Oag v. Desert Gas Exploration Co.

Oag and other landowners (plaintiffs) leased oil-and-gas rights, with the lease providing shut-in royalty payments when there was no production. Desert Gas (defendant) was assigned a portion of the lease on which no wells were producing, though other wells on the retained portion of the lease were producing. The plaintiffs sought shut-in royalties from Desert Gas for the non-producing assigned portion.

Whether, when an oil-and-gas lessee assigns a portion of its lease interest and obtains production on the portion it retains, that production also satisfies the habendum clause for the assigned portion.