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…