KiefaberOliva

Royalty Free of Post-Production Costs

The Texas Supreme Court, in Chesapeake Exploration, L.L.C. v. Hyder, No. 14-0302, 2015 Tex. LEXIS 554 (June 12, 2015), addressed the issue of allocation of post-production costs and whether, based on a certain lease royalty provision, an overriding royalty must bear its share of post-production costs. The dispute in Hyder centered on the interpretation of a lease royalty provision.  Chesapeake Exploration, L.L.C. (“Chesapeake”), as lessee, acquired an interest in 948 mineral acres in the Barnett Shale previously leased by the Hyder family.  Id., at *2-3.  The Hyder family had previously executed a lease with the original lessee containing three royalty…
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Subsurface Trespass Remains Undecided in Texas

In Envtl. Processing Sys., L.C. v. FPL Farming Ltd., No. 12-0905, 2015 Tex. LEXIS 113 (Feb. 6, 2015), the Supreme Court of Texas concluded that lack of consent is a required element of common law trespass, but declined to address whether subsurface wastewater migration is actionable as a common law trespass in Texas. The dispute in Envtl. Processing Sys., L.C. v. FPL Farming Ltd. arose between FPL Farming Ltd. (“FPL Farming”), who owned a rice farm in Liberty County, Texas, and Environment Processing Systems (“EPS”), who leased an adjacent tract of land upon which it constructed and operated a wastewater…
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The Duty of the Executive to Non-Executives

The Texas Supreme Court, in KCM Fin., LLC v. Bradshaw, No. 13-0199, 2015 Tex. LEXIS 220 (March 6, 2015), addressed the nature of the duty owed by the executive to the nonparticpating royalty owners or non-executive mineral interest owners and under what circumstances the executive has fulfilled its duty.  The Court described the duty owed by an executive as a duty of “utmost good faith and fair dealing,” but refused to create a bright line rule outlining the nature or boundaries of the executive’s duty.  Id., at *3-4. The dispute in Bradshaw centered on the obligation of the executive to…
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Application of the Implied Temporary Cessation of Production Doctrine

In Landover Prod. Co., LLC v. Endeavor Energy Res., L.P., No. 11-13-00132-CV, 2014 Tex. App. LEXIS 11990 (October 31, 2014), the Eastland Court of Appeals applied the implied temporary cessation of production doctrine to preserve a lease in its secondary term because the lease did not have an explicit savings clause that applied to the secondary term of the lease. The Defendants (collectively “Endeavor”) owned the working interest under an 80-acre oil and gas lease.  Id., at *1.  The primary term of the lease had expired, but the lease continued to operate under the secondary term because there was production…
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Off-Lease Drilling Locations and Claims of Subsurface Trespass

In Lightning Oil Co. v. Anadarko E&P Onshore, No. 04-14-00152-CV, 2014 Tex. App. LEXIS 11844 (Oct. 29, 2014), the San Antonio Court of Appeals concluded that a mineral estate owner was not entitled to injunctive relief to prevent an adjacent mineral estate owner from drilling horizontal wells crossing through the other party’s mineral estate to access the adjacent mineral estate.  This case is significant for operators that drill multiple horizontal wells from a single pad location and for operators that drill horizontal wells from off-lease surface locations. The dispute in Lightning Oil arose from Anadarko E&P Onshore’s (“Anadarko”) attempt to…
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How Safe is Your Harbor? Suspense of Production Payments in the Wake of 1776 Energy Partners, LLC v. Freeport-McMoran Oil & Gas LLC

May 4, 2022 — In 1776 Energy Partners, LLC v. Freeport-McMoran Oil & Gas LLC, the Court of Appeals of San Antonio examined whether production payments under various joint operating agreements were properly held in suspense without interest under the “safe harbor” provisions of Texas Natural Resources Code Section 91.402(b) (a/k/a the “Texas Suspense Statute”).[1]  Specifically, it examined whether creation of a constructive trust pursuant to a judgment amounted to “a dispute concerning title that would affect distribution of payments” pursuant to Section 91.402(b)(1)(A).  For the reasons discussed below, the Court found that as a matter of law, creating a…
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Kiefaber & Oliva LLP Expands With New Oklahoma City, OK Office

HOUSTON, TX. April 19, 2022 Kiefaber & Oliva LLP is pleased to announce the opening of a third office in Oklahoma City. With attorneys licensed in 13 states, Kiefaber & Oliva serves companies active in the oil and gas industry nationwide. The firm advises a wide range of clients, including Fortune 500, integrated oil and gas companies, private equity backed companies, and mineral acquisition companies, from existing offices in Houston, TX, and Columbus, OH. “Our strength comes from a deeply held belief in providing exceptional legal services to our clients. This additional location expands the firm's ability to support client…
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“Subject to” Interpretation: Conveying Reversionary Rights and the Pauler Decision

April 1, 2022 —In the Texas case of Pauler v. M & L Minerals, LP,[1] the San Antonio Court of Appeals was tasked with interpreting a mineral deed to determine whether certain disputed royalty interests had been conveyed or excepted.  Under particular scrutiny was the effect of the deed’s “subject to” language on these previously conveyed interests.  In reversing the trial court’s judgment, the Court of Appeals held that the language in the deed conveyed all of the grantor’s interests in the property to the grantees.[2]  This included all of the grantors’ royalties and reversionary rights (other than a specific…
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