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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Do Actions Speak Louder Than Words: Ratification by Acceptance of Royalties?

In BPX Operating Co. v. Strickhausen, 2021 Tex. LEXIS 468, the Texas Supreme Court determined that there was insufficient evidence to support a finding that a lessor had impliedly ratified an unauthorized pooling agreement by depositing royalty checks that had been calculated on a pooled basis.  To make this determination, the Court considered the totality of the lessor’s actions and whether, considered objectively, they provided clear evidence of implied ratification as a matter of law. Margaret Strickhausen (“Strickhausen”) owned a fifty percent mineral interest in a tract of land in La Salle, County.  The other fifty percent of the mineral…
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Supreme Court of Montana Ruling Roars that Dinosaur Fossils are not “Minerals”

This case has its origins in the Cretaceous period, which dates to over 65 million years ago.  The fossilized remains of several dinosaurs were recently discovered on a present-day ranch in Garfield County, Montana, and the rarity and value of the fossils inevitably led to a dispute as to the rightful owner of these unique discoveries.  Before Murray v. BEJ Minerals, LLC, 464 P.3d 80 (Mont. 2020), the Montana courts had not ruled on whether fossils belonged to the mineral estate or the surface estate when the minerals were severed, and the subject mineral deed did not specifically reserve the…
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New Mexico Court of Appeals Finds that Oil Conservation Commission Acted Legally in Their Adoption of New Rules for Horizonal Wells

In Jalapeno Corp. v. N.M. Oil Conservation Comm'n, No. A-1-CA-37449, 2020 N.M. App. Unpub. LEXIS 292, the Court of Appeals of New Mexico ruled in favor of the New Mexico Oil Conservation Division (“OCD”), after a challenge from an oil and gas operator, allowing the OCD to "comprehensively revise the rules governing horizontal wells."  The updated regulations modernized well spacing, infill horizontal wells, and transitional provisions as they relate to horizontal spacing units. Soon after the New Mexico Oil Conservation Commission (“Commission”) adopted the OCD’s revised rules, Jalapeno appealed, alleging that the rules were arbitrary and capricious and contrary to…
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