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On May 23, 2025, the Texas Supreme Court issued a long-awaited opinion in Cromwell v. Anadarko E&P Onshore, LLC, in which it held that two habendum clauses written in the passive voice did not specifically require production by the lessee, but instead could be perpetuated by production from anyone on the leased premises. This case concerns two oil and gas leases that contained habendum clauses that provided that the leases shall continue so long as minerals are produced; however, the leases did not specify who must produce the minerals. As such, the Court considered whether David W. Cromwell, the lessee, must produce the minerals himself to perpetuate his leases. Because the leases did not require Cromwell to personally produce the minerals and there was continuous production in paying quantities on the property under another oil and gas lease, the Court determined that Cromwell’s leases did not terminate.
Cromwell and Anadarko E&P Onshore, LLC (“Anadarko”) both own working interests on the same land in Loving County, Texas (the “Subject Land”) and, as such, are co-tenants in the mineral estate. Anadarko obtained its interest in the Subject Land and drilled three wells thereon prior to Cromwell obtaining his working interest. After Cromwell obtained his interest in the Subject Land, Anadarko drilled three additional wells.
In February and March of 2009, Cromwell executed two leases, one with Carmen Ferrer (the “Ferrer Lease”) and one with the Tantalo Trust (the “Tantalo Lease”), that contained similar habendum clauses, both of which were written in the passive voice. The Ferrer Lease’s habendum clause read:
This lease . . . shall be in force for a term of three (3) years from this date (called “primary term”) and as long thereafter as oil, gas or minerals are produced from said land, or land with which said land is pooled hereunder, or as long as this lease is continued in effect as otherwise herein provided.
The Tantalo Lease’s habendum clause provides:
Subject to other provisions contained herein, this lease shall be for a term of five (5) years from the date first above written (hereinafter called the “primary term”) and as long thereafter as oil, gas, liquid hydrocarbons or their constituent products, or any of them, is produced in commercial paying quantities from the lands leased hereby.
Following the execution of the Ferrer Lease and the Tantalo Lease, Cromwell submitted same to Anadarko and requested to participate in Anadarko’s wells, but Anadarko never responded to Cromwell’s request. Over a nine-year period, Cromwell sent between eight and ten requests to Anadarko seeking to enter a joint operating agreement (“JOA”) and participate in production from the Subject Land. Anadarko never sent Cromwell a JOA. However, when one of the wells reached payout in August 2009, Anadarko sent Cromwell a request to confirm his net working interest in the well. Beginning in September 2009, Anadarko sent Cromwell monthly joint interest billing (“JIBs”), which itemized Cromwell’s share of the revenues and expenses for the well that had reached payout. Cromwell paid his share of the costs for the months in which costs exceeded revenues, and Anadarko paid Cromwell his proportionate share of the proceeds for the months in which revenues exceeded costs. This pattern continued from September 2009 through this lawsuit. Additionally, Anadarko sent Cromwell an authorization for expenditure (“AFE”), which stated that it was sent “[p]ursuant to the terms of the governing Operating Agreement,” for a new compressor for one of the wells. Cromwell elected to participate in the installation of the new compressor by signing the AFE and paid his proportionate share. Moreover, Anadarko referred to Cromwell as “working interest owner” in one of the wells in its correspondence.
The Ferrer Lease’s primary term ended in February 2012 and the Tantalo Lease’s primary term ended in March 2014. Anadarko argues that because Cromwell did not personally cause production on the Subject Land, the Ferrer Lease and the Tantalo Lease terminated at the end of their primary terms. Following the end of the primary terms of both leases, Anadarko continued to send Cromwell JIBs, and its internal records and continued to refer to Cromwell as a working interest owner who had leases that were held by production. Nonetheless, in 2017, Anadarko executed top leases with Cromwell’s lessors, attempting to washout Cromwell’s interests. Over a year later, Cromwell inquired about his interest in a well, and Anadarko responded that (1) Cromwell’s leases had expired “[d]ue to the passage of time” and Anadarko’s “never receiv[ing] from [Cromwell]” a JOA or AFE, and (2) Cromwell’s interests were leased to “[third] parties thereafter,” i.e., to Anadarko.
Cromwell sued Anadarko for various causes of action, including declaratory relief and trespass to try title. Cromwell and Anadarko both agreed that production in paying quantities occurred on the Subject Land at all relevant times. However, the parties disagree on whether Cromwell’s leases expired because Cromwell himself did not produce minerals from the Subject Land. The parties each moved for summary judgment on the issue of whether Cromwell’s leases terminated. The trial court granted Anadarko’s motion, denied Cromwell’s motion, and rendered judgment in favor of Anadarko that Cromwell take nothing. The court of appeals affirmed and held that Cromwell’s leases had automatically terminated at the end of their primary terms due to Cromwell’s failure to personally produce minerals in paying quantities during the primary term. Relying primarily on Cimarex Energy Co. v. Anadarko Petroleum Corp., 574 S.W.3d 73 (Tex. App.—El Paso 2019, pet. denied), the court of appeals concluded that even though the plain language of the habendum clauses did not identify who needed to cause production, Cromwell himself needed to have taken action to cause production on the Subject Land to perpetuate the leases. The court of appeals chalked up Cromwell’s payment of the JIBs and the AFE as nothing more than reflecting Cromwell’s payment of those types of operating expenses that non-participating co-tenants typically owe. On review, the Supreme Court of Texas reversed and held that the plain language of the Ferrer Lease and the Tantalo Lease habendum clauses did not require Cromwell to personally produce on the Subject Land to maintain his interest. Moreover, the Court overruled Cimarex to the extent it holds otherwise.
To determine the meaning of the habendum clauses, the Court applied general principles of contract interpretation. Both the Ferrer Lease and the Tantalo Lease’s habendum clauses were written in the passive voice and provided that leases would automatically terminate if minerals are not produced from the Subject Land at the end of the primary term or at any point during the secondary term. The Court examined the plain language of the clauses, which did not specify who must produce for the leases to continue, and it noted that had the parties intended, they could have written the Ferrer Lease and the Tantalo Lease’s habendum clauses to provide that the leases shall continue “as long as oil or gas is produced by the lessee.” But they did not, and the Court declined to rewrite the leases. Because the leases did not require Cromwell himself to cause production and production in paying quantities occurred on the Subject Land at all relevant times, the Court held that Cromwell’s leases did not terminate. The Court explained that its holding did not leave Anadarko without a remedy. Because Cromwell and Anadarko are oil-and-gas co-tenants, the Court stated that Anadarko could sue Cromwell for an accounting if Cromwell were to refuse to pay his proportionate share of the operating expenses.
Notably, the Court went further and stated that it disapproves of a string of cases on which the court of appeals relied—Mattison v. Trotti, 262 F.2d 339 (5th Cir. 1959), Hughes v. Cantwell, 540 S.W.2d 742 (Tex. Civ. App.—El Paso 1976, writ ref’d n.r.e.), and the aforementioned Cimarex Energy Co. v. Anadarko Petroleum Corp., 574 S.W.3d 73 (Tex. App.—El Paso 2019, pet. denied)—to the extent that they hold that a passive-voice habendum clause automatically requires production by the lessee. The Court determined that each of these opinions departed from the plain language of the lease and their rationale “rest[ed] on shaky foundation.” Each of these cases rested on the “incorrect[] premise[]” set forth by the Fifth Circuit in Mattison: that the prime consideration of the lease is the drilling for and production of minerals. The Court corrected this premise and provided that “the ‘vital consideration’ in an oil-and-gas lease is ‘royalties on mineral production.’”
For further questions regarding this update, contact Liskow attorneys Jana Grauberger, J.T. Kittrell, Sam Allen, and Margaret Chavez, and visit our Energy Litigation practice page.