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Energy & the Law

Category Archives: Lease Disputes

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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

Are Personal Injury Damages Available in a Nuisance Case?

Posted in Hydraulic Fracturing, Lease Disputes

Co-Author Maryann Zaki As promised, on May 22, today’s post is a study of the personal injury issues raised by the defendants in Parr v. Aruba. You will find a more detailed analysis here. In this post we raise the question and discuss what the parties believe the answer should be. The Havner Hurdle Merrell Dow Pharmaceuticals, Inc. v. Havner established hurdles to a… Continue Reading

A Cost-Free Royalty Clause That Works – Part Two: The Override

Posted in Lease Disputes, Royalty Disputes

Co-author Travis Booher Welcome to part two of the hair-splitting decision in Chesapeake Exploration, L.L.C. v. Hyder. See our prior post about the basic facts. More Facts In addition to their cost-free royalty clause for wells on the leased premises, the Hyders also received an overriding royalty interest on wells drilled from pads located on the leased… Continue Reading

A Cost-Free Royalty Clause That Works – Part One

Posted in Lease Disputes, Royalty Disputes

Co-author Travis Booher Chesapeake Exploration, L.L.C. v. Hyder is another hair-splitting Texas decision about “cost-free royalties”.  The Facts The Hyder family executed a lease covering 1,037 acres. Chesapeake drilled 22 wells on the leased premises. The Hyders believed their lease provided for a “cost free” royalty; that is, no post-production deductions. Chesapeake deducted post-production costs, and the Hyders sued… Continue Reading

Mixed Result in a Louisiana Legacy Pollution Case

Posted in Lease Disputes, Pollution

Co-author Ann Weissmann The Dietz family sued several lessees for injunctive relief and restorative damages arising out of leases on two non-contiguous tracts in Acadia Parish. In Dietz, et al. v. Superior Oil Company, et al  the trial court granted the lessees’ dilatory exceptions of prematurity and improper cumulation and dismissed the plaintiff’s suit without… Continue Reading

A Favored-Nations Clause Gone Awry

Posted in Lease Disputes

Co-author Alexandra Crawley Oh, how a simple Favored-Nations clause in an oil and gas lease can get complicated, with large financial consequences! In BP America Production Company v. Zaffirini, BP paid Solis a $1,300 per acre bonus for a lease covering 30% of the mineral estate and agreed that if paid a more favorable bonus or royalty term with… Continue Reading

Haynesville Shale Fraud Judgment Reversed

Posted in Lease Disputes

Co-author Brooke Sizer Vestiges of the early Haynesville Shale land rush remain. Imagine: The lease is about to expire. Lessee (Mecom) offers lessor (Henderson) $90 per acre for an extension, telling him, “I could extend for two more years without consent so I’m giving you free money.” He explains his intention to drill more Cotton… Continue Reading

Lessee: Beware the Automatic Termination Clause

Posted in Lease Disputes

The fellow on the right is after your lease. The result in Cabot Oil & Gas Corporation v. Healey, LP was so bad for the lessee I’m going directly to … The Takeaways Landmen: First, when offered a lease with automatic termination language, run away like you’re chased by an Obamacare Navigator who hasn’t undergone a background check, especially… Continue Reading