Three recent Texas cases have focused on the interpretation of express offset provisions in oil and gas leases. Over the last year, the Texas oil and gas industry has experienced what some commentators have called “Shale Boom 2.0,” with increased drilling activity in South Texas and the Permian Basin, leading to some marketing bottlenecks and spikes in the number of drilled but uncompleted wells.
Whatever the cause, at least three reported appellate cases in the last 18 months have focused on the construction of express offset clauses in oil and gas leases. Oil and gas landmen and lawyers alike should take note of these decisions, as they each underscore that Texas courts do not interpret oil and gas leases merely by reference to the industry’s general rules, but instead on a careful analysis of the actual language used by the parties in the lease. And as one recent case illustrates, the “surrounding circumstances” of the shale boom might lead to results some would not expect.Read More »