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Energy & the Law

Category Archives: Royalty Disputes

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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

Deduction of Post-Production Costs from Gas Royalties – Another Lesson

Posted in Lease Disputes, Royalty Disputes

Consider this while celebrating the resurrection of Big Tex: When a lease prohibits post-production cost deductions, can a lessee deduct those costs from a lessor’s royalty? Yes, says Potts v. Chesapeake Exploration, L.L.C. In a market value lease, where lessee sells the gas “at the well” and the court applies the netback approach to calculating market value, the lessee is entitled… Continue Reading

Expert Testimony Rejected in Royalty Case

Posted in Royalty Disputes

If you are involved in a royalty case, or plan to be, read Occidental Permian, Ltd. v. French et al. The appellate court decided there was no evidence to support the trial court’s findings that the lessors were underpaid. (See my too-long December 6 post for the underlying facts.)  In this case the plaintiffs were the losers. Takeways (In… Continue Reading

Underpaid Royalty Case Resolved in Favor of Lessee

Posted in Royalty Disputes

One impediment to the correct resolution of lessors’ claims for unpaid royalties is the complexity of the contractual arrangements between producers and purchasers of production. Occidental Permian, Ltd. v. French et al offers a good example. It is also a refresher on the basic rules of royalty calculation in Texas and, for royalty owners in suits for unpaid… Continue Reading

Texas Royalty Owners Beware

Posted in Royalty Disputes

Remember the Wilford Brimley character in The Firm? “I get paid to be suspicious when I’ve got nothing to be suspicious about.” Shell Oil Company v. Ross commands you to think like Mr. Brimley. If you suspect your lessee is not paying proper royalties, do not wait to investigate. Even if you don’t suspect anything… Continue Reading