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.,  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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|1.||↑||No. 04-15-00066-CV (San Antonio – August 5, 2015).|