Lease Perpetuation

The in-house attorney and in-house landman’s home for commentary, insight, and analysis of case law affecting lease termination/perpetuation.

19May

BREAKING: ConocoPhillips v. Koopmann

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:

  1. 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.
  2. 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…

5Aug

Case Law Update: ConocoPhillips Must Release 15K Acres

Texas Case Law Update: On August 5, 2015, the San Antonio Court of Appeals released its opinion in ConocoPhillips Company v. Vaquillas Unproven Minerals, Ltd., [1] No. 04-15-00066-CV (San Antonio – August 5, 2015).  affirming the trial court’s order declaring ConocoPhillips breached two oil and gas leases in Webb County by failing to release all acreage in excess of 40 acres for each producing and shut-in natural gas well capable of producing in paying quantities. As a result, ConocoPhillips was ordered to release an additional 15,351 acres. The issue on appeal was whether the retained acreage clauses allowed ConocoPhillips to retain 40 acres per gas well or 640 acres per gas well.

This case illustrates how appellate courts can interpret acreage perpetuation and release language in a lease in conjunction with regulatory rules. As such, this case underscores the importance of lease language that references regulatory rules, which may provide for spacing or proration units of a greater or smaller size than the default acreage provided within the lease.

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Footnotes   [ + ]

© Copyright 2014, Austin W. Brister. 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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