Due perhaps to geologic serendipity, Texas has a long and extensive history of oil and gas exploration and production. Consequently, much of Texas’ lands have experienced severance of mineral from surface estate and resulting complications of concurrent occupancy by parties whose interests are not always fully aligned. In Texas, the owner of a severed mineral interest (and its mineral lessee) generally enjoy an implied right to enter upon the surface and to use the surface estate for the purpose of exploring, drilling, producing, transporting, and marketing the minerals. The Texas Supreme Court has described this implied right as “a well established doctrine from the earliest days of the common law.” The underlying rational is that a grant, lease, or reservation of minerals would be worthless if the grantee, reserver, or lessee did not have access to and use of the surface estate.Read More »
Author: Austin Brister
Texas Outfitters, Ltd., LLC v. Nicholson, 572 S.W.3d 647 (Tex. 2019)
The Texas Supreme Court recently issued its opinion in Texas Outfitters v. Nicholson, addressing the duties an executive mineral owner owes to non-executive owners. The case focused on when an executive owner has a duty to sign a lease and to what extent efforts to protect or benefit the surface estate can impact this duty. The Court affirmed the trial court’s judgment holding that the executive breached its duty and affirmed the trial court’s award of $867,654.32 plus interest and costs.Read More »
Offset Obligations: Court Holds Offset Obligation Not Dependent on an Expectation of Profit or Actual Drainage
Bell v. Chesapeake Energy Corp, 2019 Tex. App. LEXIS 1978, 2019
WL 1139584 (Tex.Civ.App.—San Antonio, 2019, no pet)
In the last edition of Producer’s Edge, we surveyed several recent offset cases. Those cases illustrate that horizontal shale plays have brought several unique twists and complications, which can significantly alter the traditional notion of an “offset well.” In addition, Texas courts focus on a careful reading of the actual language within an offset provision when determining both when and how to drill an offset well.
A recent case out of the San Antonio Court of Appeals, Bell v. Chesapeake Energy Corp, continues this trend of offset lawsuits. The Bell case addresses whether two different offset provisions required the lessors to prove the reasonable prudent operator standard, and how to calculate compensatory royalties for an adjacent horizontal well.Read More »
McGinnis Lochridge’s Oil & Gas Newsletter: Producer’s Edge keeps clients informed about Texas oil and gas case law, regulatory updates, and insightful articles relevant to the oil and gas community.
In this edition, we present several insightful articles, including an article covering the recent Barrow-Shaver opinion from the Texas Supreme Court involving the role of expert witness testimony in contract construction cases. You’ll also find an article surveying surface use disputes, an article discussing a recent drainage/offset case, and an article discussing acreage assignment issues at the Texas Railroad Commission. In addition, we have included a guest article from the International Trade and Transactions Practice Group, analyzing key legal factors when engaging in international oil and gas transactions. Finally, you’ll find a short summary of several recent Texas oil and gas cases, and a list of oil and gas cases pending before the Texas Supreme Court.
Download the second issue of Producer’s Edge here.
M & M Res., Inc. v. DSTJ, LLP, 2018 Tex. App. LEXIS 9331 (Tex.Civ.App.—Beaumont 2018, no pet.)
Plaintiffs in title disputes sometimes will allege a claim under the Declaratory Judgment Act in order to seek attorneys’ fees. In this case, the court held that the claim could only be asserted as a trespass to try title claim, where attorneys’ fees are not recoverable.
Here, an oil and gas company hired landmen to acquire oil and gas leases in Jefferson County. Landmen acquired 22 leases and assigned them to the oil and gas company using a form that included an overriding royalty reservation and a provision indicating the assignment would terminate upon any late royalty payments. The landmen allegedly recorded the assignment without giving the oil and company an opportunity to review or approve the form. Years later, the landmen claimed royalty payments were untimely and sought termination of the assignment. The landmen claimed that, even though the oil and gas company had not reviewed or accepted the assignment, it ratified the assignment by its conduct.Read More »
Yates Energy Corp. v. Broadway Nat’l Bank, No. 04-17-00310-CV, 2018 Tex. App. LEXIS 10517 (App.—San Antonio Dec. 19, 2018, no pet.)
The San Antonio Court of Appeals recently analyzed the Texas Correction-Instrument Statutes in Yates v. Broadway. The court held that, if a grantor or grantee have conveyed their interests to heirs, successors, or assigns, then those heirs, successors, or assigns must sign a correction instrument in order for it to effectively correct the original instrument. For many practitioners, this was the expected outcome; however, the case provides an interesting example of complexities that can be involved when attempting to correct an instrument years after it is executed.Read More »
Endeavor Energy Res., L.P. v. Energen Res. Corp., No. 11-17-00028-CV, 2018; Tex. App. LEXIS 8705 (Tex.App.—Eastland Oct. 25, 2018, pet. filed)
The Eastland Court of Appeals recently issued its opinion in Endeavor v. Energen adopting a limited interpretation of an “accumulation” clause within a continuous development provision. The Court held that the clause only allowed the lessee to extend the “next” 150-day term, not to be accumulated and used on any well.Read More »
Apache Deepwater, LLC v. Double Eagle Dev., LLC, 557 S.W.3d 650 (Tex. App.—El Paso 2017, pet. denied Dec. 14, 2018)
Retained acreage provisions continue to be a popular subject in Texas oil and gas law. The Texas Supreme Court recently denied a petition for review in the closely-watched case, Apache v. Double Eagle. In that case, the parties disagreed as to whether a retained acreage clause provided for a single partial termination at the end of the primary term (i.e., a “snapshot-in-time” termination), or a continuous partial release throughout the secondary term (i.e., “rolling termination”). This case bolsters the old adage: “say what you mean and mean what you say.” Texas courts will not fill in the blank otherwise.Read More »
Green v. Chesapeake Expl., L.L.C., No. 02-17-00405-CV, 2018 Tex.; App. LEXIS 10307 (Tex. App.—Fort Worth Dec. 13, 2018, no pet.)
In urban oil and gas plays such as the Barnett Shale, horizontal drilling has “paved the way” for oil and gas operators to drill through and produce minerals underlying highways, streets, and roadways. Even in rural areas across Texas, numerous horizontal wells have been drilled underneath roads and highways. As a result, several reported cases in recent years have involved title to minerals underlying roadways. Landmen of the vertical era may have paid little attention to mineral title underlying roadway tracts. After all, one option may have been simply to drill the vertical well next to the road or to omit the roadway tract from the unit. However, horizontal drilling significantly altered this analysis, as geological implications and long horizontal laterals may dictate that the horizontal wellbore pass under the roadway, significantly increasing the odds that a roadway tract will be a “drillsite tract.” The result is that mineral title and pooling issues are more likely of critical concern.Read More »
OBO, Inc. v. Apache Corp., 2018 Tex. App. LEXIS 8392,
(Tex.Civ.App.—Houston [14th Dist.] 2018, no pet.)
Parties to a joint operating agreement sometimes elect to have a non-owner serve as the operator. For example, interest owners may determine that they are unwilling or unable to perform the operator duties under the operating agreement, and will instead elect hire an unaffiliated contract operator. However, placing a non-owner in the position of operator is problematic for a number of reasons. For example, most model form operating agreements either directly or indirectly indicate that ownership is a condition precedent to serving as operator. Moreover, numerous obligations, protections, and other provisions of model form operating agreements may become confusing, unworkable, or even meaningless when applied to a non-owning operator.
Some of those issues are illustrated by the recent case OBO, Inc. v. Apache, involving the American Petroleum Institute’s Model Form Unit Agreement and Model Form Unit Operating Agreement. In that case, the Houston 14th District Court of Appeals was faced with determining whether an elected Unit Operator is permitted to delegate operatorship duties to a contract operator, and whether that contract operator can be liable to nonoperators for breach of any duties imposed on the operator under that Unit Operating Agreement.