Texas Supreme Court Exempts Oil and Gas Conveyances from the Rule Against Perpetuities

The rule against perpetuities (“RAP”) and its archaic and frequently confusing interpretation of when an interest is “vested” has plagued generations of law students and property lawyers.  RAP requires that “no interest is valid unless it must vest, if at all, within twenty-one years after the death of some life or lives in being at the time of conveyance.”  BP Am. Pro. Co. v. Laddex, Ltd., 513 S.W.3d 476, 479 (Tex. 2017).  Traditionally, RAP imposed the draconian consequence of voiding any interest if any possible contingency of the grant violated RAP.  Over time, courts have continued to relax the penalty imposed by RAP.  Rosson v. Bennett, 294 S.W. 660, 662 (Tex. 1927) (holding that an oil and gas lease, which grants a lessee the right to explore and develop for a certain period of time and for so long thereafter as oil and gas is produced, creates a fee simple…
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Maintaining an Oil and Gas Lease Beyond the Primary Term

In Hardin-Simmons Univ. v. Hunt Cimarron L.P., No. 07-15-00303-CV, 2017 Tex. App. LEXIS 6934 (Tex. App.-Amarillo July 25, 2017), the court evaluated the terms of an oil and gas lease to determine to what extent the oil and gas lease remained in effect, if at all, due to a lack of production in paying quantities. In the late 1950s several producing wells were drilled on the leased premises, but production declined. In 1967, the leased premises was included in the Buckshot Unit, a 13,000 acre waterflood unit. In the 1990s, the leased premises fell out of the Buckshot Unit and the owners of entered a new lease that was subsequently assigned to United Oil and Gas (the "United Lease"). At the conclusion of the primary term of the oil and gas lease to United, the lease was released as to all of the leased premises, except for 700 acres, which lease…
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Can Consent of an Assignment be Withheld Arbitrarily?

In Carrizo Oil & Gas, Inc. v. Barrow-Shaver Res. Co., No. 12-15-00083-CV, 2017 App. LEXIS 821 (Tex. Civ. App. -Tyler January 31, 2017) the Court of Appeals concluded that if a consent-to-assignment provision fails to include a reasonableness clause, the consenting party has an unqualified right to withhold consent. Texas law does not require reasonableness or good cause to withhold consent. The dispute in Carrizo Oil & Gas, Inc. arose from the interpretation of a consent-to-assignment provision in a farmout agreement between Carrizo Oil & Gas, Inc. ("COG") and Barrow-Shaver Resources Company ("BSR"). After initial discussions and negotiations over a farmout agreement on a lease owned by COG, BSR sent a draft of their agreement to COG, which did not contain a consent-to-assignment provision. COG countered with an agreement that contained the following consent-to-assignment provision:"The rights provided to BSR under this Letter Agreement may not be assigned, subleased or otherwise…
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