New Mexico Issues Emergency Rule for Shut-in Wells on State Land

April 22, 2020 — In response to the impact of the COVID-19 pandemic and foreign price wars, the New Mexico State Land Office (“NMSLO”) recently issued an Emergency Rule that allows oil producers to temporarily shut-in wells on state land without facing penalties.[1]  Specifically, the Emergency Rule allows lessees to apply to the NMSLO to shut-in wells while maintaining the terms of their lease for at least 30 days, with the possibility of an extension of up to 120 days.  To qualify for the emergency relief under the new Rule, lessees must satisfy that: There is at least one well…
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North Dakota Clarifies Allocation of Oil & Gas Proceeds Between Life Tenants and Remaindermen and Adopts the Open Mines Doctrine

April 9, 2020 — In Reese v. Reese-Young, 938 N.W.2d 405 (N.D. 2020), the Supreme Court of North Dakota provided long overdue guidance on the allocation of oil and gas proceeds as between life tenants and remaindermen. Formerly, practitioners were relegated to the “general rules” that had emerged from legal treatises and the laws of other states. The statutory guidance provided only that the owner of a life estate must “do no act to the injury of the inheritance,” and must prevent “ordinary waste.” See N.D. CENT. CODE §§ 47-02-33, 34. In addressing these successive estates, the court also formally adopted…
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Texas Supreme Court Addresses the Deduction of Post-Production Costs

The Texas Supreme Court addressed the deduction of post-production costs in Burlington Res. Oil & Gas Co. LP v. Tex Crude Energy, LLC, 573 S.W.3d 198 (Tex. 2019).  The Texas Supreme Court, reversing the Court of Appeals, explained that Burlington, the lessee and producer, could deduct post-production costs when calculating royalty payments on the amount realized when the royalty interest is to be delivered “into the pipeline, tank, or other receptacle to which any well or wells on such lands may be connected . . . .” In 2005, Burlington and Texas Crude entered into a Prospect Development Agreement and…
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