Earlier this year, we reported the San Antonio Court of Appeals decision in Dragon v. Harrell, a fixed versus floating royalty case. Here, the court is again confronted with the same issue. Relying on its decision in Graham v. Prochaska, the court explains why the estate misconception theory does not apply and explains how the interest in dispute is a fixed nonparticipating royalty interest.
Think your early chain of title has been cured by the passage of time? As this recent case shows, even 100+ year-old instruments can be the subject of new disputes. The Tyler Court of Appeals, in Richardson v. Mills  Richardson v. Mills, 12-15-00170-CV, 2016 WL 5800261 (Tex. App.—Tyler Oct. 5, 2016, no. pet. h.) recently reviewed whether a 100+ year-old instrument was a lease or a mineral deed, and the effect of a release entered approximately two years later.
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|1.||↑||Richardson v. Mills, 12-15-00170-CV, 2016 WL 5800261 (Tex. App.—Tyler Oct. 5, 2016, no. pet. h.)|
Chris Halgren is presenting today at the Houston College of Law for its 29th Annual Energy Law institute on the topic “Royalty Litigation: An Overview of Current Trends.” The slides are embedded in this post below.
This is a condemnation case from Comanche County, Texas. In January 2013, the Railroad Commission of Texas designated BridgeTex as a common carrier and granted it a T-4 permit. BridgeTex condemned an easement across Saner’s land and constructed a pipeline to transport crude petroleum from the Permian Basin to the Texas Gulf Coast. Both the special commissioners and the trial court determined that the easement was for public use, and Saner now challenges the trial court’s finding. The Eastland Court of Appeals affirmed the trial court’s judgment. Read More »
The Corpus Christi Court of Appeals released its Memorandum Opinion today in ConocoPhillips Company v. Koopman, 13-14-00402-CV. The case involved a deed which reserved a term NPRI for a period of fifteen years, or until December 27, 2011 and for “as long thereafter as there is production [of oil, gas, or minerals from the land] in paying quantities.”
The deed also included a savings clause that provided as follows:
[I]f any oil, gas, or mineral or mining lease covering [the Koopmanns’ land] is maintained in force and effect by payment of shut-in royalties or any other similar payments made to [the Koopmanns] in lieu of actual production while there is located on [the Koopmanns’ land] a well or mine capable of producing oil, gas, or other minerals in paying or commercial quantities but shut-in for lack of market or any other reason, then for purposes of determining [whether Strieber’s NPRI continues beyond December 27, 2011,] it will be considered that production in paying or commercial quantities is being obtained from the [Koopmanns’ land]. (emphasis supplied)
The lessee and NPRI owner claimed that these conditions were met and that a $24,000 lease extension fee constituted a “similar payment” to a shut-in royalty. The lessor burdened by the NPRI disagreed and suit was filed. Among the issues addressed are:
- Whether a lease extension fee made under a paid-up lease constituted a payment that was “similar” to a shut-in royalty within the context of a savings clause contained within a deed reserving a term NPRI.
- Whether the term NPRI involved in that case created a future interest in violation of the rule against perpetuities.
Stay tuned over the next few days. We will be working through this case to provide our subscribers with a summary of the court’s holding…
This is a deed interpretation case out ofthe San Antonio Court of Appeals, arisingfrom the 218th Judicial District Court of Karnes County, Texas.
In 1991, the Harrells executed a warranty deed (“1991 Deed”) that conveyed approximately 10 acres of land to the Dragons. The 1991 Deed was subject to prior reservations and it contained the following new reservation by the Harrells:
Texas House Bill 2207, effective January 1, 2016, statutorily subordinates certain real estate mortgages to oil and gas leases, introducing an interesting tweak to the long-standing and well-established “first in time, first in right” rule. However, this statute is not without its limitations. For example, it only applies to foreclosure sales for which the foreclosure notice occurs or the judicial foreclosure action commences on or after January 1, 2016. Additionally, the statute goes on to clarify that, although the lease is to survive the foreclosure, the right to use the surface estate may be terminated and extinguished by the foreclosure to the extent the security interest had priority over the lessee.
Oil and gas price volatility is as much a part of the energy business as drill bits. Few predicted that the current down-cycle would be as long or as deep as it is proving to be. While global events could turn and prices improve, lower prices seem to be a reality for now. Lower prices impact the finances of everyone in the energy industry. Insolvencies, business failures, and bankruptcies are inevitable in this environment; and when they occur, they affect everyone, at all levels and in all aspects of the industry. Though industry participants can’t change the price of oil, they can protect their interests in other ways. In times like this, fortune favors the prepared.
Law360, New York (September 25, 2015) — Over the last five years, American shale production has more than tripled. Since last October, however, the oil and gas industry has trudged through a long and pronounced slump in crude oil prices in what has been termed the “Oil Bust of 2015.” Oil prices dropped below $40 a barrel last month for the first time in over six years, and major relief from this slump may be distant as EIA recently announced that it expects crude to average $59 per barrel in 2016.
This low-price environment has been unfavorable for most royalty owners, as low oil prices generally lead to proportionately low royalty payments. It has also lead to a slow-down in additional drilling and development activity as many oil and gas companies slashed budgets for 2015 and 2016. Drilling contractors have stored hundreds of rigs, and oil and gas companies have drastically reduced their workforces. A strong indicator of this slow-down can be found in the Texas Railroad Commission drilling statistics, showing 964 permits issued last month in Texas, compared with 2,440 in August of 2014. Read More »
Effective January 1, 2010, the SEC adopted amendments to its oil and gas reporting requirements for publicly traded exploration and production companies. Among the amendments was the expansion of the definition of “PUD” (proved undeveloped reserves). Under the new rules, E&P companies are allowed to include in their reserve report PUDs that they were not able to disclose under the previous rules. The catch is that if an E&P company does not timely develop its PUDs, it may be forced to write them off.
Fast forward five years: 2015 – The price of oil has dropped dramatically causing E&P companies to significantly reign in their operations. But what about developing those PUDs that E&P companies listed on their reserve report five years ago? This article will address how changes to the SEC disclosure rules five years ago are impacting E&P companies today. Read More »