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Energy & the Law

Category Archives: Lease Disputes

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Title Suit Booted for Failure to Join Parties

Posted in Lease Disputes, Litigation, Title Issues

Longoria v. ExxonMobil is like throwing a big party but failing to invite all the right guests. The Longorias – 59 of them – sued producer-defendants over ownership of 9,200 acres in Brooks County, Texas, acquired in the 1800’s. Plaintiffs claimed their ownership was not recognized in subsequent conveyances and judgments and sought an accounting,… Continue Reading

Lessee Escapes Termination

Posted in Contract Disputes, Lease Disputes

Co-author Trevor Lawhorn ∗ Escondido and Justapor. Next up on Tiny Desk Concert? Good guess, but no. They are the parties in Escondido v. Justapor, a Texas case presenting the perils of lease termination clauses and vaguely-drawn contracts. The agreements Justapor as lessor and Escondido as lessee entered into an oil and gas lease in 2008 on the… Continue Reading

Post-Production Deductions Revisited

Posted in Lease Disputes, Royalty Disputes

Apparently unsatisfied with its analysis in Chesapeake Exploration v. Hyder, the Texas Supreme Court revisited its original opinion on an overriding royalty clause. The Hyders remain the winners. In effect, the court replaced its reliance on earlier decisions interpreting royalty clauses with its own analysis (which looks a lot like the original). The Basics Let’s start… Continue Reading

108 Year-Old Lease Survives

Posted in Lease Disputes

Co-author Brooke Sizer A baseball question: You’ve got men on late in the game; a base hit to the right side wins. Do you put the bat on the ball for a single or swing for the deep seats, risking the game-ending strikeout? The Stiles leases were executed in 1907, when Honus Wagner was in… Continue Reading

Texas Property Code Change – No More Subordinations?

Posted in Land Titles, Lease Disputes, Title Issues

Special thanks to Gray Reed colleagues Paul Yale and Dominic Salinas for this post. Weary of having to solicit those pesky subordinations of pre-existing mortgages to your recently-acquired oil and gas leases? Tired of chasing down the third assistant to the fourth vice president for loan servicing just to obtain one simple document? The 2015… Continue Reading

Louisiana Mineral Code Article 122 Revisited

Posted in Lease Disputes

Co-author Brooke Sizer Creativity abounds: Your 16-year old “explaining” the empty Southern Comfort bottle and the roach clip; President Obama justifying his rejection of Keystone. The Louisiana Supreme Court isn’t much of a supporter, at least in statutory construction. Today we revisit McCarthy v. Evolution Petroleum Corp.  As we reported, the court of appeal had… Continue Reading

Another Chesapeake Post-Production Deduction Case

Posted in Lease Disputes

The result was like others we’ve seen. Lessors Win. These wells are in Johnson and Tarrant County, Texas. Lessee Chesapeake Exploration sells to affiliate Chesapeake Marketing through affiliate-operator Chesapeake Operating. Plaintiffs sued Exploration and Operating for underpayments of royalty and overrides. The Takeways This decision demonstrates the reason for special royalty clauses addressing sales to an… Continue Reading

Another Lease Termination Case, a Different Ending

Posted in Lease Disputes

Co-author Matthew Wheatley We recently discussed failure to produce in paying quantities. Another decision involving the same lessee had a different result. Why? The question in both cases was whether the well was capable of producing in paying quantities and whether a reasonably prudent operator would continue to operate the well. In the new case ten wells were on… Continue Reading

Royalty Clauses For the Lessor – This Battle is Over

Posted in Lease Disputes, Royalty Disputes

What is your guiding principle when writing agreements? “The more the words the less the meaning, and how does that profit anyone?” Ecclesiastes 6:11. or “The beginning of wisdom is the definition of terms.” Socrates The Legal Issue A lease grants “a perpetual, cost-free (except only its portion of production taxes) overriding royalty of five percent …… Continue Reading

Is Your Well Producing in Paying Quantities? – The Jury Will Decide

Posted in Lease Disputes

One consequence of falling oil prices is leases that cease to produce in paying quantities. The producer’s question: How soon must the well return to profitability? The answer in BP American Production Company v. Laddex, Ltd. is, a “reasonable” period, to be determined by the jury and not the judge. The Magic Well The facts aren’t unique: The well on… Continue Reading

A Lesson in Lease Administration

Posted in Lease Disputes, Royalty Disputes

Co-Author Brooke Sizer What must a Louisiana lessee do to avoid statutory penalties for non-payment of royalty, and what must a royalty owner do to put the lessee on notice that royalties are not being paid? The answers are, more than the lessee did in Samson Contour Energy E&P, LLC v. Smith and less than the lessee argued for. What the Lessee Did… Continue Reading

Must the Lessee Be Wary of the Executive Right Owner?

Posted in Lease Disputes, Royalty Disputes

You are negotiating to take a big oil and gas lease. The run sheets show you are dealing with an executive right owner on behalf of himself and his NPRI owner.  His proposed terms are odd: a lower-than-market royalty and a higher-than-market bonus. After reflecting, you get it: The terms aren’t odd; they are just better for him than the… Continue Reading

Texas Supreme Court Relaxes Its Grip on the Discovery Rule

Posted in Lease Disputes

Co-author Sandra L. Mazan The Texas Supreme Court – that elephants’ graveyard of claims and causes of action – has sided with a lessor-plaintiff who relied on the discovery rule to defeat a limitations defense.  For the many with low expectations when the court agreed to review this case, this result is a welcomed surprise. We discussed Hooks, et… Continue Reading

Consider The Retained Acreage Clause

Posted in Lease Disputes, Pooling

Have you ever wondered about the original purpose of the retained acreage clause? According to Professor Kramer, it was “to prevent the lessee from losing those portions of a lease that had productive wells thereon if the rest of the lease terminated”. The term has been expanded “to include clauses that require the release of all… Continue Reading

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… Continue Reading

Freedom to Contract Prevails in New Mexico

Posted in Lease Disputes

Co-author  Alexandra Crawley                                             Is freedom to contract a good thing for everybody?  First Baptist Church of Roswell v. Yates Petroleum Corp. says yes, and confirms that the public policy in New Mexico is freedom to contract. In this case, it was to avoid the Proceeds Payment Act requirement for payment of interest on well proceeds once a legal determination is made that a payee is… Continue Reading

CO2 is Good

Posted in Lease Disputes, Royalty Disputes

… in the right places. Co-author Mark Bohon In French vs. Occidental Permian, Ltd. the Texas Supreme Court held that costs associated with injection of carbon dioxide into a reservoir in a tertiary recovery operation were properly deducted from royalties. This case reflects court’s awareness of improvements in oil recovery created by new technology, in this case CO2… Continue Reading