Shut In Royalties Pooling Provision (Lease)
What would be the result of failing to pay shut-in royalties for the pooled acreage ?
This question has been answered by the Commission of Appeals in 1930. Duff v. Du Bose 27 S.W.2d 122, 124 (Tex. Comm'n App. 1930, judgm't affirmed).
The Court held that acreage not held by pooling reverted to or was controlled by the other provisions of the lease.
Thus, if for some reason the pooled acreage was no longer held under the pooling provision of the lease, it is still part of the acreage leased, and thus, one must determine what is the status of the underlying lease to determine if the lease has terminated as to the pooled acreage.
In Duff the lease had a continuous operations clause.
At the time the pooling agreement ended, the lessee did not commence operations and the Court held that the lease expired by its terms.
As the Court explained:
When the lease was reconveyed to the defendant [after the pooling agreement was canceled] there was no production of any character from the land, and there has been no production nor effort to obtain production since it was reconveyed to the defendant, and neither have any rentals been paid or tendered.
Such being the case the lease has forfeited and terminated by its own terms.Id.