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.
BNSF Railway Co. v. Chevron Midcontinent, LP
This dispute arises from a deed executed in 1903 from W.H.C. Goode to BNSF’s predecessor covering land in Upton County, Texas. When Chevron began producing from underneath BNSF’s railway tracks, BNSF sued for trespass of title, arguing that the 1903 deed conveyed fee simple title. Chevron argues that BNSF acquired only an easement. Thus, the issue before the Court was whether the parties to the 1903 deed intended to convey fee simple title or only an easement. Although the deed contained the term “fee simple” in the habendum clause, the court ultimately decided the deed conveyed an easement because it contained terms throughout the deed that suggested the parties intended to convey only an easement. Read More »