Author: Chris Halgren

Chris represents clients in a wide variety of litigation matters. Chris strives to identify an aggressive, yet practical approach to accomplish his clients' needs, taking into account the particular legal and business issues presented. With horizontal drilling transforming the energy landscape across Texas, Chris developed an emphasis on oil and gas related matters. He has represented operators, non-operators, and landowners in a variety of disputes ranging from seismic misappropriation, leasing issues, royalty disputes, title litigation, lease termination, midstream accounting, and other related contractual disputes. Chris has been selected to the Texas Super Lawyers Rising Stars list, a Thomson Reuters service, (2014-2019).
4Jun

Appellate Court Holds that MSA Provision Acts as Enforceable De Facto Mineral Lien Waiver

Mesa Southern CWS Acquisitions, LP v. Deep Energy Exploration Partners, LLC, No. 14-18-00708-CV, 2019 Tex. App. LEXIS 10107 (Tex. App.—Houston [14th Dist.] November 21, 2019, no pet.).

The Fourteenth Court of Appeals in Houston held that provisions within a master service agreement, stating that a subcontractor could only seek payment or damages exclusively from the contractor, were effective to preclude that subcontractor from enforcing a mineral lien against the mineral property owner. In effect, some have interpreted this case as allowing a de facto lien waiver for Chapter 56 mineral liens, despite the prohibition on lien waivers under §53.286 of the Property Code. While Chapter 56 (providing for mineral liens) does not expressly address lien waivers, §56.041 does expressly provide that “A claimant must enforce the lien within the same time and in the same manner” as a Chapter 53 lien. For this reason, the subcontractor argued that this provision in the master service agreement was a de-facto mineral lien waiver, unenforceable and void as against public policy pursuant to §53.286. The appellate court disagreed, dismissed its claims, and ordered it to release its liens.

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1Jun
Midstream Update: Eastland Court of Appeals Extends Denbury Test to Crude Petroleum Pipelines

Federal Court Examines Jurisdictional Reach Over Outer Continental Shelfs

Sam V. Laborde Marine, L.L.C., Civil Action No. H-19-4041, 2020 U.S. Dist. LEXIS 1585, (S.D. Tex. 2020)

Following removal from State Court, the Plaintiff challenged the federal trial court’s jurisdiction over the Plaintiff’s personal injury claim. Ultimately, the district court concluded that it had jurisdiction under the Outer Continental Shelf Lands Act (“OCSLA”), which grants federal courts jurisdiction over certain disputes arising out of conduct on the Outer Continental Shelf (“OCS”), codified at 43 U.S.C. 1331, et seq.

At the time of his injury, the Plaintiff was working as an inspector on a platform located on the OCS. However, the injury occurred while the Plaintiff was walking down the stairs of a nearby vessel where Plaintiff was being housed during his employment. The Plaintiff claimed that the OCSLA did not apply to his claim because it arose on the vessel, rather than the platform located on the OCS. The Plaintiff claimed that for the OCSLA to apply, his injury must have occurred while he was on a “proper situs.” In other words, the injury had to have occurred on the platform and the fact that it occurred on the vessel precluded federal court jurisdiction.

The district court rejected the Plaintiff’s argument, concluding that the Fifth Circuit has “explicitly rejected the argument that OCSLA jurisdiction includes a situs requirement.” The court noted that there is a perceived conflict between the Fifth Circuit’s 2013 opinion in Barker v. Hercules, which appears to refer to a situs requirement, and the Fifth Circuit’s 2014 opinion in In re Deepwater Horizon, which appears to reject the inclusion of a situs requirement. Rather, In re Deepwater Horizon applied a “but for” test, looking only at whether the facts underlying the action would not have occurred but for an operation on the OCS. The district court harmonized the two Fifth Circuit opinions by concluding that Barker’s “situs” element applied only when determining whether OCSLA’s choice-of-law rules would apply. When the question is focused on jurisdiction, then Deepwater Horizon’s broader “but for” test would apply.

The district court applied the “but for” test and concluded that the Plaintiff’s injuries would not have occurred but for his employment as an inspector on a platform located on the OCS. Accordingly, the district court concluded that it was vested with jurisdiction.

18May

Twelve Lessor/Lessee Issues to Consider When Navigating the “New Normal”

Operators across the nation are scrutinizing their leases in a wide-spread effort to navigate historic low oil prices, takeaway curtailment, storage shortages, issues introduced by the COVID-19 pandemic, and a host of associated issues.

These circumstances present a variety of complex lease maintenance issues. Most leases obtained during the shale boom are in their secondary terms, held either by production in paying quantities, shut-in provisions, an operations clause, or continuous development provisions. Each of these introduce a unique analysis, and each is susceptible to significant strategic challenges in the face of low commodity prices along with transportation and storage issues.

Below, we briefly explore twelve issues that may be encountered by lessees in Texas while navigating these unique challenges.

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19Aug

Post-Production Cost Fights Continue: Supreme Court Holds the Phrase “Into the Pipeline” Set a Valuation Point for “Amount Realized” Royalties

Burlington Resources Oil & Gas Co LP v. Texas Crude Energy, LLC, 2019 Tex. LEXIS 196 (Tex. March 1, 2019)

In Burlington Resources, the Texas Supreme Court held that an oil and gas royalty assignment that required the royalty to be delivered “into the pipeline” permits the payor to deduct post-production costs from the royalty owners’ payment, even if the agreement purports to prohibit such a deduction.

For years, Texas courts have found that when an oil and gas lease provides that royalty will be paid “at the well” or “at the mouth of the well,” the lessee generally can pay royalties net of all reasonable postproduction costs — even if the lease purports to prohibit such deduction. The reasoning has been that such language places the “valuation point,” (ie, where the production must be valued for royalty payment purposes) at a point before any post-production costs would have been incurred. In leases with a valuation point “at the well,” the Supreme Court has held that language prohibiting deductions for post-production costs as “surplusage” — or meaningless. In Burlington Resources, the Supreme Court held that the phrase “into the pipeline” mirrors the “at the well” designation and requires the same result.

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6Aug

Supreme Court Splits Over Use of Expert Testimony and Other Extrinsic Evidence When Construing Obligations in Oil and Gas Agreements

Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, No. 17-0332, 2019 Tex. LEXIS 688 (June 28, 2019)

On June 28, 2019, a divided Texas Supreme Court issued its opinion in Barrow-Shaver Resources Company v. Carrizo Oil & Gas, LLC, a decision that will impact what evidence a court can consider in oil and gas contract disputes and possibly how oil and gas agreements are negotiated and drafted. The Court discussed the line between admissible evidence of “surrounding circumstances” and inadmissible parol evidence, when prior drafts and the use of expert testimony regarding industry custom and usage is offered to construe an unambiguous agreement. The Court also discussed the use and function of “consent-to-assign” provisions and the inability to rely on oral representations that conflict with the terms of a written agreement.

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5Jun

Tex. Supreme Court Splits Over Meaning of “Offset Well” in Shale Plays

The Texas Supreme Court issued a narrow 5-4 opinion in Murphy Exploration & Production Co. — USA v. Adams on June 1, 2018, interpreting a common “offset” clause contained in a 2009 oil and gas lease.  The majority held that the phrase “offset well” in that clause does not necessarily refer to a well that would protect the leasehold against drainage, but instead referred to a well drilled anywhere on the leased premises that was drilled to a depth required by the lease. The Court reached this conclusion based on interpreting that phrase in light of “surrounding circumstances” evidence of the discovery of the Eagle Ford and drainage patterns of horizontal shale wells.  Four justices dissented in an opinion that, among other things, criticized the majority opinion for disregarding the commonly understood meaning of the phrase “offset well,” which is a well designed to protect the leasehold from drainage.

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25Jan

Texas Court Holds that Permit of Injection Well May be Challenged Outside Railroad Commission and Travis County Via Injunctive Relief

Brief Overview: What You Need to Know

On January 18, 2017, in Ring Energy v. Trey Resources, Inc.,[1] Ring Energy v. Trey Resources, Inc., 2017 WL 192911(Tex. App.—El Paso January 18, 2017, no pet. h.).  the El Paso Court of Appeals, in a case of first impression, addressed whether a trial court outside of Travis County (where the Texas Railroad Commission (the “RRC”) is based) has jurisdiction to issue an injunction prohibiting a party with a valid RRC injection well permit from operating its injection well based on a complaining party’s claim that the injection would cause imminent and irreparable “waste,” even though the complaining party (1) had not yet sustained any actual injury, (2) did not oppose the permit prior to issuance, and (3) did not take advantage any other administrative remedy that might have been available. Read More »

Footnotes   [ + ]

11Jan

10 Oil and Gas Cases to Watch in 2017

With the beginning of a new year, there are several oil cases pending in the Texas Supreme Court relevant to the oil and gas industry.  We’ll be following these cases throughout the year.  Sign up as a subscriber to oilandgaslawdigest.com to receive updates on these and other cases.

Here are ten cases that we will be watching:

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© Copyright 2012-2018, McGinnis Lochridge LLP. All Rights Reserved. DISCLAIMER: The information in this article is for general information purposes only. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading this article does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided in this article.
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We keep clients and subscribers updated on case law alerts and insightful articles. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. All for free!
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We keep clients and subscribers updated on case law alerts and insightful articles. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. All for free!