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.
Tag: oil and gas lease
Texas Court: Lessee May Not Exclude Other Lessees from Constructing Surface Facilities Or Drilling Through Mineral Estate
The San Antonio Court of Appeals, in Lightning Oil Co. v. Anadarko E&P Onshore, LLC, [1] Opinion not yet published, San Antonio Court of Appeals (4th Dist.), August 19, 2014. held that a Texas oil and gas lease does not inherently convey a right for the lessee to control the “subterranean structures” from which hydrocarbons may be produced. As a result, the court held that the mineral lessee of a severed mineral estate did not have the right to exclude third-parties from constructing surface facilities on the surface overlying the lessee’s mineral estate and/or exclude third-parties from drilling wells through (but was not producing from) the lessee’s mineral estate. The Lightning court identified the “central question” as being the nature of Lightning Oil Co.’s (“Lightning”) interest as a mineral lessee. After reviewing cases from its own court and the Texas Supreme Court, among others, the Lightning court concluded that the surface estate owner, not the mineral estate owner, controls the earth beneath the surface estate. Read More »
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