Nature of the Case
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Facts
Ps or their predecessors in interest entered into oil and gas leases with Ds. Each of the leases contained similar provisions including a habendum clause, a shut-in or minimum royalty clause, and a 60-day cessation of production clause. The habendum clause provides for the primary term of the lease to be for ten (10) years and 'as long thereafter as oil, gas, casing head gas, casing head gasoline or any of them is produced.' The shut-in royalty clause provides for a fifty-dollar ($50.00) royalty payment per year for each well from which gas is not sold. When the royalty payment is paid, the well is deemed a producing well for purposes of the habendum clause. The cessation of production clause provides for the lease to continue after the expiration of the primary term as long as production does not cease for more than sixty (60) days without Ds' resuming operations to drill a new well. The leases expired, and the leases continued pursuant to the habendum clause due to the wells' capability to produce in paying or commercial quantities. All of the wells continued to be capable of producing in paying quantities up until the time of trial. Ds chose at times not to market gas from the wells for periods exceeding sixty (60) days. Ds stipulated that they chose to overproduce the wells during the winter months when the demand for gas is higher and the price for gas increases. The Oklahoma Corporation Commission imposed annual allowable limitations as to how much gas may be produced from the wells, Ds curtailed the marketing of gas from the wells during the summer months when prices were lower so as not to exceed the annual allowable limits. Ds simply wanted to obtain the highest price for the gas and still stay within the allowable production limits set by the Oklahoma Corporation Commission. Such a practice is common with most of the gas producers in the state. The wells were not profitable during the summer periods. In addition, the P well was shut-in for one month during this period in order to build up pressure in preparation for an annual well test to determine its annual allowable limit. Ps filed suit in district court asserting the leases terminated by their own terms when the wells failed to produce for a sixty (60) day period and Ds' neither commenced drilling operations nor paid shut-in royalty payments. The trial court determined that an interruption in the sale and marketing of gas from the wells in excess of sixty (60) days constituted a cessation of production within the meaning of the cessation of production clause resulting in a termination of the leases. Ds appealed.
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