Zavanna v. Gadeco

Citations

• 994 N.W.2d 133
• 2023 ND 142

Syllabus

The plaintiff bears the burden of proof on its quiet title claim. Where the plaintiff owns a top lease and the defendant owns a bottom lease covering the same oil and gas leasehold interest, the plaintiff bears the burden to prove the bottom lease terminated by its own terms. If the bottom lease contains a cessation of production clause, the plaintiff must prove production ceased for the specified period. Oil and gas leases are interpreted in the same manner as other contracts. When left undefined, \production\ in a savings clause means production in paying quantities, which generally requires a court to consider whether the well yielded a profit over operating costs over a reasonable period of time. As a matter of law, a de minimis amount of production does not equate to production in paying quantities. Where profitability of the well is not at issue so as to affect when production in paying quantities ceased, cessation commences on the first day of no production and ends on the last day of no production. If a total cessation of production exceeds the time period established in the lease's cessation of production clause, the lease terminates unless it provides conditions preventing termination. In this case, a total cessation of production, including de minimis amounts, triggered the cessation of production clause requiring the well operator to timely commence reworking operations. Reworking operations must be intimately connected with resolving the physical difficulty that caused the well to cease production, and the well operator must exercise due diligence and make a bona fide effort to restore production as soon as possible. Minimal preparatory steps, such as diagnosing the failure and ordering parts, do not constitute commencement of reworking operations. An express force majeure clause in a contract must be accompanied by proof that the failure to perform was proximately caused by a contingency and that, in spite of skill, diligence, and good faith on the pro