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Click here for the full text of this decision FACTS:URI Inc. had four uranium mining leases with the Vasquez family through Feb. 12, 2000, “and so long thereafter as uranium . . . is produced in paying quantities” from the leased land. By Feb. 12, 2000, URI had not produced any uranium, but URI tendered shut-in royalty payments to the Vasquez family in 2000, 2001 and 2002, under the shut-in royalty clause of the lease. That clause said that if URI had discovered uranium that was capable of being produced in commercial quantities, but had not yet been produced, then the lease would continue for one year at a time, provided that shut-in royalty payments were made. Everest Exploration, who in January 2000 had a uranium top lease with the Vasquezes, subject to URI’s rights, advised the family to reject the tendered shut-in royalty payments. URI sued the Vasquez family in 2001 for breach of contract. Everest intervened, seeking a declaration that URI’s leases had terminated on Feb. 12, 2000, and were not extended by the shut-in royalty payments. URI filed a counterclaim against Everest for tortious interference with contract. On competing summary judgment motions, the trial court granted URI’s and denied Everest’s, ruling that the URI leases were properly extended by the shut-in royalty payments. HOLDING:Affirmed. It is undisputed that URI has discovered uranium, so the question is whether, in URI’s opinion, the uranium “is capable of being produced in commercial quantities.” To that end, the parties disagree on: “(1) the market price necessary for URI to produce uranium in”commercial quantities’ and (2) whether, under the terms of the lease, URI had to have been able to sell uranium at that price on the dates the shut-in payments were tendered.” URI contends that it could produce uranium in commercial quantities at approximately $8 per pound. Everest contends that in a filing with the Securities and Exchange Commission, URI stated that it had to sell uranium at $12 per pound to achieve a positive cash flow. The court, however, points out that the SEC filing is dealing with profitability and is not evidence of the price of production. Therefore, the undisputed cost for producing uranium in commercial quantities is approximately $8 per pound. The court agrees with URI that the leases were thus extended at the time of the shut-in royalty payments because of URI’s belief that it uranium could be produced profitably in the future. Texas cases have consistently distinguished between actual production and the capability of production in paying or commercial quantities by contrasting what is being produced at the relevant time (the actual production) with anticipated future production (the capability of production). And Everest did not controvert URI’s contention that it could achieve profitability by 2003 or 2004. The court also upholds the trial court’s award of nearly $202,000 in attorneys’ fees. URI was not required to segregate its fees for defending the tortious interference claim against Everest and the breach of contract claim against the Vasquez family. OPINION:Duncan, J.; Duncan, Marion and Speedlin, JJ.

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