               IN THE SUPREME COURT OF TEXAS
                                        ══════════
                                          No. 15-0155
                                        ══════════

     ENDEAVOR ENERGY RESOURCES, L.P. AND ENDEAVOR PETROLEUM, L.L.C.,
                             PETITIONERS,

                                                v.


      DISCOVERY OPERATING, INC. AND PATRIOT ROYALTY AND LAND, L.L.C.,
                               RESPONDENTS

            ══════════════════════════════════════════
                          ON PETITION FOR REVIEW FROM THE
                COURT OF APPEALS FOR THE ELEVENTH DISTRICT OF TEXAS
            ══════════════════════════════════════════


                                    Argued January 9, 2018

       JUSTICE BOYD delivered the opinion of the Court.

       This case involves competing claims to mineral-lease interests in two tracts of land in

Martin County. Discovery Operating, Inc., which has drilled producing wells on both tracts, bases

its claim on leases acquired directly from the mineral-estate owners. Endeavor Energy Resources,

L.P., and Endeavor Petroleum, L.L.C., (collectively, Endeavor) bases its claim on prior leases with

the same owners covering land that includes the two tracts at issue. Endeavor never drilled on

those two tracts, and the parties agree that Endeavor’s leases’ terms have expired. But the leases

include “retained-acreage clauses,” which provide that the leases would continue after they expired

as to a certain number of acres associated with each of the wells Endeavor drilled on adjacent

tracts. The issue is whether the acreage Endeavor retained under the retained-acreage clauses
includes the two tracts at issue. The trial court and court of appeals held that it does not. We agree

and affirm.

                                                      I.
                                                  Background

           Between 2004 and 2007, Endeavor acquired mineral leases involving two adjoining tracts.

The leases relevant to this dispute cover all (approximately 640 acres) of a tract we will call

“section 4,”1 and the northern half (approximately 320 acres) of a tract we will call “section 9.”2

Section 4 sits immediately north of section 9. Endeavor completed two wells in section 9, both

located in the section’s northeastern quarter (approximately 160 acres), which we will call well #1

and well #2. Although the lease covered the entire northern half of section 9, Endeavor did not

drill in or develop section 9’s northwestern quarter. Endeavor also completed two wells in section

4, both in that section’s southeastern quarter (approximately 160 acres), which we will call well

#3 and well #4. Although the lease covered all of section 4, Endeavor did not drill wells in section

4’s southwestern quarter.

           After completing the wells, Endeavor filed certified proration plats with the Texas Railroad

Commission (the Commission). For well #1, the plat designated a proration unit of 81.21 acres

consisting of the northern half of section 9’s northeastern quarter. For well #2, the plat designated



                                               
           1
         A “section” of land is a one-square-mile area containing 640 acres. See 8 HOWARD R. WILLIAMS & CHARLES
J. MEYERS, OIL AND GAS LAW: MANUAL OF OIL AND GAS TERMS 951 (LexisNexis Matthew Bender 2017) [hereinafter
WILLIAMS & MEYERS].
         2
           The Elrods, who own the mineral interests and were Endeavor’s lessors as to section 4, include Stanley D.
Elrod, Karen M. Thomas, Jon David Elrod, Janice K. Gaither, and Joseph Elrod. Section 4 is described more
particularly as Section 4, Block 35, T–1–N, T & P Ry. Co. Survey, Martin County, Texas. Rebecca J. Williams,
Norvella Ann Schafer, and Jackie Lue Wells are Trustees of The Mildred Haggard Irrevocable Grantor Trust, which
owns the mineral interests and was Endeavor’s lessor as to section 9. Section 9 is described more particularly as
Section 9, Block 35, T–1–N, T & P Ry. Co. Survey, Martin County, Texas.


                                                         2
81.21 acres consisting of the southern half of section 9’s northeastern quarter. The designated

proration units did not include any of section 9’s northwestern quarter:




       For well #3, Endeavor’s plat designated 81.0 acres consisting of the northern half of section

4’s southeastern quarter. For well #4, the plat designated 81.0 acres consisting of the southern half

of section 4’s southeastern quarter. The designated proration units did not include any of section

4’s southwestern quarter:




                                                 3
       The leases at issue include two clauses that permit Endeavor to retain certain interests after

the leases’ primary terms expire. The first, which we refer to as the continuous-development

clause, provides that the leases “shall remain in full force and effect as to all proration units” after

the primary terms expire if Endeavor, as the lessee or “operator,” is “then engaged in drilling or

reworking operations” and so long as Endeavor maintains “a continuous drilling program.” If

Endeavor is not engaged in such operations when the primary terms expire, the leases will

automatically terminate “as to each proration unit” on which there is no well “producing oil or gas

in commercial quantities.” The second clause, which we refer to as the retained-acreage clause,

provides that once the leases expire and the operator does not maintain the required continuous-


                                                   4
drilling program, the leases “shall automatically terminate as to all lands and depths covered

herein, save and except” certain lands within certain governmental proration units “assigned to” a

producing well. (Emphasis added.)

       After Endeavor’s leases’ primary terms expired, Patriot Royalty and Land, LLC, reviewed

the leases and the certified proration plats Endeavor had filed with the Commission. Based on

those documents, Patriot concluded that Endeavor’s leases had terminated as to section 4’s

southwestern quarter and section 9’s northwestern quarter—the lands Endeavor did not include in

the proration units designated in its filed plats and on which it had not engaged in any drilling or

development operations. Patriot approached the owners of section 4 and section 9, obtained leases

covering both of those quarters, and then assigned the leases to Discovery. Discovery successfully

drilled two wells in each quarter.

       When Endeavor discovered that Discovery had drilled wells on section 4’s southwestern

quarter and section 9’s northwestern quarter, it objected to Discovery’s assertion of any leasehold

interest in those quarters. Relying on the leases’ retained-acreage clauses, it asserted that the

applicable governmental proration unit for each of its two wells in section 9’s northeastern quarter

covered 160 acres, and thus each proration unit included half of section 9’s northwestern quarter

as well as half of section 9’s northeastern quarter. Endeavor also asserted that the applicable

governmental proration unit for each of its two wells in section 4’s southeastern quarter also

covered 160 acres, and thus each proration unit included half of section 4’s southwestern quarter

as well as half of its southeastern quarter. In short, based on the retained-acreage clauses, Endeavor

asserted that its leases remained in effect as to the entire southern half of section 4 and the entire

northern half of section 9, so Discovery’s leases were invalid.



                                                  5
       As explained, however, Endeavor had previously filed plats with the Commission

assigning proration units of only 81.21 or 81.0 acres to each of the four wells, and those proration

units did not include the lands described in Discovery’s leases (section 4’s southwestern quarter

and section 9’s northwestern quarter). Endeavor asserted that it had mistakenly failed to assign

160 acres to each well, consistent with the applicable “governmental proration unit.” Relying on

this assertion, Endeavor filed new proration plats with the Commission, assigning 160 acres to

each well, which included the acreage described in Discovery’s leases.

       Also relying on the retained-acreage clauses, Discovery asserted that the lands within the

governmental proration units assigned to Endeavor’s producing wells included only the 81.21 and

81.0 acres that Endeavor had assigned as proration units in its plat filings before the leases’ primary

terms expired. Relying on this construction of the retained-acreage clauses, Discovery filed this

trespass-to-try-title action against Endeavor. The Elrods and the Haggard Trust intervened as

plaintiffs in support of Discovery’s position. Because of this litigation, the Commission declined

to take any action with regard to Endeavor’s request to amend its plat filings.

       After stipulating to most of the relevant facts, both sides filed summary-judgment motions.

Agreeing with Discovery’s construction of the retained-acreage clauses, the trial court granted

Discovery’s motion and denied Endeavor’s. In its order, the trial court held that (1) Endeavor’s

leases had terminated as to the disputed acreage, (2) Discovery’s leases were valid, and (3)

Discovery held record title to, ownership of, and the exclusive right to possession of the leasehold

interests. The court of appeals affirmed, holding that Endeavor’s leasehold interests survived only

as to the acreage in the proration units it assigned to its wells in the plats it filed with the




                                                  6
Commission. 448 S.W.3d 169, 178 (Tex. App.—Eastland 2014). We granted Endeavor’s petition

for review.

                                               II.
                                          Mineral Leases

       Endeavor’s rights to the disputed acreage derive solely from its mineral leases from the

Elrods and the Haggard Trust. Like all mineral leases, Endeavor’s leases memorialize the parties’

contractual agreements. But unlike many other types of contracts, mineral leases are subject to

extensive governmental regulation. As a result, mineral leases often include particular types of

terms and clauses through which the parties specify their respective rights in light of the regulatory

context. Before addressing Endeavor’s leases, we briefly describe the contractual nature of mineral

leases, the regulatory context in which they exist, and the key terms they often include.

       Contractual nature

       A mineral lease is a contract, and as such, its terms define the parties’ respective rights and

duties. See Samson Expl., LLC v. T.S. Reed Props., Inc., 521 S.W.3d 766, 774 (Tex. 2017); Amoco

Prod. Co. v. Alexander, 622 S.W.2d 563, 571 (Tex. 1981). As with contracts generally, the parties

are free to decide their contract’s terms, and the law’s “strong public policy favoring freedom of

contract” compels courts to “respect and enforce” the terms on which the parties have agreed.

Phila. Indem. Ins. Co. v. White, 490 S.W.3d 468, 471 (Tex. 2016); Nafta Traders, Inc. v. Quinn,

339 S.W.3d 84, 95 (Tex. 2011) (“As a fundamental matter, Texas law recognizes and protects a

broad freedom of contract.”).

       The general principles that govern our construction of contracts also govern our

construction of mineral leases. Tittizer v. Union Gas Corp., 171 S.W.3d 857, 860 (Tex. 2005) (per

curiam) (“An oil and gas lease is a contract, and its terms are interpreted as such.”). We review


                                                  7
and construe mineral leases de novo, and our objective in doing so is “to ascertain the parties’

intent as expressed within the lease’s four corners.” Anadarko Petroleum Corp. v. Thompson, 94

S.W.3d 550, 554 (Tex. 2002) (citing Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991)). We

presume the parties intended every clause to have some effect, so we “examine the entire lease and

attempt to harmonize all its parts, even if different parts appear contradictory or inconsistent.” Id.

Because mineral leases transfer and affect title to real-property interests, however, they are subject

to special construction rules that apply particularly to agreements governing property rights. See

generally Bruce M. Kramer, The Sisyphean Task of Interpreting Mineral Deeds and Leases: An

Encyclopedia of Canons of Construction, 24 TEX. TECH L. REV. 1 (1993).

       Regulatory context

       Although mineral leases are contracts, they are subject to legal and regulatory restrictions.

As a result, “the rights of the contracting parties to an oil and gas lease will be subordinated to the

regulatory authority of the State even though the contractual rights or obligations may be affected

in so doing.” Gulf Oil Corp. v. Southland Royalty Co., 478 S.W.2d 583, 590 (Tex. Civ. App.—El

Paso 1972), aff’d, 496 S.W.2d 547 (Tex. 1973). In particular, mineral leases are “subject to the

state’s police power to conserve and develop” the State’s natural resources. Seagull Energy E &

P, Inc. v. R.R. Com’n, 226 S.W.3d 383, 389 (Tex. 2007) (citing TEX. CONST. art XVI, § 59(a)).

       Exercising that power, the State, through the Legislature, has delegated rule-making

authority to the Commission “to further the state’s goals of preventing waste and conserving

natural resources.” Id. (citing TEX. NAT. RES. CODE § 85.201). Under that authority, the

Commission “has adopted general rules applicable throughout the State.” R.R. Com’n v. WBD Oil

& Gas Co., 104 S.W.3d 69, 70 (Tex. 2003). For example, the Commission has promulgated



                                                  8
statewide spacing rules imposing a minimum distance between wells, see 16 TEX. ADMIN. CODE

§ 3.37, as well as statewide rules relating to regulatory filings, well densities, and proration units,

see id. § 3.38.

           One of the many ways the Commission attempts to prevent waste and conserve mineral

resources is by adopting specific “production allowables” based on “proration units” assigned to

each well. “Production allowables refer to the maximum amount of hydrocarbons a well may

recover as prescribed by the applicable field rules” and “are designed to limit production from a

well in order to control the rate of production from the field.” Browning Oil Co. v. Luecke, 38

S.W.3d 625, 634 (Tex. App.—Austin 2000, pet. denied); see Victory Energy Corp. v. Oz Gas

Corp., 461 S.W.3d 159, 164 n.3 (Tex. App.—El Paso 2014, pet. denied); 58 C.J.S. Mines and

Minerals § 447. A proration unit is the “acreage assigned to a well for the purpose of assigning

[production] allowables and allocating allowable production to the well.” 16 TEX. ADMIN. CODE §

3.38(a)(3). Generally, “an operator must first designate [a well’s] proration unit and the acreage

assigned to it, then certify that the acreage is productive before receiving the well’s production

allowable.” Luecke, 38 S.W.3d at 634.

           The Commission’s statewide rules typically require operators to designate a well’s acreage

and proration unit by filing certified plats and other forms, such as a “Form P–15.”3 See, e.g., 16

TEX. ADMIN. CODE § 3.31(c)(1) (requiring gas-well operators to file a “certified plat showing the

acreage assigned to the well for proration purposes”); id. § 3.40(a) (permitting operators to pool



                                               
           3
           “A Form P–15 is the means by which an operator designates the configuration, size, and location of acreage
attributable to a given well for purposes of obtaining a production allowable from the Railroad Commission.” XOG
Operating, LLC v. Chesapeake Expl. Ltd. P’ship, 480 S.W.3d 22, 25 (Tex. App.—Amarillo 2015), aff’d, No. 15-0935,
— S.W.3d — (Tex. Apr. 13, 2018).


                                                         9
acreage to create “a drilling unit or proration unit by filing an original certified plat”); id. § 3.40(g);

(permitting operators to “file proration unit plats for individual wells in a field”). Acreage assigned

to a well “for allocation of allowables” may not be assigned to another well in the same field. Id.

§ 3.40(d) (“[S]uch duplicate assignment of acreage is not acceptable.”). The Commission reviews

the operator’s filings to ensure they comply with applicable rules and generates a “maximum

allowable for a well,” which is “the largest allowable that can be assigned under applicable rules,”

id. § 3.31(g)(9), and it will not accept a proration plat that “shows acreage in the unit in excess of

the maximum number of acres permitted by the field rules,” id. § 3.31(c)(1).

        The Commission’s statewide rules, however, “cannot adequately address the widely

varying conditions found in the thousands of oil and gas reservoirs in Texas.” WBD Oil & Gas

Co., 104 S.W.3d at 70. To accommodate unique circumstances existing within particular

production areas, the Commission adopts specific “field rules,” which provide “detailed

regulations for a specific field.” Id. The Commission “has replaced the statewide rules with more

specific field rules where necessary to prevent waste or confiscation.” Seagull Energy E & P, 226

S.W.3d at 389 (footnotes and citations omitted).

        Common mineral-lease terms

        Although mineral owners and operators generally enjoy the freedom to contract as they

wish, they must exercise that freedom within the limits of the Commission’s statewide and field

rules. As a result of this unique regulatory context, mineral leases often contain particular terms

and clauses that other kinds of leases and contracts do not. The dispute in this case involves clauses

that address the duration and expiration of Endeavor’s mineral leases; specifically, the habendum




                                                    10
clause, the continuous-development clause, and the retained-acreage clause. We briefly discuss

each in turn.

           1.          Habendum clause

           Generally, a lease’s habendum clause defines the duration of the mineral-lease estate.

Anadarko, 94 S.W.3d at 554. The habendum clause typically divides a lease’s duration into two

parts: a primary term and a secondary term. Id. The primary term usually lasts for a fixed period

of time stated in the lease, while the secondary term continues the lease after the primary term

expires, for “as long thereafter as oil, gas or other mineral is produced.” Id. Under this type of

habendum clause, a lease may continue indefinitely “as long as oil or gas is produced,” but will

automatically terminate if actual production permanently ceases during the secondary term. Id. As

long as one portion of the leased tract—even a small portion—is producing oil or gas, the lease

will continue as to the entire tract, even if the operator elects not to develop other areas within the

leased tract. See Mathews v. Sun Oil Co., 425 S.W.2d 330, 333 (Tex. 1968).

           Because a mineral lease is a creature of contract, parties may modify the effect of a

habendum clause by including other provisions. See Anadarko, 94 S.W.3d at 554.4 Lessors, of

course, typically desire that the operator fully develop the lease and produce as much as possible

to maximize the lessors’ royalties. After all, “the dominant purpose of a lease is to discover and

produce oil and gas . . . .” Rogers v. Osborn, 261 S.W.2d 311, 315 (Wilson, J., concurring). Thus,

a “habendum-only” lease—under which the lessee’s production on only a small portion may

permit the lessee to retain its rights as to the entire leased tract—may conflict with the lessor’s


                                               
           4
          See also Cmty. Bank of Raymore v. Chesapeake Expl., L.L.C., 416 S.W.3d 750, 755 (Tex. App.—El Paso
2013, no pet.) (“The habendum clause, however, also recognizes that this general principle is subject to modification
by other contractual provisions in the lease, including the producing-acreage and continuous-development clauses.”).


                                                        11
desire to seek full development given the operator’s ability to hold the entire estate by drilling only

a single producing well. See Anadarko, 94 S.W.3d at 554. But an operator may prefer to postpone

drilling and production until, for example, the market for the minerals produces a greater financial

return. Continuous-development and retained-acreage clauses serve to balance the interests of the

lessor and lessee in this respect.

        2.      Continuous-development clauses

        A continuous-development clause “permits a lease to be preserved under certain

circumstances even though there is no production after the expiration of the primary term during

continuous drilling operations, whether on the same or different wells.” WILLIAMS & MEYERS at

§ 617. Generally, under these types of clauses, “if production results from the continuous

prosecution of the very operations being engaged in by the lessees upon the expiration of the

primary term, the lease is good.” Rogers, 261 S.W.2d at 315. But the required development efforts

must “be continuous with no gap.” Id. (Wilson, J., concurring). If the efforts cease at any moment

after the primary term, the lease typically terminates immediately and automatically.

        3.      Retained-acreage clauses

        Continuous-development clauses often work in tandem with other clauses, including

retained-acreage clauses. While a habendum clause generally extends the entire lease so long as

some production is occurring on the lease, and a continuous-development clause further extends

the entire lease so long as the operator remains engaged in the required development efforts, a

retained-acreage clause typically divides the leased acreage such that production or development

will preserve the lease only as to a specified portion of the leased acreage. See 3 WILLIAMS &




                                                  12
MEYERS at § 603.7. So if a lessor wants its entire leasehold acreage developed, it should include a

retained acreage clause in its leases. Id.

           Retained-acreage clauses come in many different shapes, sizes, and forms.5 The effect of

a particular retained-acreage clause depends on the terms the parties freely chose and, like the

Commission’s implementation of special field rules, there is no “one size fits all” result of their

proper construction. Each retained-acreage clause must be construed on its own, under governing

principles of contract interpretation.

           Although “originally drafted to prevent the lessee from losing those portions of a lease that

had productive wells located thereon if the rest of the lease terminated,” retained-acreage clauses

have expanded to “include clauses that require the release of all acreage that, at the end of the

primary term, is not within a drilling, spacing, or proration unit.” Bruce M. Kramer, Oil and Gas

Leases and Pooling: A Look Back and a Peek Ahead, 45 TEX. TECH L. REV. 877, 881 n.28 (2013).

As a result, retained-acreage clauses often “refer to [Commission] proration units as the lodestar

for determining which acreage has been obtained and which acreage must be surrendered.”

WILLIAMS & MEYERS at § 603.7. Defining the retained acreage by reference to a Commission

designation like a proration unit can provide certainty or clarity regarding the extent of the acreage

that remains under lease. But the inclusion of such regulatory principles in a retained-acreage


                                               
           5
           See, e.g., No. 15-0935, slip op. at 2 (clause reserved “portion of said lease included within the proration or
pooled unit of each well”) (emphasis added); ConocoPhillips Co. v. Vaquillas Unproven Minerals, Ltd., No. 04-15-
00066-CV, 2015 WL 4638272, at *1 (Tex. App.—San Antonio Aug. 5, 2015, pet. granted, judgm’t vacated w.r.m.)
(mem. op.) (clause reserved 640 acres unless a Commission rule “provide[d] for a spacing or proration establishing
different units of acreage per well”) (emphasis added); Chesapeake Expl., L.L.C. v. Energen Res. Corp., 445 S.W.3d
878, 883 (Tex. App.—El Paso 2014, no pet.) (clause provided lease would terminate except as to each proration unit
“established under the rules and regulations” of the Commission and “upon which there exists (either on the above
described land or on lands pooled or unitized therewith) a well capable of producing oil and/or gas in commercial
quantities”) (emphasis added). By contrast, the retained-acreage clauses at issue here reserved acreage “assigned to”
a particular well.


                                                          13
clause may also cause confusion or disappointment, as the contracting parties may not fully

understand the ramifications of including a regulatory term in the typical mineral lease. See

ConocoPhillips, 2015 WL 4638272, at *2 (“[W]hen a lease ties the retained acreage clause to

governmental authority, the parties may not ‘fully anticipate the consequences of doing so.’”)

(quoting Scott C. Petry, Drafting the Retained Acreage Clause: The Effect of Governmental

Authority on Retained Acreage, STATE BAR.                     OF   TEX. PROF. DEV. PROGRAM, 27TH ANNUAL

ADVANCED OIL, GAS, AND ENERGY RESOURCES LAW COURSE 3 (2009) [hereinafter Petry]).6 This

is such a case. With these principles in mind, we turn to Endeavor’s leases.

                                                             III.
                                                  Endeavor’s Mineral Leases

           Endeavor’s mineral leases were located in the Spraberry (Trend) Area, a massive oil field

in the Permian Basin. Although the field’s low porosity hindered initial efforts to recover the

minerals underneath,7 the advent of new technology has increased production significantly.8

           Regulatory context

           The Commission has promulgated field rules specific to the Spraberry Trend Area, and

those rules have changed over time. In 1952, for example, the Commission increased the allowable

size of proration units from 80 acres to 160 acres per producing well, though the standard unit

                                               
           6
           See also Jones v. Killingsworth, 403 S.W.2d 325, 328 (Tex. 1965) (“The fact that the [Commission] may
Permit a much larger unit cannot be read into the lease contract when, as here, the authority to create larger units is
expressly limited to units of the size Prescribed by the [Commission].”).
           7
         ‘Largest uneconomic pay in the world’ proved worth effort, MIDLAND REPORTER-TELEGRAM (Sept. 26,
2009, 7:00 PM), http://www.mrt.com/business/energy/article/Largest-uneconomic-pay-in-world-proved-worth-
7491811.php (“The expectation of a low recovery efficiency led many explorationists to call the sands the largest
uneconomic oil-producing pay in the world.”).
           8
          Mella McEwen, USGS assessment puts Spraberry resources at 4.2 billion barrels, MIDLAND REPORTER-
TELEGRAM (May 22, 2017, 12:24 PM), https://www.mrt.com/business/oil/article/USGS-assessment-puts-Spraberry-
resources-at-4-2-11156810.php.


                                                             14
remained 80 acres. Tex. R.R. Com’n, Special Order Adopting Rules and Regulations for the

Spraberry Trend Area Field, Oil & Gas Docket Nos. 125 & 126, 7 & 8–25,841 (Dec. 22, 1952).

And since at least 1952, the Commission has required operators, “for proration purposes,” to “file

certified plats of their properties in the field, which plats show all those things pertinent to the

determination of the acreage claimed for each well hereunder.” Id.

        The Commission amended the Spraberry rules in 2008, clarifying the permissible size of

standard proration units, and also adopting specific rules for the assignment of “tolerance” acreage:

        The acreage assigned to an individual well shall be known as a proration unit. The
        standard drilling and proration units are established hereby to be EIGHTY (80)
        acres. No proration unit shall consist of more than EIGHTY (80) acres except as
        hereinafter provided. The two farthermost points in any proration unit shall not be
        in excess of THREE THOUSAND (3,000) feet removed from each other; provided
        however, that in the case of long and narrow leases or in cases where because of
        the shape of the lease such is necessary to permit the utilization of tolerance
        acreage, the Commission may after proper showing grant exceptions to the
        limitations as to the shape of proration units as herein contained. All proration units
        shall consist of continuous and contiguous acreage which can reasonably be
        considered to be productive of oil. No double assignment of acreage will be
        accepted.

        Notwithstanding the above, operators may elect to assign a tolerance of not more
        than EIGHTY (80) acres of additional unassigned lease acreage to a well on an
        EIGHTY (80) acre unit and shall in such event receive allowable credit for not more
        than ONE HUNDRED SIXTY (160) acres.

        Operators shall file with the Commission certified plats of their properties in said
        field, which plats shall set out distinctly all of those things pertinent to the
        determination of the acreage credit claimed for each well . . . .

Tex. R.R. Comm’n, Final Order Amending Field Rule Nos. 2 and 3 in the Spraberry (Trend Area)

Field Various Counties, Texas, Oil and Gas Docket No. XX-XXXXXXX (Dec. 16, 2008). After the

2008 amendment, the Spraberry field rules still required operators to file certified plats describing

their proration units. See id.



                                                  15
       Lease language

       The leases at issue here contain both continuous-development and retained-acreage

clauses. The continuous-development clauses provide that the leases

       shall automatically terminate as to each proration unit upon which there is no well
       or wells thereon located and then producing oil or gas in commercial quantities
       unless Lessee is then engaged in drilling or reworking operations in accordance
       with the other provisions hereto. In the event Lessee is engaged in drilling or
       reworking operations at the expiration of the Primary Term, this lease shall remain
       in full force and effect as to all proration units so long as a continuous drilling
       program is maintained whereby not more than one-hundred twenty (120) days shall
       elapse from the completion of one well to the commencement of another well until
       all proration units are tested.

Each lease’s retained-acreage clause identifies the acreage retained by referring to the

Commission’s regulatory concepts of proration units and allowables. Specifically, the clauses

provide that, at the end of the leases’ primary term or “upon the cessation of the continuous

development . . . whichever is later,” the

       lease shall automatically terminate as to all lands and depths covered herein, save
       and except those lands and depths located within a governmental proration unit
       assigned to a well producing oil or gas in paying quantities and the depths down to
       and including one hundred feet (100’) below the deepest productive perforation(s),
       with each such governmental proration unit to contain the number of acres required
       to comply with the applicable rules and regulations of the Railroad Commission of
       Texas for obtaining the maximum producing allowable for the particular well.
       [Emphases added]

       The parties do not dispute that the continuous-development period for section 9 ended on

February 9, 2008, 120 days after Endeavor completed well #2, or that section 4’s continuous-

development period ended on February 5, 2009, 120 days after Endeavor completed well #4. Under

the retained-acreage clauses, these dates capture at a particular moment in time the amount of

acreage Endeavor stood to retain upon the clauses’ triggering event.




                                               16
       The retained-acreage clauses also specify the acreage excepted from termination.

Specifically, the leases do not terminate as to all “lands and depths located within a governmental

proration unit assigned to a well producing oil or gas in paying quantities.” The clauses provide

further that each such proration unit must “contain the number of acres required to comply with

the applicable rules and regulations of the Railroad Commission of Texas for obtaining the

maximum producing allowable for the particular well.” Thus, Endeavor retained acreage

consisting of the governmental proration unit “assigned to” each well, and any such unit must

contain the amount of acreage required to comply with the applicable Commission rules for

obtaining the “maximum producing allowable” for the particular well.

       The parties’ dispute over the meaning of this clause focuses primarily on the phrases

“proration unit assigned to a well” and “maximum producing allowable for the particular well.”

When Endeavor filed its plats with the Commission, it assigned 81.21 acres as the proration unit

for each of the wells in section 9 and 81.0 acres for each of the wells in section 4. But Endeavor

contends that it retained rights to proration units of 160 acres for each well because the

Commission rules allow for a maximum total of 160 acres including the tolerance acres, and that

is the amount of acreage that would result in the “maximum” allowable under the Commission’s

rules. Like the trial court and the court of appeals, we disagree.

       1.      “Proration unit assigned to a well”

       Endeavor contends that the clauses’ reference to a proration unit “assigned to” a well is

ambiguous because it does not identify whose assignment controls. Specifically, Endeavor argues

that, although we could reasonably construe the phrase to refer to the 81-acre proration units

Endeavor “assigned to” the wells in the plats it filed with the Commission, we can also reasonably



                                                 17
construe it to refer to the proration units the Commission has “assigned to” the wells through its

special field rules. The court of appeals disagreed and held that the clause unambiguously refers

to Endeavor’s assignments because the Commission’s rules required Endeavor, as the operator, to

assign acreage to its proration units.9

            “Deciding whether a contract is ambiguous is a question of law for the court.” N. Shore

Energy, L.L.C. v. Harkins, 501 S.W.3d 598, 602 (Tex. 2016) (quoting J.M. Davidson, Inc. v.

Webster, 128 S.W.3d 223, 229 (Tex. 2003)). In construing an oil and gas lease, our primary goal

is to determine the parties’ intent as expressed by the lease’s plain language. Id. To do this, we

“‘construe contracts from a utilitarian standpoint bearing in mind the particular business activity

sought to be served, and avoiding unreasonable constructions when possible and proper.’” Id.

(quoting Plains Expl. & Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex.

2015)). Of course, no ambiguity exists if the contract’s language can be given a “definite or

certain” meaning. Id. (quoting Plains Expl., 473 S.W.3d at 305). Conversely, “a contract is

ambiguous if it is susceptible to more than one reasonable interpretation.” Id. (citation omitted).

“An ambiguity, however, does not arise ‘merely because parties to an agreement proffer different

interpretations of a term.’” Id. (quoting DeWitt Cty. Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 100

(Tex. 1999)). For there to be an ambiguity, both parties’ interpretations “must be reasonable.” Id.

(quoting Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex.

1996)).




                                               
           9
            448 S.W.3d at 177 (“[W]e conclude that the parties intended for the Endeavor Leases to terminate as to
acreage that was not included in a governmental proration unit assigned to a well by Endeavor in a certified proration
plat filed with the [Commission].”) (emphasis added).


                                                         18
           Discovery cites a number of authorities for the proposition that operators, and only

operators, “assign” acreage to proration units, pointing to various Commission regulations, cases,

and examples from practitioners. We agree with Discovery that the leases’ reference to “assigned”

proration units is unambiguous because the only reasonable construction of that reference is to the

operator’s assignment of a proration unit through its filing of a proration plat with the

Commission. Within the regulatory context in which these leases exist, their references to acres

“assigned to . . . proration units” must necessarily be construed in light of the Commission’s rules

as the standards governing the parties’ contractual agreement. And as we have explained, both the

Commission’s statewide and field rules recognize that the operator is responsible for “assigning”

acreage to a proration unit through its regulatory filings. As Discovery notes in its brief, Texas

courts have consistently recognized that operators, and not the Commission, “assign” acreage to a

proration unit.10

           Endeavor’s argument that the Commission could be the “assignor” is not reasonable

because the Commission does not “assign” acreage to proration units—it merely quantifies the



                                               
           10
            See Broussard v. Texaco, Inc., 479 S.W.2d 270, 271–72 (Tex. 1972) (noting operators “assigned” 296.79
acres out of a 476 acre lease to proration units, leaving “179.21 producing acres . . . unassigned”); Corzelius v. Harrell,
186 S.W.2d 961, 971 (Tex. 1945) (observing that field rules required operator to file plat “showing the acreage to be
assigned to each well, [the] proven productive acreage, and the dimensions of the unit on which each gas well is
located”); Unit Petroleum Co. v. David Pond Well Serv., Inc., 439 S.W.3d 389, 396 (Tex. App.—Amarillo 2014, pet.
denied) (holding leasehold-interest owner has an “exclusive executive right to establish a proration unit encompassing
any part of its leasehold estate”); Luecke, 38 S.W.3d at 634 (“[A]n operator must . . . designate the proration unit and
the acreage assigned to it . . . .”); Verble v. Coffman, 680 S.W.2d 69, 70 (Tex. App.—Austin 1984, no writ) (operator
“assigned an 80 acre proration unit for the well”); May v. Cities Serv. Oil Co., 444 S.W.2d 822, 823 (Tex. Civ. App.—
Beaumont 1969, writ ref’d n.r.e.) (“[T]he operator assigned acreage . . . to the production allowable unit.”); Expando
Prod. Co. v. Marshall, 407 S.W.2d 254, 256 (Tex. Civ. App.—Fort Worth 1966, writ ref’d n.r.e.) (noting “acreage
assigned” to well’s unit by the operator); see also 16 TEX. ADMIN. CODE § 3.86(g)(4) (requiring operators to file a
“proration plat” that “depict[s] the lease . . . showing the acreage assigned to the proration unit for the . . . well”); id.
§ 3.40(a) (noting that operators “creat[e] a . . . proration unit by filing an original certified plat”); id. § 3.40(d)
(prohibiting operators from “assign[ing]” acreage to a well’s “proration unit” that has already been “assign[ed]” to
another well’s unit).


                                                            19
amount of acreage an operator assigns. Consistent with its statewide rules, the Commission’s

special field rules for the Spraberry Trend provide that operators “shall file with the Commission

certified plats of their properties in said field, which plats shall set out distinctly all of those things

pertinent to the determination of the acreage credit claimed for each well.” Tex. R.R. Comm’n,

Final Order Amending Field Rule Nos. 2 and 3 in the Spraberry (Trend Area) Field Various

Counties, Texas, Oil and Gas Docket No. XX-XXXXXXX (Dec. 16, 2008).

        Indeed, the Commission reviews an operator’s filings to determine whether the operator’s

assignment conflicts with the Commission’s prohibition against the double-assignment of acreage

or the over-assignment or under-assignment of acreage based on the applicable field rules. See 16

TEX. ADMIN. CODE § 3.40(d) (“[A]creage assigned to a well for drilling and development, or for

allocation of allowable, shall not be assigned to any other well or wells completed or projected

to be completed in the same field . . .”). As the Commission has explained in its amicus brief in

this case, if the operator’s assignment of acreage complies with the rules, the Commission will

input that acreage into a well-tracking system, and it becomes “the lawfully assigned proration

acreage for purposes of the [Commission’s] records.” The Commission then “automatically

generate[s] a maximum allowable for that particular well pursuant to” the applicable proration

formula. This is a well-established practice. See, e.g., Luecke, 38 S.W.3d at 634 (“Thus, an

operator must first designate the proration unit and the acreage assigned to it, then certify that the

acreage is productive before receiving the well’s production allowable.”) (emphasis added).




                                                    20
Indeed, the numerous amici11 who filed briefs in this case nearly all agree that the operator, not

the Commission, “assigns” lands to proration units.

           We conclude that the leases’ use of “assigned” is unambiguous, and refers to the lessee’s

assignment of acreage through its regulatory filings. Nevertheless, Endeavor argues that we cannot

reasonably read the leases to make its leasehold interest dependent upon its regulatory filings

because the Commission uses proration records not to determine title but simply to assess a proper

amount of allowables. Stated differently, Endeavor contends that a court cannot use regulatory

filings as a basis for changing title. While we agree that the Commission “is a conservation body

and does not have jurisdiction to effect a change of property rights,” Elliott v. Davis, 553 S.W.2d

223, 227 (Tex. Civ. App.—Amarillo 1977, writ ref’d n.r.e.), Endeavor’s argument ignores the

contractual nature of its leasehold interest and the regulatory context in which it exists. Although

the Commission does not unilaterally determine title by approving or accepting an operator’s

assigned proration unit, the parties are free to agree that the operator’s leasehold interest will

survive and continue only to the extent of that assignment.

           That is exactly what the parties did here. The retained-acreage clauses that govern

Endeavor’s rights following the expiration of the leases’ primary terms unambiguously provide

that those rights extend only to a proration unit “assigned to” a well, and within this regulatory

context that can only refer to the operator’s assignment. The operator’s assignment affects the

operator’s leasehold interest because Endeavor’s contractual agreement, made within the context

of the Commission’s applicable rules, requires that result. Endeavor’s leases designated the


                                               
           11
          Amici include the Permian Basin Petroleum Association, the Texas Independent Producers and Royalty
Owners’ Association, Pennington Resources, LLC, Redwood Exploration Company, LLC, Tyner Energy, LP, the
Railroad Commission, the Texas Oil and Gas Association, and Browning Oil Company, Inc.


                                                    21
amount of retained acreage as the amount in the proration unit assigned to the wells per the

Commission’s rules. And consistent with the Commission’s rules, Endeavor assigned a specific

amount of acreage to the proration units for the wells at issue in this case by filing certified

proration plats. We hold that under the leases’ unambiguous language, those assignments govern

the leasehold interests Endeavor retained.

           2.          “Obtaining the maximum producing allowable”

           Endeavor argues, however, that its retained acreage includes 160 acres per well because

the leases provide that “each [assigned] governmental proration unit” must “contain the number

of acres required to comply with” the Commission’s rules for obtaining “the maximum producing

allowable for the particular well.” Endeavor contends that, regardless of the meaning of the

“assigned to” clause, the “maximum producing allowable” clause makes clear that Endeavor’s

retained proration units must consist of 160 acres, rather than the 81.21 and 81.0 acres it actually

(but mistakenly) assigned to its wells.

           More specifically, Endeavor argues that the leases’ references to “maximum producing

allowable” means that each proration unit automatically consists of the greatest amount of acreage

the Commission’s rules permit an operator to assign, because that amount will result in the

“maximum producing allowable.” As described above, the Commission’s special rules for the

Spraberry Trend provide for a “standard drilling and proration unit” of 80 acres, but allow

operators to “elect to assign a tolerance of not more than” 80 additional acres and thereby “receive

allowable credit for not more than” 160 acres.12 According to Endeavor, it retained 160 acres per


                                               
           12
            The Commission’s statewide rules define “tolerance acreage” as “[a]creage within a lease, pooled unit, or
unitized tract that may be assigned to a well for proration purposes pursuant to special field rules in addition to the
amount established for a prescribed or optional proration unit.” 16 TEX. ADMIN. CODE § 3.38(a)(6).


                                                         22
well because that is the amount that would result in the “maximum producing allowable” under

the Commission’s rules.

            Discovery, on the other hand, contends that the retained-acreage clauses require the

operator to file a plat assigning only the amount of acreage necessary to obtain the maximum

producing allowable as determined by the applicable field rules for the particular well at issue.

According to Discovery, Endeavor required only 80 acres per well to obtain the maximum

producing allowable for each of its wells. The court of appeals agreed with Discovery, holding

that the parties intended this clause “to define the amount of acres that Endeavor was to include in

the governmental proration units that it assigned in its certified proration plats filed with the

[Commission].” 448 S.W.3d at 178.

           We agree with Discovery. We construe the retained-acreage clauses as requiring Endeavor

to include in its certified plats only “the number of acres required to comply with the applicable

rules and regulations of [Commission] for obtaining the maximum producing allowable for the

particular well.” If Endeavor’s regulatory filings included an amount sufficient to obtain the

maximum producing allowable, then that amount—however small it might be—would be excepted

from termination under the retained-acreage clauses.

           Under the special field rules, the maximum producing allowable for Endeavor’s wells

depends in part on the amount of acreage it assigned to each well. Rule 4 provides that the

maximum producing allowable for a well on an 80-acre proration unit is 515 barrels per day.13



                                               
           13
           The actual maximum producing allowable for Endeavor’s wells is determined by an equation set out in
Spraberry (Trend) Area Rule 4:




                                                     23
Thus, the smallest amount of acreage that an operator can assign and remain in compliance with

the applicable field rules is 80 acres, and the maximum producing allowable under that assignment

is 515 barrels. If production exceeds that amount, this clause requires the operator to assign

additional acreage—tolerance acreage—to each well if the operator desires to increase the

maximum production allowable for each well. Thus, if Endeavor included in its certified plats the

minimum amount of acreage sufficient to comply with the Commission’s rules for obtaining the

maximum producing allowable for each of its wells, that is the amount it stood to retain upon the

retained-acreage clauses’ triggering event.

           Endeavor assigned roughly 81 acres to each of its wells. It is undisputed, however, that

Endeavor’s wells could not achieve the maximum producing allowable for that amount of acreage

under Rule 4. In fact, when this dispute arose, the Commission’s hearings examiner acknowledged

that “the 81.0 acre allowables will allow the wells to produce an amount of oil far in excess of the

amount of oil the wells are currently capable of producing.” Thus, Endeavor assigned to each of

its wells an amount of acreage that “compl[ied] with the applicable rules and regulations of the



                                               
           RULE 4: The maximum daily oil allowable for each well on an EIGHTY (80) unit in the subject
           field shall be 515 barrels of oil per day, and the actual allowable for an individual well shall be
           determined by the sum total of the two following two values:

                 1.    Each well shall be assigned an allowable equal to the top allowable established for a well
                       having a proration unit containing the maximum acreage authorized exclusive of tolerance
                       acreage multiplied by SEVENTY FIVE percent (75%) and by then multiplying this value
                       by that fraction the numerator of which is the acreage assigned to the well and the
                       denominator of which is the maximum acreage authorized for a proration unit exclusive of
                       tolerance acreage.

                 2.    Each well shall be assigned an allowable equal to TWENTY FIVE percent (25%) of the
                       maximum daily oil allowable above.

Tex. R.R. Comm’n, Final Order Amending Field Rule 4 in the Spraberry (Trend Area) Field Various Counties, Texas,
Oil and Gas Docket No. 7C-0258301 (Jan. 15, 2009).


                                                             24
[Commission] for obtaining the maximum producing allowable for the particular well.” Having

met the threshold requirement for compliance with the field rules, Endeavor retained exactly what

it bargained for: approximately 81 acres per well. Under the leases’ unambiguous language, all

unassigned acreage reverted to the lessors.

       To retain 160 acres per well, Endeavor needed to actually assign 160 acres to each well.

Rule 3 provides that Endeavor could have attempted to assign to each of its existing proration units

an additional 80 acres of “tolerance acreage.” Although such an assignment would hypothetically

raise each well’s maximum producing allowable, when productive acreage is a component of the

maximum producing allowable—as it is here—some authorities suggest that operators should

“verify[] that additional acreage is actually necessary or required to achieve the maximum

allowable.” Philip C. Mani, Interpreting and Drafting Retained Acreage Provisions—Partial

Termination of Leasehold Rights, STATE BAR OF TEX. OIL, GAS, & MINERAL TITLE EXAMINATION

COURSE, at 6 (2015). Of course, this question is not directly before us, as Endeavor did not assign

any tolerance acreage to its proration units.

       In summary, Endeavor’s retained-acreage clauses provided that its leases would

automatically terminate except for lands “located within a governmental proration unit assigned

to a well . . . with each such governmental proration unit to contain the number of acres required

to comply with the applicable rules and regulations of the [Commission] for obtaining the

maximum producing allowable for the particular well.” The applicable field rules required

Endeavor to “file with the Commission certified plats of their properties,” and for those plats to

“set out distinctly all of those things pertinent to the determination of the acreage credit claimed

for each well.” Endeavor assigned 81-acre proration units to each of its producing wells, as



                                                25
depicted in the certified plats it filed with the Commission. Thus, at the clauses’ triggering event—

the end of each lease’s continuous-development period—Endeavor retained only the acreage it had

assigned to each well. That amount was 81 acres—not 160 acres. Consequently, Endeavor’s leases

terminated as to the acreage that Discovery’s leases cover, which Endeavor did not assign to a

producing well.

           Other construction rules

           Endeavor argues that two additional rules of construction require the conclusion that it

retained its lease as to 160 acres per well. Again, we do not agree.

           1.          Forfeiture

           Endeavor contends that the court of appeals’ construction of its leases’ retained-acreage

clauses violates the “rule against forfeiture” because it “divest[ed] Endeavor of 320 acres of

productive property, and did so without compensation.” Although we have noted that “[f]orfeitures

are not favored in Texas, and contracts are construed to avoid them,” Fischer v. CTMI, L.L.C., 479

S.W.3d 231, 239 (Tex. 2016) (quoting Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d

768, 774 (Tex. 2009)), we agree with the court of appeals that its construction does not result in

forfeiture, but rather a partial termination of the leases under their own terms. This result arises

from the fact that the retained-acreage clauses operate as special limitations on Endeavor’s

leasehold interests.14

                                               
          14
             Forfeitures, which generally arise from the failure to comply with a condition subsequent, cut short the
natural limit of the leasehold interest. A.W. Walker, Jr., The Nature of the Property Interests Created by an Oil and
Gas Lease in Texas, 8 TEX. L. REV. 483, 486 (1930) (“A condition subsequent is a forfeiture provision; it renders the
estate liable to be defeated by the happening of the event expressed in the condition prior to the normal termination of
the estate.”). By contrast, a special limitation “does not operate to cut short the estate but simply fixes one of the
natural limits of the estate beyond which the estate cannot endure, being similar in this respect to a general limitation,
and, like a clause of general limitation, is in no proper sense a forfeiture provision.” Id. (footnote omitted).




                                                           26
           A special limitation in an oil and gas lease provides that the lease will automatically

terminate upon the happening of a stipulated event. This event may be the cessation of production

in contravention of the lease’s terms,15 failure to commence drilling or reworking operations within

the time the lease required,16 or an operator’s failure to timely pay a shut-in royalty the lease

required.17 And although whether a lease has terminated “‘is always a question of resolving the

intention of the parties from the entire instrument,’” we will not find a special limitation “unless

the language is so clear, precise, and unequivocal that we can reasonably give it no other meaning.”

Anadarko, 94 S.W.3d at 554 (quoting Fox. v. Thoreson, 398 S.W.2d 88, 92 (Tex. 1966)).

           The plain, grammatical language of Endeavor’s leases shows that the parties intended the

leases to continue only as to acreage that had been assigned to a well as reflected in the certified

plats Endeavor filed with the Commission, and that the leases “shall automatically terminate” as

to all acreage not assigned to those proration units. This is precisely the type of clear and

unequivocal language that imposes a special limitation on a lease. Here, the leases required

Endeavor to either (1) continue developing the tracts at issue, or (2) by the end of the continuous-

development period, assign sufficient acreage to the wells’ respective proration units to achieve

the maximum producing allowable for those wells. Because Endeavor did not assign the

undeveloped acreage to a proration unit, Endeavor’s leases automatically terminated as to those


                                               
           15
           See Freeman v. Magnolia Petroleum Co., 171 S.W.2d 339, 342 (Tex. 1943) (“Here the parties agreed that
if no gas was being produced on April 7, 1940, the lease should terminate.”).
         16
            See Samano v. Sun Oil Co., 621 S.W.2d 580, 584 (Tex. 1981) (“When production stopped on May 4, 1977,
during the secondary period, Sun had an express sixty days to drill or rework the well. When it failed to do so, the
lease by its express terms automatically terminated.”).
           17
                See id. at 583–85.



                                                        27
lands. Lessees who agree to leases like those at issue here must meet “the condition which they

imposed upon themselves . . . . For their failure to do so they have only themselves to blame.”

Freeman, 171 S.W.2d at 342.

       2.      Construed as a whole

       Finally, Endeavor argues that only its construction is consistent with the rest of the contract.

Specifically, Endeavor notes that the leases’ continuous-development clauses use the term

“proration unit” to refer to a part of the lease “even if it had no well.” Yet Discovery construes

“assigned to,” as used in the retained-acreage clause, to refer to the proration unit the operator

assigns to a specific well. Endeavor contends that, because the term must bear the same meaning

in both clauses, the term “assigned” as used in the retained-acreage clause must refer to what the

Commission assigns, not what the operator assigns. We disagree.

       The continuous-development clauses provide that the leases will terminate “as to each

proration unit upon which there is no well or wells thereon located and then producing oil or gas

in commercial quantities.” We do not agree that this clause suggests that a proration unit can exist

where “there is no well.” Rather, it refers to a proration unit upon which there is no well that is

both (1) located on the proration unit, “and” (2) producing oil or gas in commercial quantities

when the termination occurs. “‘And’ is a conjunction that means ‘along with or together with.’”

Harkins, 501 S.W.3d at 604 (quoting And, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY

80 (2002)). Given the retained-acreage clauses’ identical requirement that proration units contain

a producing well, we agree with Discovery’s interpretation.




                                                 28
                                             IV.
                                          Conclusion

       We conclude that the unique language of the retained-acreage clauses in the leases at issue

permitted Endeavor to retain the amount of acreage Endeavor “assigned to” each well in the plats

it filed with the Commission. Thus, we affirm the court of appeals’ judgment.



                                                    _____________________
                                                    Jeffrey S. Boyd
                                                    Justice

Opinion delivered: April 13, 2018




                                               29
