Nature of the Case
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Facts
On June 21, 1990, D was assigned an interest in a portion of an oil and gas lease on Ps' property. The assigned units were originally part of a larger lease granting exclusive rights to drill for, produce, and market oil and gas upon the land. No wells are producing on D’s assigned land but there are 8 wells producing on the rest of the original lease premises and P is receiving royalties from them. Plaintiffs commenced this action seeking compensatory damages for breach of an oil and gas lease covering D’s lease, rescission of the lease, and a declaration that the lease is null and void. Ps demanded the shut-in payments as there were no producing wells on D’s property. The court granted summary judgment in favor of D declaring that the subject oil and gas lease is in full force and effect. The court applied the general rule prevailing in all oil and gas producing States except Louisiana that, in an oil and gas lease, 'the habendum clause, and modifying clauses of the habendum clause such as the well completion, continuous drilling, shut-in royalty, and dry hole clauses, are treated as being indivisible.' Ps appealed.
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