A month after hearing oral argument on four cross-motions for partial summary judgment, Judge Ezra issued a 94-page opinion that narrowed the claims to be tried in this oil and gas lease dispute.
The primary issue was whether the leases had terminated or remained extant by operation of their shut-in royalty clauses. The pertinent clause in each lease provided that wells “capable of producing oil and gas . . . in paying quantities” were shut-in the lessee could maintain the lease by paying a shut-in royalty of a dollar an acre within 90 days of being shut-in. Slip op. at 13-14. The District Court determined that there were genuine issues of material fact regarding the “Well’s capability of production in paying quantities.” Id. at 40. But the District Court concluded that (a) no shut-in royalties were paid during the primary term of the leases, (b) the only well was shut-in on June 2, 2010, making the shut-in royalties due on August 31, 2010, and (c) EnerQuest failed to tender payment beforehand, meaning the leases terminated according to their terms. Id. at 72.
In an amended complaint, EnerQuest claimed trespass and other causes of action related to EOG Resources’ unauthorized three-dimensional seismic program on a portion of the leased property. Slip op. at 73-74. EOG Resources moved for summary judgment on the grounds that they claim was barred by the two-year statute of limitations for trespass to real property. Id. at 74. The District Court rejected EnerQuest’s argument that these claims relate back to the filing of its original complaint, as well as its efforts to invoke tolling doctrines to the claim. Id. at 75-92. The District Court therefore dismissed these claims. Id. at 92-94.