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…
More

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…
More

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…
More

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…
More

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…
More

Wyoming Oil and Gas Legislation Update: House Bill 14

June 17, 2020 — Wyoming’s oil and gas regulations were recently amended in an effort to attract energy development in the state. Among the new laws is House Bill 14, which changes the way operators force pool nonconsenting owners. The Wyoming Oil and Gas Conservation Commission has authority to issue pooling orders to pool interests located within a drilling and spacing unit (“DSU”). WYO. STAT. § 30-5-109 currently provides that when two or more separately owned tracts of land are embraced in a DSU, and in the absence of voluntary pooling, any interested party may enter an order pooling all…
More

Wyoming Supreme Court Finds That Commission Acted Arbitrarily and Capriciously in Denying a Drilling Unit

June 15, 2020 — In Exaro Energy III, LLC v. Wyo. Oil & Gas Conservation Comm'n, 455 P.3d 1243 (Wyo. 2020), the Supreme Court of Wyoming reviewed and reversed a decision rendered by the Wyoming Oil and Gas Conservation Commission (the “Commission”) regarding the approval of adjacent drilling and spacing units (“DSUs”) in the Jonah Field.  The Commission is given the broad authority to establish DSUs, and must follow appropriate agency standards when deciding whether or not to allow an operator to establish a DSU.  In this decision, the Supreme Court of Wyoming decided that the Commission’s denial of an…
More

El Paso Court of Appeals Grapples with Deed Interpretation Issue and Applies the Estate Misconception Theory – Petition for Review Timely Filed

May 5, 2020 — In WTX Fund, LLC v. Brown, 595 S.W.3d 285 (Tex. App.—El Paso 2020, pet. filed), the Eighth District Court of Appeals (the “Appellate Court”) addressed the question of whether a 1951 mineral deed reserved any incident of mineral ownership, and specifically a nonparticipating royalty interest.  In reversing the trial court’s judgment, the Appellate Court held that where a deed specifically conveyed leasing rights, bonuses, delay rentals and development rights, the inclusion of the “shall not affect” clause was a clear and specific reservation or exception of not only a nonparticipating royalty interest, but the entireright to…
More