Krabbe v. Anadarko Petroleum Corp.
46 S.W.3d 308 | Texas Court of Appeals, 7th District (Amarillo) | 2001
What This Case Means for Subcontractors
Oil and gas lessors sued to terminate a lease after the lessee (Anadarko) temporarily stopped production due to processing plant shutdowns. The Texas court ruled the lease remained valid because temporary production stops caused by mechanical issues or equipment failures don't trigger lease termination if the operator acts diligently to restart. This protects operators from losing their rights during unavoidable operational interruptions.
Key Takeaways
- •Temporary shutdowns for maintenance, equipment failure, or force majeure events don't automatically kill a lease if you resume work promptly and in good faith
- •Document your diligence: keep records showing you're actively working to restart operations after any production stoppage to prove good faith compliance
- •Lease language matters—this lease had no shut-in clause or cessation provision, which strengthened the operator's position; review your contract terms carefully
Temporary cessation of production doctrine excuses cessations due to mechanical breakdown or the like.
Frequently Asked Question
If our equipment breaks down and we stop production temporarily, can the property owner terminate our lease?
No, not if you act diligently and in good faith to restart production within a reasonable time. Courts recognize that temporary mechanical breakdowns and shutdowns are normal business interruptions. However, you must document your efforts to resume operations quickly—passive inaction won't be excused.
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