Oil and Gas Lease: Habendum Clause; Retained Acreage Clause

摘要

Schwatken leases 2,366 acres to Explorer Resources, Inc. for a primary term of three years and so long as "oil or gas ... is produced... or drilling operations are continued as hereinafter provided." The drilling clause extends the lease "so long as . . .drilling operations are being continuously prosecuted on the leased premises. . . ." Explorer contends it extended the lease beyond the primary term by complying with the drilling clause. Explorer commences drilling ten days prior to the end of the three-year primary and completes the first well ten days after the end of the primary term. Schwatken asserts the lease terminates pursuant to a clause, paragraph 18, it drafted into the lease which states: "It agreed that at the end of the primary term, this lease shall expire as to all lands located outside of a producing unit" Their theory is: '"producing unit' means the portion of land immediately surrounding a producing well." Since there is no "producing well" at the end of the primary term, Schwatken argues there is no "producing unit" The trial court grants Explorer's motion for summary judgment. Held: affirmed. The court of appeals recites a number of constructional guides before rejecting Schwatken's interpretation of the lease. The court observes that although Explorer tendered the form lease, Schwatken is the party mat drafted paragraph 18 which the court finds to be in conflict with the habendum clause. The court relies on these observations to conclude: (1) any doubts regarding the meaning of paragraph 18 should be resolved against Schwatken; (2) paragraph 18 creates an "irreconcilable conflict" with the habendum clause and in such cases the habendum clause terms should control; (3) Schwatken's interpretation would result in a forfeiture; and (4) a "reasonable person in the position of the lessee" would not interpret paragraph 18 as limiting the habendum clause in the manner contended by Schwatken.