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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Asserting Dominance: Do Renewable Developers Have to Accommodate Oil & Gas Surface Use?

Disputes between renewable energy developers and the owners of mineral rights could potentially lead to losses well outside the scope of most title insurance policies. At the very least, these disputes can lead to protracted and expensive litigation, laden with fact-intensive expert testimony, as in the case of Lyle v. Midway Solar, LLC. Our latest Energy Law Update explores the El Paso Court of Appeals' decision on whether to apply the accommodation doctrine in a case involving a solar facility that was constructed by defendants on a 315-acre tract of land in Pecos County, Texas. [Download the article]  
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Travis County District Court Finds that Texas Railroad Commission Lacks Power to Issue Allocation and Production Sharing Well Permits

May 14, 2021 — In Opiela v. Railroad Commission of Texas, No. D-1-GN-20-000099, the 53rd District Court of Travis County, Texas, concluded that the Texas Railroad Commission (“RRC”) violated the Administrative Procedure Act, Tex. Gov’t Code § 2001.001 et seq., by adopting rules for issuing allocation and production sharing well permits.  Further, the court held that the permit applicant, EnerVest (and subsequently Magnolia Oil & Gas), failed to make the requisite showing that it had a good faith claim of right to drill the proposed well under RRC rules. In Opiela, the Plaintiffs objected to an application filed by EnerVest…
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Conveying Future Interests: What You Don’t Say Is As Important As What You Do Say

May 14, 2021 — In Parker v. Jordan,[1] the El Paso Court of Appeals interpreted a 1998 warranty deed to determine the extent of the interests conveyed by the deed.  The deed, which claimed to convey all right, title and interest, was silent on whether it also conveyed a remainder interest that was owned by the grantor.  Ultimately, the Court held that because the remainder interest was a vested future interest and not a present interest, the remainder interest could not be conveyed without clear and express language in the deed.  Thus, because the deed was silent as to the…
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