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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Duhig Revisited – Perryman v. Spartan Tex. Six Capital Partners, Ltd.

Title examination is typically characterized by a series of deeds and conveyances, which—unsurprisingly—do not convey property and/or interests in a neat, uniform fashion.  To eliminate some of this confusion in the context of over-conveyances, the Texas Supreme Court established the Duhig doctrine.  Duhig v. Peavy-Moore Lumber Co., 144 S.W.2d 878 (Tex. 1940).  The Duhig doctrine holds that where full effect cannot be given to the granted interest and the reserved interest, the grantor will be stopped, and the courts will give priority to the granted interest until the granted interest has been fully satisfied.  If the granted interest cannot be…
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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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