texas – Oil and Gas Law Digest

Texas Supreme Court to Determine Whether Accommodation Doctrine Applies to Severed Groundwater Estate

Posted by: Morgan Johnson and Chris Halgren in Case Law Update

The Texas Supreme Court recently granted Coyote Lake Ranch’s petition to review an opinion by the Amarillo Court of Appeals in Lubbock v. Coyote Lake Ranch, holding that the “Accommodation Doctrine” does not apply to the relationship between a surface owner and the owner of a severed groundwater estate. In the context of a severed mineral estate, the Accommodation Doctrine requires that the owner of a severed mineral estate accommodate pre-existing surface uses in certain circumstances.

By granting Coyote Lake Ranch’s petition to review, the Texas Supreme Court will have the opportunity to address whether this doctrine also applies to a severed groundwater estate. The decision in this case could potentially answer an important question regarding conflicts between groundwater production activities and existing surface uses. With the oil and gas industry dealing with sub-$50 oil prices, and the public’s increasing awareness of the importance of water, the Supreme Court’s holding in this case will have significant implications to the development of groundwater in Texas. As Texas A&M University School of Law professor Gabriel Eckstein told Law 360, this case “has big implications, some of which we can’t even imagine yet.”

Texas Court: Lessee May Not Exclude Other Lessees from Constructing Surface Facilities Or Drilling Through Mineral Estate

Posted by: Chris Halgren in Case Law Update

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 (4^th 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 »

Footnotes[+]

Footnotes
↑1	Opinion not yet published, San Antonio Court of Appeals (4^th Dist.), August 19, 2014.

5Aug

Case Law Update: ConocoPhillips Must Release 15K Acres

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

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., ^[1] 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.

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

Anderson v. Dominion – JOA AMI, Pref Right, Contract Area and Term

Posted by: Austin Brister in Case Law Update

In Anderson Energy Corp. v. Dominion Oklahoma Texas Exploration & Prod., Inc., ^[1] 04-14-00170-CV, 2015 WL 3956212 (Tex. App.—San Antonio June 30, 2015, no. pet. h.) the San Antonio Court of Appeals answered the following questions involving a 1977 AAPL JOA, with a printed Pref Right, and a typewritten AMI:

Whether the AMI and Pref Right clauses covered interests acquired after execution of the JOA, based largely on the extent of the “Contract Area;”
The Term of the JOA where the parties failed to select one of the printed options;
Whether the above claims were precluded by the Statute of Frauds; and
Whether the affirmative defenses of waiver or laches precluded the plaintiff’s claims described above.

Footnotes
↑1	04-14-00170-CV, 2015 WL 3956212 (Tex. App.—San Antonio June 30, 2015, no. pet. h.)

Mineral Liens: Collecting Unpaid Debt for Oilfield Service Companies

Posted by: Austin Brister in Primers and Insights

Purpose and Application of Mineral Liens

Everyone in the construction industry is intimately familiar with the “Mechanic’s Lien,” which gives a security interest in the title to real property (and sometimes personal property) to those who have supplied materials or labor to improve the property. In some jurisdictions, the liens are broken down further into sub-groups, such as the the “Materialman’s Lien,” “Construction Lien,” “Supplier’s Lien,” or “Laborer’s Lien.” But one lesser known type of lien can be crucial to oilfield service companies in collecting on debts owed to them: the Mineral Lien.

Liens are similar to a sort of mortgage or deed of trust on the property, acting like a cloud on title, and having the effect of hooking the owner into paying you for your services or labor before selling, financing, or refinancing the property. Mineral Liens were designed specifically for companies like oilfield service companies, to give them an easier route to collecting their debts, and receiving money rightfully owed to them. Read More »