Texas Court Clarifies Who is a “Payor” under the Texas Division Order Statute

In a case of first impression, The Eastland Court of Appeals recently held that Tex. Nat. Res. Code § 91.402 (the “Texas Division Order Statute”) does not require an operator to pay royalties directly to mineral interest owners who have leased their interest to a different working interest owner.  Devon Energy Prod. Co., L.P. v. Apache Corp., 550 S.W.3d 259 (Tex. App.–Eastland 2018, pet. denied). The dispute arose relating to the payment of royalties in Glasscock County, Texas.  A mineral owner had leased her one-third interest in the subject land to Apache Corporation (“Apache”) and the remaining mineral owners leased…
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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…
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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…
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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…
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Interpretation of Mineral Deed to Grant Mineral Interest Despite “Lease-like” Language

In Richardson v. Mills, No. 12-15-00170-CV, 2016 App. LEXIS 7316 (Tex. Civ. App. - Tyler, July 12, 2016) the Court of Appeals concluded that an instrument that used the word "forever" in the habendum and warranty clauses was not a mineral lease, but was an unambiguous mineral deed. Although the instrument included consideration for future services, it lacked any implied covenant for development. The dispute in Richardson arose from the interpretation of a 1906 instrument, which pertained to the minerals under property in Nacogdoches County. Appellees, Donald Roger Miller, Rhonda Mills, and Beverly Mills Pool (collectively, the "Mills"), owned an undivided…
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