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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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…
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New Lease or Top Lease? Lessor’s Intent Will Govern

In Anadarko Petroleum Corp. v. TRO-X, L.P., No. 08-15-00158-CV, 2016 Tex. App. LEXIS 2861, the El Paso Court of Appeals concluded that the execution of new leases operated to terminate and release old leases covering the same lands. Id., at *22. The Court recognized that there was not enough evidence to show (i) that the Lessors placed any emphasis on the execution of a separate release of the old leases to make the new leases effective, or (ii) that the Lessors intended for the new leases to be top leases that would come into effect only upon the recordation of…
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Washout of Production Payments Upon Expiration of the Underlying Leasehold

The Texas Supreme Court, in Apache Deepwater, LLC v. McDaniel Partners, Ltd., No. 14-0546, 2016 Tex. LEXIS 179 (February 26, 2016), addressed the issue of the calculation of production payments reserved in the assignment of four oil and gas leaseholds, and whether, after two of the leases terminated, the production payment should be adjusted to reflect the loss of the two leaseholds. The dispute in Apache Deepwater centered on the interpretation of a production payment reserved in the assignment of four oil and gas leases.  Id., at *1-2.  In 1953, Hugh W. Ferguson, Jr. (“Ferguson”) assigned to L.H. Tyson (“Tyson”)…
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Statutory Subordination of Liens to Oil and Gas Leases

In a measured victory for oil and gas companies operating in Texas, the 84th Texas Legislature has passed House Bill 2207, codified as TEX. PROP. CODE § 66.001, and titled “Sale of Property Subject to Oil or Gas Lease.” Chapter 66 became effective January 1, 2016, and applies with respect to foreclosure sales or judicial foreclosures commenced on or after that date. Prior to the enactment of House Bill 2207, the general rule of priority between mortgages and oil and gas leases was “first in time, first in right.” If an oil and gas lease was taken prior to a…
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