee Resources, Inc. v. Gold Energy Corp., 11 Kan. App. 2d 436, 724 P.2d
695 (1986), is discussed and distinguished.

6.
Under the facts of this case, the oil and gas lease provided to the lessee an option
to pay shut-in royalty payments in order to allow the only well on the leased acreage to
be "considered" to produce gas in paying quantities sufficient to satisfy the habendum
clause and extend the lease in full effect, but because the lessee did not exercise this
option and pay the shut-in royalties, the result is that the lease expired by its own terms.



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7.
The doctrine of temporary cessation of production has been recognized in Kansas
as dictating that a mere temporary cessation of production from wells on an oil and gas
lease because of necessary developments or operations does not result in the termination
of the oil and gas lease, despite the requirement of production to satisfy the habendum
clause. So long as the cessation is temporary, the doctrine allows the lessee a reasonable
time to recommence production in paying quantities.

8.
The lessee of an oil and gas lease cannot invoke the doctrine of temporary
cessation to avoid complying with a specific provision in the lease that addresses
temporary cessation of production and requires the lessee to recommence production
within a specified period of time. The express provision, as a contractual agreement of
the parties, supersedes application of the more general doctrine.

9.
The constructive production achieved by the payment of shut-in gas royalty is not
the production to which the cessation of production clause applies and thus the clause
does not apply to a cessation of constructive production that results from a failure to
make payment of the shut-in gas royalty.


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10.
The bankruptcy of a purchaser is generally covered by the shut-in royalty clause,
not the force majeure clause of an oil and gas lease, because a lessee seldom has control
over the demand for production from a well, and this is why the shut-in royalty clause
was devised. Generally courts refuse to excuse performance under the force majeure
clause of an oil and gas lease provision when financial issues have caused a cessation of
production that could have been replaced by constructive production upon payment of
shut-in royalties.

11.
Under the facts of this case, and given a force majeure clause that required for its
application that some default was due to a force majeure event, the default (failure to pay
shut-in royalties) was not due to the unavailability of purchasing and transporting
services. Therefore, the force majeure clause in this lease was not triggered.

12.
Under the facts of this case, the oil and gas lease expired by its own terms when
production from the only producing well on the acreage ceased due to financial failure of
the gas purchaser, the well was shut in, production was not recommenced nor was
additional drilling achieved within the 60 days required under the lease, shut-in royalty
payments were not paid when they would have been due had lessee exercised this option,
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and the failure to pay or tender such shut-in royalty payments was not due to any force
majeure event.

Appeal from Edwards District Court; BRUCE T. GATTERMAN, judge. Opinion
filed December 18, 2009. Reversed and remanded with directions.

Michael K. Johnston, of Johnston & Eisenhauer, of Pratt, and Larry E. Keenan, of
Keenan Law Firm, P.A., of Great Bend, for appellant.

Michael P. Womack, of Riggs, Abney, Neal, Turpen, Orbison & Lewis, P.C., of
Tulsa, Oklahoma, and Gordon B. Stull, of Stull Law Office, P.A., of Pratt, for appellees.

Gregory J. Stucky, of Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, and
David G. Seely, of the same firm, for amici curiae The Southwest Kansas Royalty
Owners Association and The Eastern Kansas Royalty Owners Association.

Before GREENE, P.J., MALONE, J., and KNUDSON, S.J.

GREENE, J.: Dean D. Welsch, successor in interest to the lessors in an oil and
gas lease, appeals the district court's refusal to grant summary judgment cancelling the
lease, as well as the court's award of summary judgment to Trivestco Energy Company,
the successor in interest to the lessee in that lease, thus preserving the lease on the basis
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that the shut-in royalty provisions of the lease created a covenant with entitlement to
money damages rather than a condition with entitlement to lease termination. As
alternate bases for its decision, the district court relied on a construction and application
of the force majeure clause in the lease and the doctrine of temporary cessation of
production. Welsch argues that the failure of Trivestco to pay shut-in gas royalty
payments caused the lease to expire by its own terms and that neither the force majeure
clause nor the doctrine of temporary cessation of production apply to save the lease. We
agree with Welsch, reverse the district court, and remand with directions to cancel the
lease in favor of lessor Welsch.

Factual and Procedural Background

The subject of this oil and gas lease cancellation action is a lease covering the
northeast quarter and the north 80 acres of the east half of the west half of section 6,
township 26 south, range 17 west, in Edwards County. The lease was entered into on
May 23, 1975, and contained the following material provisions:

"2. Subject to the provisions herein contained, this lease shall
remain in force for a term of three (3) years from this date (called the
'primary term') and as long thereafter as oil, liquid hydrocarbons, gas or
other respective constituent products, or any of them, is produced from said
land or land with which said land is pooled.

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"3. The royalties to be paid by lessee are: (a) on oil, and other liquid
hydrocarbons saved at the well, one-eighth of that produced and saved from
said land . . . (b) on gas, including casinghead gas and all gaseous
substances, produced from said land and sold or used off the premises or in
the manufacture of gasoline or other products therefrom, the market value
at the mouth of the well of one-eighth of the gas so sold or used . . . and (c)
at any time either before or after the expiration of the primary term of this
lease, if there is a gas well or wells on the above land . . . and such well or
wells are shut in before or after production therefrom, lessee or any
assignee hereunder may pay or tender annually at the end of each yearly
period during which such gas well or gas wells are shut in, as substitute gas
royalty, a sum equal to the amount of delay rentals provided for in this
lease for the acreage then held under this lease by the party making such
payments or tenders, and if such payments or tenders are made it shall be
considered under all provisions of this lease that gas is being produced from
the leased premises in paying quantities. . . .
. . . .
"6. If, . . . after discovery of oil, liquid hydrocarbons, gas or their
respective constituent products, or any of them, the production thereof
should cease from any cause, this lease shall not terminate if lessee
commences reworking or additional drilling operations within sixty (60)
days thereafter. . . .
. . . .
"9. Lessee shall not be liable for delays or defaults in its performance
of any agreement or covenant hereunder due to force majeure. The term
'force majeure' as employed herein shall mean: any act of God . . .;
exhaustion or unavailability or delays in delivery of any product, labor,
service, or material."

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By declaration of unitization dated June 26, 1978, and pursuant to an express
provision in the lease, the lease acreage was unitized with adjoining leases to create a unit
of approximately 682.4 acres. The only producing well on the unitized acreage was the
gas well at issue herein.

In late August 2004, Trivestco shut in the gas well because the gas purchaser for
this well ceased making payments for produced gas. The well remained shut in until late
March 2007. In the interim, bankruptcy proceedings ensued involving the gas purchaser
and related entities. At no time during this 2 and 1/2-year period did Trivestco pay or
tender shut-in royalties to Welsch, nor did it attempt to recommence production or to
commence additional drilling activities at any time thereafter.

After Welsch made demand for release of the lease and negotiations between the
parties failed, Welsch brought this action to declare the lease terminated. After discovery
was concluded, both parties filed opposing summary judgment motions. The district
court denied Welsch's motion but sustained Trivestco's motion, thus resulting in the
preservation of the lease.

The district court justified its decision on multiple bases. First, it held that the
difficulties experienced by Trivestco with its gas purchaser "triggered the force majeure
clause in the lease, thereby suspending any provision of the lease which would otherwise
terminate it." The court also held that the "obligation to pay royalty is a covenant of a
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lease, not a condition," that "a forfeiture under the facts would represent a windfall to
[Welsch]," and that the lease therefore should not be terminated for failure to pay shut-in
royalties. Finally, the court held that because the cessation of production was temporary,
never intended to be permanent, and occurred for only a reasonable time, the cessation
did not warrant termination of the lease, applying the doctrine of temporary cessation of
production rather than the specific lease provision governing cessation of production.
Although the court refused to cancel the lease, the court granted judgment to Welsch for
payment of shut-in royalties of $706.

Welsch timely appeals.

Standards of Review

When the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of law, summary
judgment is appropriate. The district court is required to resolve all facts and inferences
which may reasonably be drawn from the evidence in favor of the party against whom the
ruling is sought. When opposing a motion for summary judgment, an adverse party must
come forward with evidence to establish a dispute as to a material fact. In order to
preclude summary judgment, the facts subject to the dispute must be material to the
conclusive issues in the case. On appeal, the same rules apply; summary judgment must
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be denied if reasonable minds could differ as to the conclusions drawn from the evidence.
Miller v. Westport Ins. Corp., 288 Kan. 27, 32, 200 P.3d 419 (2009). Where there is no
factual dispute, appellate review of an order regarding summary judgment is de novo.
Central Natural Resources v. Davis Operating Co., 288 Kan. 234, 240, 201 P.3d 680
(2009).

The interpretation and legal effect of a written contract are matters of law over
which an appellate court has unlimited review. Conner v. Occidental Fire & Cas. Co.,
281 Kan. 875, 881, 135 P.3d 1230 (2006). Regardless of the district court's construction
of a written contract, an appellate court may construe a written contract and determine its
legal effect. City of Arkansas City v. Bruton, 284 Kan. 815, 828-29, 166 P.3d 992 (2007).
These standards have application to the interpretation of oil and gas leases. Lauck Oil
Co. v. Breitenbach, 20 Kan. App. 2d 877, 878, 893 P.2d 286 (1995).

Did the District Court Err
in Holding the Shut-in Royalty Provision of the Lease to be a Covenant
that Limited Welsch to a Judgment for Unpaid Royalties
Instead of Lease Cancellation?

At the outset of our analysis, it is critical to recognize that oil and gas law is not so
much a unique body of law as it is a specialized application of contract law. The rights
and obligations of those operating in the Kansas oil patch are governed by the terms and
conditions of specialized contracts, and each dispute arising in this context can and
should usually be resolved by the construction and application of such contracts.
10 
 
Although parties to such disputes often seek to rely on and argue the application of case
law, we must decline to blindly apply what may appear to be legal principles within such
precedent without a preliminary determination whether the contract provisions at issue in
the cited authority are identical to those before us. This is particularly true in construing
a shut-in royalty clause. See Pray v. Premier Petroleum, Inc., 233 Kan. 351, 662 P.2d
255 (1983).

Notwithstanding the importance of the particular lease terms and conditions,
certain general characteristics of shut-in royalty clauses should be noted. The concept
underlying such clauses is to enable a lessee, under appropriate circumstances, to keep a
nonproducing lease in force by the payment of the shut-in royalty and that such a clause
by agreement of the parties creates constructive production. In this manner, the clause
can modify and become an integral part of the habendum clause, or extension clause, of
the lease. See Pray, 233 Kan. at 353. Our Supreme Court has provided a more detailed
history and use of such clauses in Tucker v. Hugoton Energy Corp., 253 Kan. 373, 380-
82, 855 P.2d 929 (1993).

Here, we begin our analysis by analyzing the shut-in royalty provisions of the
subject lease. First, we note that the provisions are not a part of the habendum clause but
rather are contained within the royalty clause. Second, we note that the provisions are
stated in language indicating that such payments are optional; that is, the lease provides
that the lessee "may" pay or tender such royalties rather than employing language of
11 
 
obligation. Third, we note that the provisions contain the saving clause that if such
royalties are paid, "it shall be considered under all provisions of this lease that gas is
being produced from the leased premises in paying quantities"; that is, payment of such
royalties—if elected by the lessee—is obviously intended to relate to the habendum
clause that preserves the lease in effect "as long thereafter as" production is achieved.
Finally, we note that production from the lease was achieved during the primary term,
and its cessation occurred well into the secondary term of the lease, where the habendum
clause required production for the term of the lease to continue. These unique features of
the shut-in royalty provisions are paramount to our construction and application of those
provisions to the factual circumstances here.

Generally, reliable authorities recognize that an option to pay shut-in gas
royalties—in contrast to an obligation to do so—can support cancellation where the
optional royalties are not paid. Generally, such an option is considered to create a special
limitation on the lease, and the failure to pay the shut-in royalties will terminate the lease.
See Pierce, Incorporating a Century of Oil and Gas Jurisprudence Into the "Modern" Oil
and Gas Lease, 33 Washburn L.J. 786, 811 (1994). According to the foremost treatise
authority, Williams & Meyers,

"[a]t first glance it might appear that lessees would prefer the
optional to the obligatory form of this clause. However where the optional
form is employed, the lease will provide, expressly or by implication, that
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the lease shall expire under the prescribed circumstances unless such
optional payment is made. In a number of cases lessees have lost valuable
leaseholds by reason of failure to make timely payment of the optional
shut-in royalty payment. It is for this reason that many such clauses
provide that a lease shall be preserved even though there is no production
or operations on the premises if a well capable of producing is shut-in; such
clauses impose a duty to pay shut-in royalty. " 3 Williams & Meyers, Oil
and Gas Law § 632.8, pp. 436-37 (2008).

See Amber Oil and Gas Co. v. Bratton, 711 S.W.2d 741, 743-44 (Tex. App. 1986)
(optional language creates special limitation on the lease grant, and failure to pay the
shut-in royalty when due results in termination); see also Greer v. Salmon, 82 N.M. 245,
247-51, 479 P.2d 294 (1970) (where optional rather than obligatory provision, failure to
pay resulted in automatic termination); Freeman v. Magnolia Pet. Co., 141 Tex. 274,
278-79, 171 S.W.2d 339 (Tex. 1943) (optional character of payment coupled with the
provision that it will be considered that gas is being produced if such payment is made
indicates that advance payment is required to keep the lease alive).

Indeed, here the lease does provide "by implication" that it will expire absent such
payment. In stating that "if such payments or tenders are made it shall be considered
under all provisions of this lease that gas is being produced," the lease implies that if such
payments are not made, the production requirement of the habendum clause is not
satisfied by reason of the shut-in well. In the absence of production in paying quantities,
the lease expires by its own terms. In construing a lease form that was apparently
13 
 
identical to the lease before us, the Texas Court of Civil Appeals held that failure to pay
the shut-in royalties causes the lease to expire. The court expressed its reasoning as
follows:

"According to the clause in the instant case, if a well is shut in, the
lessee may pay an annual royalty equal to the amount of the delay rentals,
in the same manner as payment of the delay rentals, and if such payment is
made, it shall be considered under all provisions of the lease that gas is
being produced in paying quantities for one year from the date of payment.
It was held in Freeman v. Magnolia Petroleum Co., 141 Tex. 274, 171
S.W.2d 339 (1943), that the optional character of payment coupled with the
provision that it will be considered that gas is being produced if such
payment is made indicates that advance payment is required to keep the
lease alive. [Citations omitted.]" Marifarms Oil & Gas, Inc. v. Westhoff,
802 S.W. 2d 123, 125-26 (Tex. App. 1991).

Here, the district court held that the shut-in provisions should be construed as a
covenant rather than a condition or special limitation of the lease and, therefore, limited
the lessor to money damages rather than lease termination. We respectfully disagree with
this conclusion, not only because of the weight of the authorities cited above but because
the phrase "may pay or tender" simply does not express any language of obligation. The
term "may" is commonly understood to mean "is permitted to" in the discretionary or
permissive sense. Black's Law Dictionary 993 (7th ed. 1999). Trivestco is unable to cite
any Kansas case law to suggest that our courts have at any time recognized "may" as a
14 
 
term of obligation, and we find none as well. In contrast, our appellate courts have often
recognized that the term "may" connotes only an option or an election. State ex rel.
Secretary of SRS v. Jackson, 249 Kan. 635, 641-42, 822 P.2d 1033 (1991) (discussing the
definitions of "shall" and "may" and stating that the word "may" is usually "employed to
imply permissive, optional or discretional, and not mandatory action or conduct." The
court stated that as a general rule the word "may" will not be treated as a word of
command unless the context or subject matter indicates it should be treated as such.). We
decline to construe the language of the clause here as a covenant.

Finally, the district court concluded that payment under the shut-in provisions here
must be construed as a royalty rather than a rental and that the obligation to pay royalties
is generally considered a covenant rather than a condition of the oil and gas lease, citing
Cherokee Resources, Inc. v. Gold Energy Corp., 11 Kan. App. 2d 436, 724 P.2d 695
(1986). We respectfully disagree that characterization of the shut-in payment (which
was not made here) as a royalty is somehow determinative of the issue before us. In
Cherokee Resources, a panel of our court was faced with a guaranteed minimum royalty
clause in an oil and gas lease and addressed the question of who should pay such
minimum royalties when the acreage covered by the lease was divided by assignment,
and producing wells were located on only 80 acres within the 240-acre tract. The only
clause at issue was a guaranteed royalty clause, and there was no claim or question about
the impact of nonpayment on the lease. We simply do not view the decision in Cherokee
Resources as in any way instructive or dispositive to the issues before us. Moreover,
15 
 
neither the characterization of a shut-in payment as royalty nor the location of shut-in
provisions within the royalty provisions of a lease is determinative of any aspect of
construction of such provisions other than questions related to who may be entitled to the
proceeds from such payment. See 3 Williams & Meyers, Oil and Gas Law § 632.9, pp.
438-440.1.

In summary, the lease before us provided to Trivestco an option to pay shut-in
royalty payments in order to allow the only well on the leased acreage to be "considered"
to produce gas in paying quantities sufficient to satisfy the habendum clause and extend
the lease in full effect. The language of the clause created a special limitation on the
lease, and failure to exercise the option directly affected the life of the lease. It is beyond
dispute that Trivestco did not exercise this option, and the result is that the shut-in royalty
provisions of this lease did not preserve the lease and it expired by its own terms on May
22, 2005, unless some other aspect of the lease saved it from such expiration. We
examine other lease clauses and potentially applicable doctrines to determine whether the
lease was otherwise preserved.

Did the District Court Err
in Holding the Lease Was Preserved
by the Doctrine of Temporary Cessation of Production?

Welsch argues the district court erred in generally applying the doctrine of
temporary cessation of production as a legal basis to avoid expiration of the oil and gas
16 
 
lease. The doctrine has been recognized in Kansas as dictating that a mere temporary
cessation of production because of necessary developments or operations do not result in
the termination of the oil and gas lease, despite the requirement of production to satisfy
the habendum clause. See Wilson v. Holm, 164 Kan. 229, Syl. ¶ 6, 188 P.2d 899 (1948).
So long as the cessation is temporary, the doctrine allows the lessee a reasonable time to
recommence production in paying quantities. See Wrestler v. Colt, 7 Kan. App. 2d 553,
558, 644 P.2d 1342 (1982). Here, the district court determined that the cessation was
temporary rather than permanent and that renewed production was achieved in a
reasonable time, thus preserving the lease under the doctrine.

The problem with the court's rationale is best articulated by amici curiae's
argument that the doctrine cannot be applied where the parties have expressly contracted
for a particular result in the event of production cessation. Indeed, here the oil and gas
lease contained express provisions governing temporary cessation of production, and the
period for recommencement or additional development was specified to be 60 days.
According to amici curiae:

"A producer simply cannot invoke the doctrine of temporary
cessation to avoid complying with a provision that requires it to
recommence production within a specified period of time. See Pierce,
[Kansas Oil and Gas Handbook], at § 11.16 [1991] (cessation clause
'eliminate[s] the permanent/temporary cessation issue [by] substitut[ing] a
definite time frame, such as 'within sixty (60) days . . . .'; [3] Williams &
17 
 
Meyers, [Oil and Gas Law], at §616.2, pp. 283-84 ('If the lease specifically
provides that, in the event of cessation of production, it may be preserved by
new operations commenced within some specific period of time (e.g., 60
days), then it is difficult to support the contention that the lease may be
preserved for a longer period of time without any drilling operations thereon
by reason of the "temporary cessation of production" doctrine [ ] . . . .')."

We agree and adopt this reasoning and the authorities cited in support of our
conclusion that the district court erred in applying the doctrine here in lieu of the express
contract provision. The oil and gas lease provided that if production of gas ceases "from
any cause," then the lessee had 60 days to commence reworking or additional drilling
operations in order to prevent termination of the lease. The gas well at issue ceased
producing and was shut in on August 31, 2004. In the absence of any record evidence
that rework or additional drilling occurred prior to October 31, 2004, the lease was not
subject to being preserved by the cessation of production clause within the lease.

Moreover, we note in passing that some authorities have suggested that a
temporary cessation of production clause does not save a lease where the cessation could
have been saved by the shut-in royalty provisions of the same lease.

"[T]he constructive production achieved by the payment of shut-in gas
royalty is not the production to which the cessation of production clause
applies and thus such clause would not apply to a cessation of constructive
18 
 
production that results from a failure to make payment of the shut-in gas
royalty." 4 Kuntz, Oil and Gas § 47.3(f)(2), p. 112 (Thornton rev. 1990).

See also Marifarms Oil & Gas, 802 S.W.2d at 125-26 (if a lease contains both a cessation
of production clause and a shut-in royalty provision, then to preserve the lease it is
required to make the shut-in royalty payment within the time period stated in the
cessation of production clause); Duke v. Sun Oil Company, 320 F.2d 853, 858-59 (5th
Cir.), (the shut-in royalty payment must be paid within the time given in the cessation of
production clause or else the lease terminates), reh'g granted on factual questions of
proper anniversary date and timeliness of tender 323 F.2d 518 (5th Cir.1963).

Finally, we note that the district court considered equitable factors in determining
whether to terminate the lease. We concede that the law abhors a forfeiture, but our
Supreme Court has held that where an action is one to determine the continued validity of
the lease under its own terms and not an equitable action to declare the forfeiture of an
existing lease, the court has no power to extend a lease beyond the term which the parties
have fixed by their written contract. Reese Enterprises, Inc. v. Lawson, 220 Kan. 300,
Syl. ¶ 9, 553 P.2d 885 (1976). Accordingly, equitable factors, such as those recognized
by M & C Oil, Inc. v. Geffert, 21 Kan. App. 2d 267, Syl. ¶¶ 3-5, 897 P.2d 191 (1995), are
not applicable to the situation before us.

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We conclude the district court erred in applying the doctrine of temporary
cessation of production in lieu of the express provision in the lease governing the same
eventuality. Here, the lease was certainly not preserved by the express temporary
cessation of production clause because there was no recommencement or additional
drilling activity within the 60 days specified and agreed within the lease.

Did the District Court Err
In Applying the Force Majeure Clause
To Preserve the Oil and Gas Lease

Finally, Welsch argues that the district court improperly applied the force majeure
provisions of the oil and gas lease to avoid its expiration. The district court held that the
difficulties with the gas purchaser, including bankruptcy, were "factual events [that]
triggered the force majeure clause in the lease, thereby suspending any provision of the
lease which would otherwise terminate it." Again, we respectfully disagree.

First, we note that the bankruptcy of a purchaser is generally covered by the shut-
in royalty clause, not the force majeure clause. Pierce, Kansas Oil and Gas Handbook §
11.18, p. 11-20 (1991) (a lessee seldom has control over the demand for production from
a well, and this is why the shut-in royalty clause was devised); see also United States v.
Panhandle Eastern Corp., 693 F. Supp. 88, 96 (D. Del. 1988) (surveying the law
regarding the question whether market forces may constitute force majeure and
concluding that courts generally refuse to excuse performance under such a theory);
20 
 
Champlin Petroleum Co. v. Mingo Oil Producers, 628 F. Supp. 557, 560-61 (D. Wyo.
1986) (bankruptcy proceedings of lessee's subassignee did not constitute force majeure
but inherently the result of financial problems). For these reasons, we are not convinced
the financial issues of a gas purchaser should be considered a force majeure event under
this lease.

More importantly, however, we note that even if the unavailability of purchasing
and transportation services would constitute a force majeure event under the express
provisions of the lease, the clause simply does not excuse the failure to pay shut-in
royalties. The clause states that "lessee shall not be liable for delays or defaults in its
performance of any agreement or covenant hereunder due to force majeure." (Emphasis
added.) The performance default that caused the lease to expire was the failure to pay
shut-in royalties, and that default was not due to any force majeure event.

In the context of legal instruments, the phrase "due to" has long been synonymous
with the phrases "caused by," "because of," and "resulting from." See Black's Law
Dictionary 501 (6th ed. 1990); Webster's Third New International Dictionary 699 (1993);
Federal Life Ins. Co. v. White, 23 S.W.2d 832, 834 (Tex. Civ. App. 1929).

In order for the force majeure clause to prevent the lease from terminating, the
default (failure to pay shut-in royalties) must be the result of the force majeure event,
here the unavailability of gas purchasing services. The unavailability of such purchasing
21 
 
22 
 
and transporting services simply did not prevent Trivestco from paying shut-in royalties;
therefore, the force majeure clause was not triggered.

The district court erred in determining that the force majeure clause was triggered
because of the unavailability of purchasing and transportation services. Even if
unavailability of services had been a force majeure event, the failure to exercise an option
to pay shut-in royalties was not due to this purported force majeure event; thus the clause
has no application here.

Summary and Conclusion

We have concluded that the oil and gas lease at issue expired by its own terms
when production from the only producing well on the acreage ceased due to financial
failure of the gas purchaser, the well was shut in, production was not recommenced nor
was additional drilling achieved within the 60 days required under the lease, shut-in
royalty payments were not paid on or before May 22, 2005, and the failure to pay or
tender such shut-in royalty payments was not due to any force majeure event. For these
reasons, the district court must be reversed and the matter remanded with directions to
enter judgment of lease cancellation to lessor Welsch.

Reversed and remanded with directions.