Date: Mar 13, 2025

Passive-Voice Habendum Clauses Do Not Imply a “Produced by the Lessee” Requirement

I. Introduction

In DAVID W. CROMWELL v. ANADARKO E&P ONSHORE, LLC, the Supreme Court of Texas addressed a recurring oil-and-gas lease question with outsized title consequences: when a habendum clause says a lease continues “as long as” minerals “are produced,” but does not specify who must produce, does the lease nevertheless terminate unless the lessee personally causes production?

The dispute arose between co-tenants in a Loving County working interest: David W. Cromwell (a non-operating interest holder under two paid-up leases) and Anadarko E&P Onshore, LLC (the operator). Anadarko drilled and produced continuously in commercial paying quantities. Yet Anadarko later asserted Cromwell’s leases expired at the end of their primary terms because Cromwell did not personally “cause” production—then took “top leases” from Cromwell’s lessors and treated Cromwell as terminated.

The central issues were (1) whether passive-voice habendum clauses imply a requirement that production be “by the lessee,” (2) whether Cromwell preserved that argument despite adverse intermediate appellate precedent, and (3) whether an additional clause in one lease (Paragraph 16) changed the result.

II. Summary of the Opinion

The Court reversed the court of appeals and held that the two leases did not automatically terminate at the end of their primary terms. Because the habendum clauses provided that the leases continue “as long thereafter as” minerals “are produced” (or “is produced in commercial paying quantities”) and did not identify the producer, the clauses were satisfied so long as production occurred on the land—regardless of whether Cromwell personally caused it.

The Court further held that Cromwell preserved his “passive voice” argument, construed ambiguity in Paragraph 16 of the Tantalo Lease against forfeiture, and disapproved the line of cases requiring lessee-driven production from passive-voice habendum clauses—Mattison v. Trotti, Hughes v. Cantwell, and Cimarex Energy Co. v. Anadarko Petroleum Corp.—to the extent they held otherwise. The case was remanded for the trial court to address remaining issues.

III. Analysis

A. Precedents Cited

1. Contract interpretation and textual primacy

Endeavor Energy Res., L.P. v. Energen Res. Corp. and Anadarko Petroleum Corp. v. Thompson supplied the baseline: oil-and-gas leases are contracts construed de novo from their text.
URI, Inc. v. Kleberg County anchored the Court’s objective “ordinary person” meaning approach, and First Bank v. Brumitt supplied a key constraint: surrounding circumstances cannot make a contract “say what it unambiguously does not say.”
Tenneco Inc. v. Enter. Prods. Co. and Am. Midstream (Ala. Intrastate), LLC v. Rainbow Energy Mktg. Corp. reinforced that courts do not rewrite or “blue-pencil” parties’ terms to add missing requirements.
U.S. Polyco, Inc. v. Tex. Cent. Bus. Lines Corp. was used to reject the court of appeals’ method of elevating the lease’s broad “purpose” language over the controlling duration language in the habendum clause.

2. Habendum clauses, forfeiture, and the anti-forfeiture canon

BP Am. Prod. Co. v. Red Deer Res., LLC framed the inquiry: lease termination depends on intent drawn from the lease “as a whole,” but still expressed through the text.
Endeavor Energy Res., L.P. v. Discovery Operating, Inc. and Anadarko Petroleum Corp. v. Thompson provided the taxonomy: the habendum clause can create a special limitation that causes automatic termination on a stated event.
The Court invoked the anti-forfeiture principle from Anadarko Petroleum Corp. v. Thompson (citing Fox v. Thoreson): a special limitation will not be found (or expanded) unless the termination-triggering language is “clear, precise, and unequivocal.”
Endeavor Energy Res., L.P. v. Energen Res. Corp. supported use of “default rules of construction” after textual tools are exhausted; Rogers v. Ricane Enters., Inc. supplied the formulation that doubts are resolved against termination conditions.

3. The Court’s repudiation of the passive-voice termination line

The court of appeals relied on Cimarex Energy Co. v. Anadarko Petroleum Corp., which in turn leaned on Hughes v. Cantwell, which traced back to the Fifth Circuit’s Erie-guess in Mattison v. Trotti. The Supreme Court of Texas rejected their approach because it inserted a lessee-production requirement absent from the habendum text.
The Court also undermined Mattison’s premise about “prime consideration,” citing Texas Co. v. Davis for the correct principle: the “vital consideration” is royalties on production, not necessarily who performs the producing acts.

4. Preservation/forfeiture doctrine

The Court applied TEX. R. APP. P. 38.1(f), and relied on Perry v. Cohen and Li v. Pemberton Park Cmty. Ass'n to hold that an issue statement covers subsidiary questions and permits refined arguments on appeal.
On terminology, the Court distinguished waiver vs. forfeiture using Bertucci v. Watkins, Roccaforte v. Jefferson County, and United States v. Olano.

5. Co-tenancy remedies as the proper “backstop”

To address fairness concerns (a non-operating co-tenant “free-riding”), the Court pointed to standard accounting principles from Cox v. Davison: the producing co-tenant may recover reasonable and necessary costs of production/marketing from the non-producing co-tenant. Termination of leases was not the remedy.

6. Other cited authorities (contextual definitions)

Paradigm Oil, Inc. v. Retamco Operating, Inc. (quoting Stable Energy, L.P. v. Newberry) was used to define “working interest.”
BP Am. Prod. Co. v. Laddex, Ltd. provided the definition of a “top lease.”
Cosgrove v. Cade was invoked to justify a bright-line, text-forward approach in property/ title matters.
The Court also contrasted habendum clauses that expressly require production “by the lessee,” citing: Ridge Oil Co. v. Guinn Invs., Inc., Fleming v. Ashcroft, W.T. Waggoner Est. v. Sigler Oil Co., and Willson v. Superior Oil Co..

B. Legal Reasoning

Text controls duration. The Court treated the habendum clause as the operative duration provision. Both leases said they continue into the secondary term “as long thereafter as” minerals “are/is produced” from the land (in commercial paying quantities for Tantalo). That condition was satisfied because Anadarko’s wells produced continuously.
No implied “by the lessee” term from passive voice. The Court emphasized that the clauses could have included “produced by the lessee” (as many forms do), but did not. Under Brumitt, Tenneco, and Am. Midstream, the judiciary cannot add that missing limitation, especially where adding it would cause forfeiture.
Purpose language cannot override clear operative language. The court of appeals inferred a personal-duty-to-produce from recitals about “exploring” and “drilling.” Relying on U.S. Polyco, the Court rejected that move: courts are not empowered to realign provisions to fit a perceived overarching “purpose,” particularly when the controlling clause already addresses duration.
Paragraph 16 (Tantalo) did not mandate automatic termination. Paragraph 16 spoke in terms of what “Lessee has obtained” and was “[s]ubject to” other paragraphs that were themselves passive and circularly “[s]ubject to” Paragraph 16. The Court found ambiguity and applied the anti-forfeiture canon: ambiguous language will not be read as a “special limitation” that automatically terminates the lease. Instead, the Court construed Paragraph 16 as a covenant—enforceable (if at all) through damages or conditional cancellation, not automatic expiration.
Doctrinal cleanup: disapproval of Mattison/Hughes/Cimarex. The Court expressly disapproved Mattison v. Trotti, Hughes v. Cantwell, and Cimarex Energy Co. v. Anadarko Petroleum Corp. to the extent they infer a lessee-production requirement from passive-voice habendum clauses. It faulted those cases for departing from plain text and for relying on a mistaken view of what consideration is “vital” in oil-and-gas leasing (corrected by Texas Co. v. Davis).
Equitable/functional concerns addressed by co-tenancy accounting, not forfeiture. If a non-operating co-tenant fails to pay costs, the producing co-tenant’s remedy lies in accounting under Cox v. Davison, not in rewriting lease termination rules.

C. Impact

Bright-line rule for Texas lease titles. The decision supplies a predictable rule: where the habendum clause is silent on who must produce, continuous production from the land satisfies the clause without requiring lessee-driven operations. This reduces “gotcha” forfeitures and stabilizes chains of title—consistent with Cosgrove v. Cade.
Limits operators’ ability to “expire” non-operators through nonparticipation. Operators can no longer rely on the Cimarex theory to argue that a non-operating lessee’s interest ends merely because the operator did the producing while also withholding operating agreements or participation mechanisms.
Drafting consequences. Parties who intend that only lessee-driven production maintains the lease must say so expressly (e.g., “produced by the lessee”), as illustrated by the Court’s citations to leases that include that language.
Recharacterization of “extension” clauses. The treatment of Paragraph 16 signals that “extension beyond primary term” provisions that are internally inconsistent or circular may be construed as covenants rather than automatic-termination conditions, especially where forfeiture is the consequence.
Downstream effects on top leasing. Because top leases depend on prior-lease termination, the ruling narrows opportunities to validate top leases based on an implied personal-production requirement (cf. the definition context in BP Am. Prod. Co. v. Laddex, Ltd.).

IV. Complex Concepts Simplified

Habendum clause: The “to have and to hold” clause that sets how long an oil-and-gas lease lasts—typically a fixed primary term plus a conditional secondary term (often tied to production).
Primary term vs. secondary term: The primary term lasts a set number of years. After that, the lease continues only if the habendum clause’s condition (often production) is satisfied.
Passive voice in a habendum clause: Wording like “as long as oil or gas is produced” that states a condition (production) without identifying the actor (who produces). This case holds courts cannot add “by the lessee” when the clause does not.
Special limitation: A lease provision that causes automatic termination upon a stated event. Texas disfavors construing provisions as special limitations unless the termination language is “clear, precise, and unequivocal.”
Covenant (vs. special limitation): A promise in the lease. Breach may support damages or (in rare cases) conditional cancellation, but does not automatically end the lease absent unmistakable termination language.
Working interest / co-tenancy: The working interest bears costs and shares production proceeds. Co-tenants each own an undivided share; a producing co-tenant can seek an accounting for costs from a non-producing co-tenant.
Top lease: A later lease granted while an earlier lease is still on record; it becomes effective only if the earlier lease terminates.

V. Conclusion

The Supreme Court of Texas reaffirmed a text-first, anti-forfeiture approach to oil-and-gas lease duration. When a habendum clause states that a lease continues “as long thereafter as” minerals “are produced” and does not specify “by the lessee,” Texas courts will not imply that missing actor requirement—especially where the implied term would forfeit a mineral estate. Continuous production on the land satisfied the leases here, and ambiguity in an “extension” paragraph was construed against automatic termination.

By disapproving Mattison v. Trotti, Hughes v. Cantwell, and Cimarex Energy Co. v. Anadarko Petroleum Corp. to the extent they held otherwise, the Court substantially clarifies Texas law, strengthens title predictability, and shifts disputes about non-operators’ “participation” away from forfeiture theories and toward co-tenancy accounting and express drafting.