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Rule 23 order filed
June 11, 2003;
Motion to publish granted
July 25, 2003.

The plaintiffs, Herbert Eugene Dart and Mary Jane Dart, filed an action to cancel anoil and gas lease granted to the defendants, Stanley Leavell and Eva Lovene Leavell, alleging that the lease had been forfeited due to nonproduction and inoperable equipment. Following a bench trial, the circuit court of Crawford County entered a judgment for theplaintiffs. The court found that the lease had terminated due to nonproduction and that thedefendants had not exercised due diligence in producing and marketing product from thelease. On appeal, the defendants claim that the court's decision was against the manifestweight of the evidence.

The following evidence was adduced at the trial. The plaintiffs acquired a 40-acretract of land in Crawford County, Illinois, in May 1964. They have resided in a house onthe southeast corner of the property since that time. In 1983, the plaintiffs entered into anoil and gas lease with a company affiliated with the Leavell family. The defendants, alsomembers of the Leavell family, obtained ownership of the lease in 1996. Under the termsof the lease, the defendants had the right to prospect, drill, and produce oil on the 40-acretract. Four production wells and an injection well, all powered by electricity, were drilledon the property. The wells are surrounded by fields that the plaintiffs farm. There areunimproved roads throughout the farm fields that lead to the wells.

Herbert Dart testified that the wells were productive from 1983 through the mid-1990sand that he and his wife received royalty checks regularly during that period. Dart stated thatproduction began to fall off about the time the defendants obtained the lease. He testifiedthat they received two royalty checks in 1997 and one in April 1998. He stated that the April1998 payment was for oil produced in March 1998. Dart testified that he did not see any ofthe wells pumping after March 1998. He presented pictures he had taken in September 1999,around the time that this suit was filed, showing that vegetation had grown up around thewells. He said that he did not know whether any of the wells were functional at that timebecause they had been shut down for 18 months. Dart testified that he farmed the groundsurrounding the wells. Each spring, he disced and planted through the access roads on theproperty. He stated that discing smoothed the ruts and made the roads passable. Dart statedthat the defendants had never complained about the road conditions and that they continuedto use the lease roads after the discing work. Dart admitted that he put up "no trespass" signsand a barricade near two of the lease roads at the time the lawsuit was filed. He alsoadmitted that during the leasehold period he made complaints to the Illinois Office of Minesand Minerals of the Department of Natural Resources (Office of Mines) about thedefendants' lack of maintenance of some of the wells.

Rhonda Huddleston, an accounts supervisor at the Norris Electric Cooperative,testified in the plaintiffs' case. Huddleston testified that her company supplied electricity forthe wells. She testified that she had reviewed monthly records regarding the electricity usedto operate the wells and the cost of that usage. Her records showed that from April 1998through December 1998, the defendants were charged $25 in each monthly billing period. The records reflected a minimal usage of 200 to 250 kilowatt hours per month. Shecompared the electricity used during this period to that used during the first three months of1998. During the first part of 1998, the usage resulted in charges of more than $300 permonth. She also noted that with the exception of a 30-day period from December 17, 1998,through January 18, 1999, the records reflected minimum usage throughout 1999. Duringthat December-January period, the defendants were charged $61.91, and 180 kilowatt hourswere used. Huddleston stated that an operating pump jack would use more than theminimum amount of electricity during a one-month period. She explained that she could notstate whether the minimum amount of electricity would be sufficient to operate a well pumpfor one week because the watt usage depends on the horsepower of the motor. She testifiedthat the defendants' service was cut for nonpayment in July 1999.

Stanley Leavell testified that he did not abandon the wells and that he engaged inactivities directed toward oil production on the wells from April 1998 through the date thelawsuit was filed. Leavell testified that he had expenditures for operations of the wells in1998 and 1999. He did not produce records documenting the expenditures. Leavell alsostated that he paid the well fees and the property taxes during this period. Leavell admittedthat he did not pay the electric bill in July 1999. He stated that he did not pay the billbecause he intended to install a new pump house and he wanted to be sure that the electricityto the wells would be cut off. Leavell testified that oil production suffered because oil priceswere depressed in 1998 and 1999.

Leavell testified that the wells on the Dart property produced about 3.5 barrels a day. He admitted that he did not keep a daily gauge or any other record of the quantity of oilproduced by any of the wells on the lease. Leavell testified that he sold oil on March 5 andMarch 10, 1998. After that oil was sold, his reserve tank was empty. He stated that thereis a residual amount of oil that is not removed from the tank. Leavell stated that he ran thewells from March 10, 1998, through April 20, 1998. He did not have any record of thequantity of oil produced during this period. Leavell also stated that he ran one well inDecember 1998. He stated that he turned that well on, ran it for a few days, and then turnedit off. Again, he had no record of the quantity of oil produced during this period. He saidthat he did not run the well throughout January 1999 because he was concerned that the wellmight freeze due to the very cold temperatures. Leavell testified that he sold 72.65 barrelsof oil in August 1999. He stated that the lease had produced approximately 72.65 barrelsbetween March 1998 and December 1998 because he sold all of his reserves in March 1998. Leavell stated that the oil produced in December 1998 was a part of the 72.65 barrels soldin August 1999, but he could not identify what portion was produced in April 1998 and whatportion was produced in December 1998.

The plaintiffs filed a complaint to cancel the lease in September 1999. In thecomplaint, the plaintiffs allege that "no production of oil has been obtained from said leases"since about March 1998, that subsequent to that time the equipment has become inoperable,and that by the express terms of the leases, the leases have been forfeited and are of nofurther force and effect. In their answer, the defendants denied that they abandoned theleases and alleged that the plaintiffs had interfered with their access to the wells by plantingon the lease roads, by placing "no trespass" signs on the property, and by filing complaintswith the Office of Mines.

The trial court found that the plaintiffs had presented a prima facie case ofabandonment and cancellation, based upon evidence that no royalties had been receivedsince April 1998, that no production-related activities had occurred on the plaintiffs' propertyfor a considerable length of time, that the electrical service had been disconnected in July of1999, that the electrical bills showed only minimal billings for most months since April1998, and that there was a great growth of vegetation in and around the well sites, giving theappearance that the well sites had been abandoned and forgotten.

The trial court also determined that the grounds offered by the defendants for the lackof production did not constitute matters beyond their control and that the defendants failedto show reasonable diligence to continue production under the lease. More specifically, thecourt determined that the lease had lapsed due to nonproduction before the "no trespass"signs and barricades were placed and that this action did not account for the lack ofproduction prior to August 1999. The court found that with the exception of the period fromDecember 1998 to January 1999, when there was slightly more than minimum usage, therewas no evidence that the wells were producing from April 1998 through July 1999, when theelectric service was cut off. The court concluded that oil sold in August 1999 had beenactually produced and stored months prior to the sale and that by the time the oil was sold,the lease had already lapsed through nonproduction. The court rejected the defendants' claimthat they were diverted from production activities while they were responding to complaintsfiled with the Office of Mines. The court noted that the complaints involved matters ofproduction which were under the control of the defendants and further that they were notshown to lack merit. Finally, the court found that the discing of the roads had not blockedthe defendants' access to the wells. The court determined that though the defendants couldhave accessed the roads as they had in prior years or, alternatively, confronted the plaintiffs,they chose to do nothing. Based upon the evidence, the court ruled that the plaintiffs wereentitled to a cancellation of the lease.

In this case, the plaintiffs alleged that the defendants had not produced any oil fromthe wells in the 18-month period immediately preceding the filing of the complaint. Insupport of their prayer to cancel the lease, the plaintiffs rely on the habendum clause in thelease. The habendum clause provides that the lease "shall remain in force for a period of sixmonths from this date (called 'primary term') and as long thereafter as oil, liquidhydrocarbons, gas or their respective constituent products, or any of them is produced" fromthe leasehold. The plaintiffs argue that the period of nonproduction was of sufficientduration to warrant a declaration that the lease was at an end.

Whether the lease was "producing" was a question of fact for the trial court.Pieszchalski v. Oslager, 128 Ill. App. 3d 437, 448, 470 N.E.2d 1083, 1090 (1984). An oiland gas lease may be abandoned by the cessation of operations for an unreasonable lengthof time. Spies v. De Mayo, 396 Ill. 255, 274, 72 N.E.2d 316, 325 (1947). The long-standingrule is that "temporary cessation of production after the expiration of the primary term is nota cessation of production within the contemplation and meaning of the 'thereafter' clause if,in the light of all surrounding circumstances, reasonable diligence is being exercised by thelessee to continue production of oil or gas under the lease." Gillespie v. Wagoner, 28 Ill. 2d217, 220, 190 N.E.2d 765, 767 (1963).

In this case, the evidence in the record supports a finding that the lease terminated dueto nonproduction. According to the records of the oil sales, the defendants produced only73 barrels of oil in the period from April 1998 through September 1999. Stanley Leavelltestified that he ran one well for a few days in December 1998. He stated that some oil wasproduced during that brief period, but he could not identify how much was produced. Thereis no other evidence indicating the quantity of oil, if any, that was produced in December1998. The electric company records show a only slight increase in watt usage during thisperiod. The recorded wattage is far less than the amount used during the periods when thewells were operating in 1998 or 1997. Based upon the electric company records, it isreasonable to infer that most of this oil was produced prior to April 20, 1998. There is noevidence in the record to show that the wells were operated or that any oil was producedafter December 1998. In addition, the defendants did not present bills, receipts, or otherdocuments to support their claim that they had been engaged in preproduction preparationand maintenance activities in 1999. As of September 1999, at the time this lawsuit was filed,there was no evidence that a restoration of production was imminent. The plaintiffs did notreceive a royalty check after April 1998. Based upon the record, we conclude that the trialcourt's finding that the lease terminated under its own terms for nonproduction was supportedby the evidence. See Pieszchalski, 128 Ill. App. 3d at 447, 470 N.E.2d at 1090.

The evidence does not support the defendants' contentions that they exercisedreasonable diligence to continue to produce oil under the lease. The evidence shows that thedefendants did not run any of the oil wells after December 1998. This is not a case wherean interruption in production occurred because of a mechanical breakdown, vandalism, orsome other problem beyond the control of the operator. See, e.g., Smith v. Duncan, 230 Ill.App. 3d 164, 595 N.E.2d 645 (1992). One of the reasons offered for the defendants' failureto run the pumps and to produce oil was the depressed price of oil. Though a depressedmarket may have rendered it unprofitable to operate the lease, it did not prevent the operationof the wells. We have reviewed the lease and have found no provision excusing productionand marketing in the event that the oil market becomes depressed. The depressed price ofoil was not contracted against. Consequently, it cannot be used to justify nonproduction, andit does not prevent a lapse of the lease where production has been shut down.

The trial court also considered and rejected the defendants' claims that the plaintiffsinterfered with their ability to tend to the wells. There was conflicting testimony regarding when "no trespass" signs had been placed near the lease roads and whether discing preventedthe defendants from using the lease roads. The trial court apparently accepted Herbert Dart'stestimony that the signs had been placed at the time the lawsuit was filed and that the discinghad never before prevented the defendants from using the lease roads in order to tend to thewells. In a bench trial, the trial court, as the fact finder, is in a superior position to assesscredibility and resolve conflicts in the testimony, and we will not second-guess the trial courton those issues absent a finding that its decision was against the manifest weight of theevidence. See Powers v. Bridgeport Oil Co., 238 Ill. 397, 401, 87 N.E. 381 (1909); Kalatav. Anheuser-Busch Cos., 144 Ill. 2d 425, 433, 581 N.E.2d 656, 660 (1991). The trial courtproperly rejected the defendants' claim that their attention to production was diverted due tothe complaints filed with the Office of Mines. This is not a case where the issue involvedthe validity of the lease. See, e.g., Maschhoff v. Klockenkemper, 317 Ill. App. 3d 554, 740N.E.2d 830 (2000). According to the record, the subject of the complaints involved safetyand production issues. The defendants have not shown that the complaints were unfoundedor were so numerous that they interfered with ongoing operations of the lease and constitutedharassment.

There is sufficient evidence in the record to support the trial court's findings that thecessation of production was not temporary and that the lease terminated under the terms ofthe habendum clause, and its decision is not against the manifest weight of the evidence.

Accordingly, the judgment of the circuit court is affirmed.

Affirmed.

GOLDENHERSH and DONOVAN, JJ., concur.