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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North Dakota Supreme Court Concludes that a Pugh Clause Controls over the Habendum and Continuous Drilling Clauses

In Robert Post Johnson & A.V.M., Inc. v. Statoil Oil & Gas LP, 918 N.W.2d 58 (N.D. 2018), the North Dakota Supreme Court interpreted an oil and gas lease to resolve a conflict between the habendum and continuous drilling clauses and the Pugh clause.  The habendum and continuous development clauses were part of a form oil and gas lease and the parties separately negotiated a Pugh clause that was added to the lease. At the expiration of the three-year primary term, production in paying quantities was occurring in only three of eight units that included lands covered by the disputed…
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R.A.P. Battle: The Kansas Supreme Court Clips the Rule Against Perpetuities

In Jason Oil Co., LLC v. Littler, 2019 Kan. LEXIS 204 (Kan. 2019) Kansas joined a growing number of jurisdictions declining to apply the rule against perpetuities to defeasible term oil and gas interests. On December 30, 1967, Grantor executed two deeds in favor of separate Grantees conveying tracts of land in Rush County, Kansas (the “1967 Deeds”).  Each 1967 Deed excepted the mineral estate “for a period of 20 years or as long thereafter as oil and/or gas and/or other minerals may be produced.”  Upon the expiration of 20 years, no drilling operations had been conducted on the lands…
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