Introducing the first edition of Producer’s Edge

Posted by: Austin Brister in Uncategorized

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 first edition, we highlight several recent Texas oil and gas cases. We also highlight Partner Donald D. Jackson, and his recent article, Can A Driller Trespass While Fracking On Its Own Lease? You’ll also find our article listing a brief summary of several oil and gas cases pending in front of the Texas Supreme Court.

Download the first issue of Producer’s Edge here.

8Aug

Appellate Court Holds that Landowner’s “Course of Dealing” Leads to Waiver

Posted by: Austin Brister and Marcus V. Eason in Case Law Update, Lease Perpetuation

In June 2018, the Dallas Court of Appeals issued its memorandum opinion in Tollet v. Surface, holding that an ambiguous royalty provision in a groundwater lease, when read in light of the parties’ course of dealings, allowed the lessee to make royalty payments once per month with a 90-day grace period. The court also reviewed the landowner’s “course of conduct,” including a “continual failure” for four years to demand strict performance of royalty timing and metering provisions, and held that this resulted in a waiver of the lessee’s breach of those provisions.

Water companies and oil and gas operators alike may be interested in this case, as it underscores the importance of carefully drafting royalty and metering provisions, and illustrates the use of a “waiver” defense in a breach of lease case.

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

Posted by: Austin Brister and Chris Halgren in Case Law Update, Litigation

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.

10Aug

Slideshow: Production in Paying Quantities

Posted by: Austin Brister in Uncategorized

This afternoon, I will be presenting at the Dallas Bar Association’s 31st Annual Review of Oil & Gas Law on the topic “Production in Paying Quantities.”

Here is a copy of my slides:

25Jan

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

Posted by: Chris Halgren in Case Law Update, Primers and Insights

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[+]

Footnotes
↑1	Ring Energy v. Trey Resources, Inc., 2017 WL 192911(Tex. App.—El Paso January 18, 2017, no pet. h.).

18Jan

Denbury v. Texas Rice: Clarifying the Test for Common Carrier Status, Power of Eminent Domain

Posted by: Austin Brister in Case Law Update, Primers and Insights

On Friday, January 6, 2017, the Texas Supreme Court issued its long-awaited opinion in Denbury Green Pipeline–Texas, LLC v. Texas Rice Land Partners, Ltd. (“Texas Rice II”), ^[1]15-0225, 2017 WL 65470 (Tex. Jan. 6, 2017). holding that:

Denbury’s evidence of a post-construction transportation agreement with an unaffiliated customer was relevant to the “reasonable probability test,”
rejecting a rule that the requisite intent must exist at the time the pipeline was contemplated,
rejecting the appellate court’s “substantial public interest” test, and
holding that Denbury had “conclusively” established its qualification as a common carrier with the power of eminent domain.

The opinion provides clarity as to the test previously set forth in Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline–Texas, LLC (“Texas Rice I”), ^[2]363 S.W.3d 192, 202 (Tex. 2012). and the types of evidence relevant to that determination.

Footnotes[+]

Footnotes
↑1	15-0225, 2017 WL 65470 (Tex. Jan. 6, 2017).
↑2	363 S.W.3d 192, 202 (Tex. 2012).

11Jan

10 Oil and Gas Cases to Watch in 2017

Posted by: Chris Halgren in Case Law Update

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:

31Aug

Royalty Litigation – An Overview of Current Trends

Posted by: Chris Halgren in Primers and Insights, Royalty Litigation

Chris Halgren is presenting today at the Houston College of Law for its 29th Annual Energy Law institute on the topic “Royalty Litigation: An Overview of Current Trends.” The slides are embedded in this post below.

Royalty litigation by Chris Halgren

19May

BREAKING: ConocoPhillips v. Koopmann

Posted by: Austin Brister in Case Law Update, Lease Perpetuation

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:

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.
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…

13Jan

Texas: Statutory Subordination of Mortgages

Posted by: Austin Brister in Primers and Insights

Texas House Bill 2207, effective January 1, 2016, statutorily subordinates certain real estate mortgages to oil and gas leases, introducing an interesting tweak to the long-standing and well-established “first in time, first in right” rule. However, this statute is not without its limitations. For example, it only applies to foreclosure sales for which the foreclosure notice occurs or the judicial foreclosure action commences on or after January 1, 2016. Additionally, the statute goes on to clarify that, although the lease is to survive the foreclosure, the right to use the surface estate may be terminated and extinguished by the foreclosure to the extent the security interest had priority over the lessee. If you are doing a foreclosure search to find your next property, read further to see how things happen in Texas.