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Energy & the Law

A Little-Used Doctrine Saves a Lease

Posted in Lease Disputes

Would this scenario keep you up at night? Your lease does not produce from May through August because a leak in a heater-treater makes it impossible or impractical to produce the well. Problems such as access to the site during rainy weather make repairs difficult. You are beyond the primary term. The top- lessee lurks.

The Lease

“If at the expiration of the primary term oil and gas is not being produced on said land but Lessee is then engaged in drilling or re-working operations thereon, the lease shall remain in force so long as operations are prosecuted with no cessation of more than thirty (30) consecutive days, and if they result in the production of oil and gas so long thereafter … .”

The Question

Did the lease automatically terminate due to cessation of production from the only well on the property?

The Answer

Go ahead and admit it.  You either don’t know or have forgotten the “necessarily implied” temporary cessation of production clause for a Texas oil and gas lease. The “ … automatic termination rule is relaxed if the lessee can prove that the cessation of production was temporary and due to sudden stoppage of the well, some mechanical breakdown of the equipment used in connection therewith, or the like.”

In Landover Production Company, LLC v. Endeavor Energy Resources, L. P.Endeavor had the lease in Borden and Dawson Counties. Landover held the top lease.  The jury, trial court, and court of appeal all agreed with Endeavor that cessation of production was excused in accordance with the implied doctrine.

The lease clause is a savings clause. The lease would remain in effect if the lessee is then engaged in operations and there was no cessation of more than 30 consecutive days. If production was obtained thereafter the lease would continue. But this clause never came to fruition because there was production at the end of the primary term. The court reasoned that the savings clause applied only if, at that time, oil and gas was not being produced. In order to avoid the harsh result of automatic termination, the court impressed the temporary cessation of production clause upon the lease.

Endeavor had to prove that the cessation of production after the primary term was temporary and due to sudden stoppage of the well, and that it acted with diligence and remedied the cause of a temporary cessation and resumed production within a reasonable time.

The court determined that there was evidence in the record to support the jury finding. The court recited examples of the temporary nature of the cessation and Endeavor’s attempts to make repairs and turn the well back on. This procedure ultimately resulted in resumption of production. Thus, there was no termination.

If you’ve dealt with cessation of production you are no doubt wondering about the myriad cases addressing continuous drilling and reworking operations. Those cases address typical explicit savings clauses in modern leases. but those provisions apply to the secondary term. Typical examples are shut-in royalties, continuous operations, and drilling operations. There was no such clause in this case.

Just to be sure Landover got the message, the court also declared that even if Landover had won, Endeavor held title to the leasehold estate by adverse possession.

Merry Christmas

Listen to the Words In the Injunction Battle

Posted in Litigation, operations

If it’s an injunction you want, some words are your friend and others aren’t. For example:

“Imminent” = friend

“Might” = not friend

“Likely” = friend

“Could” = not friend

“Irreparable” = friend

“Money damages” = not friend

In Lightning Oil Company v. Anadarko E&P Offshore, LLC, the surface and 1/6 of the minerals of the Chaparral Wildlife Management Area is owned by the Texas Parks and Wildlife Department. 5/6th of the minerals is owned by the Light family. Adjacent is the Cutlass Lease, owned by their company, Lightning.

Anadarko planned to drill into its CWMA lease from locations on the surface of the adjacent Briscoe Cochina East Ranch and negotiated a surface use and subsurface easement agreement, which allowed Anadarko to drill five horizontal wells on each of 13 to 14 drillpads. The wellbores would cross through Lightning’s mineral estate to reach Anadarko’s lease. Lightning objected and staked its own location at the same surface location as Anadarko.

Lightning sued Anadarko for trespass and tortious interference with contract. The trial court denied a temporary injunction and Lightning appealed.

According to Lightning, the question was (1) would Anadarko’s plan to drill through Lightning’s mineral estate constitute a trespass, (2) does a third party surface owner with no interest in the mineral estate have the right to consent to such drilling activity and (3) was Lightning entitled to enjoin Anadarko’s drilling plan.  Issues 1 and 2 were not on the table in this injunction appeal.

The Standards

The main disputed issue: Did Lightning prove that it would suffer an imminent and irreparable injury if Anadarko were permitted to proceed with its plan to drill through the Lightning mineral estate. Here are the rules:

  • The injury must be probable and imminent. This is not satisfied by evidence indicating that the harm or injury is merely possible or feared.
  • The commission of the act must be more than speculative and the injury that flows from the act must be more than conjectural. If the injury can be compensated in money damages, injunctions are typically not authorized.
  • On the other hand, money damages are generally inadequate to compensate for the loss of property deemed to be legally unique or irreplaceable.

Lightning’s Testimony

  • Leaky casing from an Anadarko well could harm the value of the Lightning mineral estate. But a loss could be quantified and compensated based on reserve estimates for Lightning’s other wells in the area.
  • Anadarko’s drilling plans would place a “tremendous burden” on Lightning to drill offset wells to prevent drainage of its minerals, costing “millions of dollars”. But even if Anadarko would have drilled from a different location and not enter the mineral estate, Lightning would have the same offset obligations.
  • Anadarko’s activity would “probably disrupt our drilling program” because the pipes would be in the way of Lightning’s wells. But the wellbore for the Cutlass No. 3 would never encounter any portion of Anadarko’s wellbores because of the 330-foot field rules.
  • An Anadarko casing leak or blowout is probably not going to happen, and the Cutlass No. 3 could be drilled without any problem from Anadarko’s proposed wells. The difficulty in avoiding a collision with one of Anadarko’s wellbores would increase Lightning’s cost to drill offset wells.

The Predictable Result

There was a potential for injury and increased costs, but Lightning could not show that those injuries were not susceptible to quantification and compensation.  Lightning failed to prove that any injury to its mineral estate was probably imminent and irreparable pending trial on the merits. Denial of temporary injunction affirmed.

Today’s musical interlude has nothing to do with the topic.


Why the Pearl Harbor pic? To remember, but also to remind that the injunction is the surprise attack, rather than the war of attrition that characterizes much litigation. As the Japanese learned four years and millions of dead people later, the risk of this approach is if you don’t prevail early, you are likely not to prevail at all.

Avoid the Oral Agreement

Posted in operations

Cresson SWD Services, L.P. vs. Basic Energy Services, L.P. is a warning about the perils of an oral agreement for a risky downhole procedure. Cresson hired Basic to make improvements on a saltwater disposal well by deepening the injection zone, inserting a liner, and cleaning out the hole to 8,600 feet.

The Claims

Cresson’s claim: Basic did not complete the well to 8,600 feet as promised and did not offer to complete the work.

Basic’s response: The agreement did not include a guarantee of success and Basic worked on the well until Cresson decided not to spend any more money on the project.

Let the Swearing Match Begin

The testimony came down to the word of Lack, Cresson’s “company man”, and Thomas and Wild, Basic’s rig manager and “head fishing rental tool guy”.  Lack understood that the well was a straight hole, with no deviation from vertical. In communicating with Basic, Lack did not share any of the specifics with the workover other than they were going to clean the bottom of the well and attempt to run a liner. Obstructions were encountered downhole.  Several unsuccessful fishing operations were conducted. It turned out that one surprise obstruction was a whipstock - the tool that kicks off the wellbore and changes the angle from vertical to deviated or directional.

Lack testified about a  meeting at which he told Cresson their options were to continue to spend money fishing without knowing whether it would be successful, or set another whipstock and go in another direction. He testified that it was Cresson’s financial decision to decide what to do.

Basic’s witnesses testified that no decision was made at the meeting.  Basic then rigged down the equipment, moved off the location, and demanded payment. Litigation ensued when Crossen would not pay Basic’s invoice.

The jury decided that the decision not to continue with the operation was Cresson’s and not Basic’s.  Basic recovered a judgment for its invoices.  The appellate court found that this finding by the jury was supported by the evidence.

The Takeaways

  • If essential terms of the transaction had been reduced to writing, perhaps this dispute could have been avoided.
  • With more effort up front, even more detail could be incorporated into the agreement, further reducing the chances of misunderstandings leading to conflict.
  • The trial revolved around a bunch of oral communications. Reducing communications, alternatives, options, and questions to writing brings clarity.
  • The more clarity, the more likely litigation can be avoided altogether.
  • Clarity adds certainty to the litigation calculation, which enhances early resolution, … which eliminates  trial and appeal, … which saves you time, money, and the agony of tedious, seemingly endless, cross-examination under oath.
  • Diogenes would have liked Lack. He was the company man, yet his testimony seems to have helped Basic. either Lack was an honest man or the court  cherry-picked his testimony to find support for the jury finding. That is likely. The appellate court’s job was to look for evidence supporting the jury verdict.

Bobby Keys RIP (his greatness begins at about 3:10)

The Fat Lady Who Hasn’t Sung, Oil Field Technology, and a Lizard

Posted in Contract Disputes, Regulations

Today is a grab-bag of topics, a pastiche if your college tuition was higher than mine.

When Will the Fat Lady Sing?

El Paso Marketing, LP v. Wolf Hollow I, L.P., involving a gas plant Supply Agreement, continues its tortured journey through the Texas civil justice system. Chance Decker and I reported on this case in July 2012.

El Paso provides natural gas for a power plant owned by Wolf Hollow. El Paso has a Transportation Agreement with Enterprise. Interruptions in gas delivery required purchase of replacement power. Wolf Hollow claims Enterprise delivered gas contaminated with liquids that damaged the plant, requiring plant upgrades and the purchase of replacement power.

I won’t delve into the complicated procedural history, except to say that the Supreme Court refers to Wolf Hollow I, III and II (no doubt this will be IV). The court of appeals misunderstood it to say it held on the merits that Wolf Hollow was entitled to recover on its claim for replacement power damages resulting from poor quality gas.  The Supreme Court says it didn’t rule on that and remanded the case for proceedings “consistent with this opinion.”

The opinions case (but not necessarily this one) are worth following in that they address a number of legal issues:  The force majeure provision of the Supply Agreement; waiver of consequential damages; default and remedy provisions, including how a contract treats gas quality and gas quantity (to interpret:  use your words carefully); and cover damages.

Technology Marches On

According to Leon Rosen, with the Futurest (a publication of the World Future Society), NET Power is constructing the first natural gas power plant that will completely sequester carbon. The rationale (read it for yourself) is that rather than burning natural gas in ambient air, which produces nitrous oxide, the energy driver is compressed CO2.  It’s way more complicated than that but is good news for the gas industry and the environment.

Whither the Dunes Sagebrush Lizard? (or as his mother would say, ”sceloporus arenicolus”)

Last month a federal district judge dismissed a suit by environmental groups over an agreement between the state of Texas and oil and gas producers in which the industry would promise to protect vast expanses of the lizard’s shinnery-oak habitat. The agreement was to avoid what was referred to as the “regulatory rigidity of the Endangered Species Act”. The suit had claimed that the U.S. Fish and Wildlife Service erred by allowing voluntary conservation agreements to eliminate threats to the dunes sagebrush lizard. Environmental groups said the pacts were not enforceable or verifiable. The original agreement was either a welcome respite from unnecessary regulation, smart policy,  or the end of the little fella’s time on this earth.

References to “the industry” are misleading; the players do not take their orders from Dick Cheney. But it seems to me this is “the industry’s” opportunity to prove that it can be a responsible steward of the environment.

Today’s musical interlude – having nothing to do with the topics – features dead white-boy blues guitar players who died too young – one from the ’60′s and one from the ’80′s.

More Seismic Rumbling in Louisiana

Posted in Contract Disputes

Co-author Brooke Sizer

In Olympia Minerals et al v. HS Resources, et althe Louisiana Supreme Court addressed a decision we discussed in a February entry by affirming in part, reversing in part, amending in part and remanding (because why do one thing when you can do four). The case involved the “North Starks Project Agreement” covering 42,000 acres in Beauregard and Calcasieu Parishes.


HS/Aspect breached its obligation to complete a seismic survey over all of the lands covered by the agreement.  The Supreme Court agreed with the lower courts that HS/Aspect was required to survey all the lands. HS/Aspect focused on limiting language, “shall not be obligated …”  The court considered this as a customary phrase recognizing that there may be obstacles that preclude undertaking seismic surveying in certain areas, eg., towns and cemeteries. the court ruled that a complete survey of both the northern half and the southern half was a benefit of the bargain and that El Paso was entitled to foreseeable damages.


HS/Aspect was not obligated to sublease a minimum of 15% of El Paso’s mineral rights; instead, HS/Aspect had a non-binding option to sublease. Only after the company exercised the opinion was it obligated to sublease at least 15% of the leaseholder’s rights. Aspect never exercised that option, thus the damage award for breach of contract for failing to sublease at least 15% was reversed.

Reversal was based on Civil Code Art. 1933. The Court must interpret the word “option” according to civil law tradition, by beginning with legislative direction. Civil Code Art. 2047 requires that the words of a contract be given their generally prevailing meaning. According to Art. 1933: “[a]n option is a contract whereby the parties agree that the offeror is bound by his offer for a specified period of time and that the offeree may accept within that time.”


The damage award for HS/Aspect’s failure to conduct a complete survey was proper. The judgment had typos and was amended to reflect the correct amount: $4,125,00.00.


The question was whether HS/Aspect’s use and sharing of its seismic data was proper. The lower courts reasoned that because HS/Aspect failed to fulfill the terms of the agreement, the agreement was dissolved and there was no restriction as to the use of seismic data by El Paso/Olympia. Because the Supreme Court found that the agreement did not require the sublease, the agreement was still active. Findings on the merits as to the use of the data must now be determined by the court of appeal.

There was a question about the kind or type of data HS/Aspect was required to deliver to El Paso/Olympia. The Supreme Court agreed that HS/Aspect should have turned over the raw data to El Paso/Olympia upon request, but because it was evident that El Paso/Olympia did not fulfill its agreement to keep the data confidential, there could be no malice by HS/Aspect.

This being a Louisiana case, and our purpose being to educate about meaningful topics, we bring to your attention two classic (and deceased, unfortunately) New Orleans musicians you might not be familiar with: a guitar player and a singer.


Election Scoreboard: Frackers 4, Anti’s 4

Posted in Hydraulic Fracturing

Hydraulic fracturing bans had eight at-bats last Tuesday. Here are the results.

Denton, Texas

See the Ballot Question in a recent entry.

YES 58.64%

NO 41.36%

Athens, Ohio

“To establish a community bill of rights for residents and natural communities of Athens and to protect those rights by prohibiting shale gas and oil extraction and related activities; and by elevating the rights and governance of the people of Athens over those privileges bestowed on certain extraction corporations.”

YES 78.28%

NO 21.72%

Gates Mills, Ohio

“Shall Article II of the Charter of the Village of Gates Mills be amended to add Section 4, Gates Mills Community Bill of Rights?”

The amendment itself  was described as a “poorly drafted populist-like approach to changing all manner of laws in our village charter”. The proposition included additional rights such as the “right to pure water”, “right to be free from toxic trespass.”

30.7% Yes

69.3% No

Kent, Ohio

“Shall the proposed amendment to the Charter of the City of Kent adding Section 4 et seq. to Article I, Incorporation; Form of Government; Powers, under the heading titled Community Bill of Rights be adopted?”

YES 46.31%

NO 53.69%

Youngstown, Ohio

The effect of the “Community Bill of Rights Fracking” would be to:

  • Prohibit “unconventional natural gas extraction using horizontal hydraulic fracturing”
  •  Ban “the establishment of infrastructures supporting gas production”
  • Ban “the storage, transportation or depositing of gas drilling waste products” in Youngstown.

YES 42%

NO 58%

Santa Barbara County, California

“Initiative to Ban ‘High-Intensity Petroleum Operations’ including but not limited to Well Stimulation Treatments and Secondary and Enhanced Recovery Operations such as Hydraulic Fracturing, Steam Injection and Acid Well Stimulation Treatment on all Lands within Santa Barbara County’s Unincorporated Area.”

YES 37.35%

NO 62.65%

San Benito County, California

“Shall San Benito County’s General Plan be amended to ban High-Intensity Petroleum Operations (such as hydraulic fracturing, also known as fracking, acid well stimulation, and cyclic steam injection, but not Low-Intensity Petroleum Operations) throughout all unincorporated areas, and all Petroleum Operations in residential general plan designations of Rural, Rural Transitional, Rural Residential, Rural/Urban, and Sphere of Influence Rural/Urban, with related zoning changes to implement the new General Plan policies?”

YES 57.3%

NO 42.64%

Mendocino County, California

“An Initiative to Assert the Rights of Residents of Mendocino County in Order to Secure Clean Water, Air and Soil and Freedom From Chemical Trespass. Which Would Ban Hydraulic Fracturing, Directional and Horizontal Drilling, and Waste Injection Wells in the County of Mendocino and Invalidates Any and All Laws Contrary to this Purpose to the Extent They Effect the County of Mendocino.”

YES 67.18%

NO: 37.82%

What does it mean?

  • We are in the middle innings of the debate. More of these votes are sure to come as reserves are discovered in places where people live.
  • There is a home field advantage.  Drivers of the Denton vote were lackadaisical local regulation leading to wells in places where voters thought they shouldn’t be, and vocal and organized proponents.
  • As nasty as a Randy Johnson fastball on the inside edge of the plate, citizens without mineral rights and the royalty checks that come with them, get cranky when noisy, ugly industrial activities jam and ruin their roads and otherwise interfere with their lifestyle. They vote in large numbers.
  • The industry whiffs on the hanging curveball.  The perceived risks - groundwater contamination, air pollution, earthquake damage - are fears, not well grounded in science.  The industry can’t convince some voters otherwise.
  • As with the Yankees, it’s not about the money. Industry outspent the opposition by substantial amounts, sometimes with success, sometimes not.
  • Like a spring-training game, there are times when the outcome doesn’t matter.  There is no fracking (and for all I know, no oil and gas activity) in San Benito County.
  • Sometimes the player off the bench makes the winning play. Results appear not to be based on predictable factors. Denton is heavily Republican and banned fracking. Athens votes Democratic and refused a ban. (The labor unions were against it).
  • Don’t underestimate the stolen base. They say it’s only about “fracking”. But without fracking it’s really about drilling.

New players in different places will be called on to participate.

The Well Operator Should Have Listened To My Mother

Posted in Royalty Disputes, Title Issues

My mother used to give us good advice.  For example:  Don’t lie … do your homework.  Sabella v. Appalachian Development Corporation agrees with my mother.

Sabella bought minerals in 1997 under 66 acres in Warren County, Pennsylvania, on which the Haners had two producing wells (under a 144-acre lease from the Harveys). They weren’t paying royalties to Sabella. When given the chance in a 2008 meeting, Mr. Haner did not tell Sabella that his wells produced Sabella’s minerals. Haner then went “all in”, elected not to conduct a title search, drilled more wells, and never paid Sabella.

Limitations and the Discovery Rule

Sabella sued in 2010 for ejectment, conversion and trespass. The Haners asserted that the suit was barred by a two-year limitations statute. Sabella pled the discovery rule: The statute of limitations may be delayed by the plaintiff’s ignorance of his injury and its cause until such time as he could or should have discovered it by the exercise of reasonable diligence.

The court determined that Sabella had used reasonable diligence by taking reasonable efforts to examine the property for oil and gas production. A witness who resided on the secluded, wooded property testified that it was virtually impossible to see wells from the road. For his part, Sabella believed that he did not have the right to trespass on the property to investigate, so he did little else other than investigate from the road.

Does the Objective Test Allow For a Subjective Factor?

Reasonable diligence is determined by an objective standard. Sabella became legally blind between his acquisition of the property and his suit. The Haners argued that such a party-specific consideration could never play into the inquiry. The court disagreed, citing the flexibility of the rule. His impairment was a factor in whether or not he exercised reasonable diligence.

Trespass - Good Faith or Bad Faith? 

As in most states, a Pennsylvania good-faith trespasser owes to the injured party, in effect, the trespasser’s net profits. The bad-faith trespasser is liable for all monies derived from the trespass without offset for the cost of generating those monies here, drilling costs and operating expenses.

The court of appeal determined that when Sabella recorded his mineral deed in official public records the Haners were put on constructive notice of his ownership. Pennsylvania’s constructive notice statute imputes knowledge of a fact to a person if he knows the fact or has reason to know it.  This includes notice by recording in the public record. The Haners were bad-faith trespassers.  The court determined that oil and gas lessees, such as the Haners, are purchasers for purposes of the recordation statute because, upon discovery and production of oil, the lease conveys a potential and definite fee simple determinable.  It appears from the discussion that this issue is a new one for Pennsylvania courts.

About That Homework …

The Haners were required to exercise due diligence in their acquisition of their lease from the Harveys. If they had done so, they would have learned of Sabella’s ownership of the minerals under the 66 acres. Because constructive notice of Sabella’s ownership was imputed to the Haners by statute, they lost their claim to bona fide purchaser status.

Mr. Haner should have listened to my mother.

Hydrocarbon Exposure Reconsidered

Posted in Litigation, Pollution

Co-author Maryann Zaki

You might recall previous entries (here is one) discussing the $2.9 million Dallas County verdict and judgment in Parr v. Aruba. Not all similar suits have the same result.

Michael and Myra Cerny sued Marathon Oil Corp. and Plains Exploration & Production Company, alleging, as in Parr,  private nuisance, negligence, and negligence per se. As in Parr, among  the allegations were:

  • continuous release of “ … strong odors and noxious chemicals into the environment, including the plaintiffs’ property, causing injury and harm to the plaintiffs’ property and to their persons;” and
  • health problems, including headaches, rashes, chest pain, “strange nerve sensations,” high blood pressure, nausea, difficulty breathing, and nosebleeds.

Plains’ defense was that in order to prevail, the Cernys had to prove exposure specifically to Plains’ hydrocarbons, not just hydrocarbons in general.

The trial court observed that proving causation – that Plains’ operations and not something else - caused injury was a “high hurdle that has to be jumped”, and dismissed all defendants. Gray Reed attorneys, led by Jim Ormiston, represented Plains.

Parr and Cerny are on appeal to different courts. The question for those courts is likely to be: What evidence is necessary to prove causation in a hydrocarbon exposure case?

What Does the Texas Supreme Court Say?

The Texas Supreme Court held in Bostic v. Georgia Pacific Corporation that where multiple sources of exposure exist, the plaintiffs must prove substantial factor causation. Proof of “some exposure” or “any exposure” will not establish causation. There must be defendant-specific evidence relating to the approximate dose of the defendant’s product to which the plaintiff was exposed, along with evidence that the dose was a substantial factor in causing the plaintiff’s disease. The dose must be quantified but need not be established with mathematical precision.

Also, under Merrell Dow Pharmaceuticals, Inc. v. Havner, to establish substantial factor causation plaintiffs must prove with scientifically reliable expert testimony that a plaintiff’s exposure to the defendant’s product more than doubled the plaintiff’s risk of contracting the disease.

Bostic involved exposure to asbestos, but the decision could be a factor in any multiple-exposure case, including claims alleging exposure to emissions from oil and gas operations.

In light of this precedent one thing remains clear: Texas plaintiffs asserting toxic tort claims must show that their injuries were caused by exposure to the defendant’s activities. Their success will depend on how well they present reliable epidemiological and scientific evidence.

Cerny, Parr and other Texas hydrocarbon injury cases have drawn attention. See Lawyers and Settlements.com (discussing these kinds of cases generally), the San Antonio Express News (discussing the ruling), Texas Lawyer (discussing inconsistent results in Texas courts) and Inside Climate News (misunderstanding the judicial system and the defendants’ legal position).

Keep watching. These issues, and the future of hydrocarbon exposure claims, are not going to be resolved soon.

What’s Going On in Denton, Texas?

Posted in Energy Policy, Hydraulic Fracturing

As you probably know, the Denton City Council denied a petition signed by several thousand citizens to ban hydraulic fracturing within the city limits. The denial sent the question to the November 4 general election ballot.  Here is the proposition, its legalese in full bloom:


The players

Supporters and detractors of the ban are divided into two predictable groups: Local and national environmentalists on the one hand and producers and local royalty owners on the other. Who’s who and what they say can be seen from their websites:

In support of the ban you have FrackFree Denton.

Against the ban you have Denton Taxpayers for a Strong Economy.

Dig a little deeper, say into campaign finance filings, and you can see whose money is behind the campaigns.  Here is the local Denton Record Chronicle on where the bulk of the money is coming from on both sides.

In the news

Want news on the election? The Denton Record Chronicle evaluates the claims of both sides.

Here is a report from StateImpact, a publication of National Public Radio member stations.

And a comprehensive and pretty fair article from the New York Times.

There is no shortage of opinions

Here is one from the Dallas Morning News.

In another, Eagle Ridge Energy presents a forceful case for the benefits of hydraulic fracturing. They have every reason to have an opinion. Eagle Ridge has been the target of litigation by homeowners and opprobrium by bloggers for their operations in the city limits.

Here is one from Energy in Depth, a non-local group with an interest in fracking everywhere.

The Texas Railroad Commission also has an opinion.

In the spirit of open debate, on these web sites you can read about the “evils” of fracking. I’m not of this mindset, but it’s helpful to know what the uninitiated are hearing.

One from “Texas Sharon“.

And from the environmental group Earthworks, which is working hard in Denton and worldwide to pass the  ban. (Disclaimer:  The photo is Earthwork-like in its extremism, but it is not from Denton.)

Let’s have a live debate?

A debate is scheduled in Denton between FrackNation Producer Phelim McAleer and environmental activist Calvin Tillman on Monday, October 27. Here is the link.

What does it mean?

If the ban passes, litigation.

Failure would be a retreat from overreaction, and maybe a debate about whether Denton needs more neighborhood-friendly drilling oversight.

In the spirit of universal suffrage …

Today’s musical interlude has nothing to do with the topic, unless it’s divine guidance you are seeking (in which case, why are you reading this blog?).  We all get to vote. How do you like your Amazing Grace, … Celtic, …  African, … or Country?

Special thanks to Tricia Davis of the Texas Royalty Council for her help on this post.

Delay Strikes Down Another Plaintiff

Posted in Land Titles, Litigation

Another in our cavalcade of ugly college football uniforms

Why am I always reporting on plaintiffs who wait too long to file their lawsuit? See below for a few possible answers.

In the latest Texas case, Trahan v. Mettlen, the Trahans sued in 2010 on a 2006 warranty deed.

The earnest money contract for the sale of property from the Mettlens to the Trahans didn’t mention reservation of mineral rights. The warranty deed included a “clear and unequivocal” reservation. Mr. Trahan testified that he did not read the deed at the closing and a deed was not given to him at closing. More than four years later, when leasing activity began, the Trahans realized that the minerals had been reserved.

The clear and unequivocal reservation

The court’s first duty was to ask, When did the cause of action accrue? A mistake plainly evident or clearly disclosed on the face of a deed (such as this reservation of minerals) means that all parties are chargeable with knowledge of the contents of the deed. The court’s view was that a mutual mistake was plainly evident on the face of the deed. The statute began to run on the day the deed was executed by the grantor or on the date it was delivered to the grantee.

The discovery rule is sometimes available to the plaintiff. If the mutual mistake was not plainly evident but related instead to the legal effect of the material term, the statute will begin to run when the mistake was or in the exercise of due diligence should have been discovered. Subsequent conduct of the parties might rebut the presumption that all parties are chargable with immediate knowledge of the mistake. None of that happened in this case. The discovery rule was inapplicable.

What could have been

Game over, which is unfortunate for the Trahans because there might have been a legitimate claim to reform the deed for mutual mistake. A Texas court will find a mutual mistake when (1) there is a mistake of fact; (2) held mutually by the parties; (3) which materially affects the agreed upon exchange.

There is another way to go about it. A Texas court will consider a unilateral mistake by one party coupled with knowledge of that mistake by the other party as the equivalent of that mutual mistake.

Why do these things happen? 

I’m tempted to offer platitudes: Read and understand your contract, act if and when you need to. But the downfall of many unsuccessful plaintiffs is neglect. Your delay in acting is not forgiven if your mistake is about a term that isn’t important at the time. I suspect the Trahans didn’t act sooner because the didn’t think about the minerals until the landman came knocking on the door bearing bonus payments.

The second culprit is trust. Trust has two components: Integrity and competence. Your counterparty can be honest, but he also must be trusted to prepare a document correctly. Ronald Reagan had the right attitude on this subject.

A musical interlude. Don’t let this be you.