Co-author Paul Yale

Issues surrounding the legality of allocation wells in Texas have been percolating for some time, and lately we’ve heard of potential litigation. So, what’s the fuss about? The results in Klotzman (a Texas Railroad Commission dispute) and Spartan et al v. EOG (a district court case) didn’t resolve the legal questions. Both settled before a ruling. Browning Oil Company v. Luecke provided theoretical underpinnings but didn’t go far enough.

Why does the controversy exist? Continue Reading Is the Allocation Well Debate About to Boil Over?

Chauvin v. Shell Oil Company et al is the pot full of legal unpleasantness that can be stirred up by landmen trying to buy easements, leases, and the like.

A number of plaintiffs – descendants of grantors of two parcels of land in St. Charles Parish, Louisiana – were contacted by pipeline companies seeking servitudes. Apparently believing that betting on litigation offered a better return than the trifecta at the Fairgrounds, the descendants sued Shell and several pipeline companies holding servitudes from Shell for trespass. In the end, the court denied the plaintiff’s claims; they couldn’t carry their burden to prove their ownership of the property. Continue Reading Trespass Plaintiff: First, Prove Your Ownership

Email is the way we communicate these days. Whether  emails create a contract is important if you’re thinking nothing short of scribblings on a piece of old parchment could ever bind anybody or, to the contrary, your goal is to establish an enforceable agreement. Before hitting “send”, consider Bujnoch v. Copano.  Questions of fact precluded a summary judgment denying an agreement. A jury will decide the question.  Continue Reading Can Emails Establish an Easement in Texas?

Let’s take a look at what President Trump has done for the oil industry in his first year (This is not about decorum, dossiers, tweets, or Oprah’s inauguration.) As in the past, I refer to sources whose opinions and insights are more knowledgeable than mine.

No More “Sue and Settle” Continue Reading Trump and the Oil Patch One Year In

Co-author Chance Decker

Gloria’s Ranch v. Tauren et al – the Louisiana lenders’ bad dream

Anyone seeking stability in the law governing E&P activities in Louisiana will view the lower court decision as a grave error that must be corrected. Virtually every mortgage provides safeguards to protect collateral and manage lenders’ risk. The court of appeal reasoned that because of those provisions, the lender controlled the ability of the borrower to execute a release of a mineral lease, resulting in solidary liability when the borrower-lessee failed to release its lease. Continue Reading An Oil and Gas Case to Expect From Louisiana, and Another From Texas

Co-author Chance Decker

The Texas Supreme Court recently heard oral argument in three intriguing oil and gas cases.  Here’s what you need to know about two of them (We’ll address the third case soon).

Adams v. Murphy Exploration & Production Co. USA

Did lessee Murphy comply with an offset-well clause that doesn’t state where the offset-well must be drilled?  When a well was drilled on an adjacent tract, Murphy drilled its offset-well more than 2,000 feet from the triggering well.

The lessors argued the offset-well clause requires Murphy to drill its offset close enough to the triggering well to actually prevent drainage, which Murphy’s well won’t accomplish. Murphy argued all it has to do is drill on the lessors’ property – anywhere.  Whether it actually prevents drainage doesn’t matter.

The San Antonio court of appeals sided with the lessors.  “Offset-well” is understood in the industry to be a well that protects against drainage.  Thus, Murphy must drill a well close enough to the triggering well to actually prevent drainage from the lessors’ tract—and Murphy must prove it.

Predicting a “flood of litigation” if the lessors prevail, Murphy argues this interpretation is a “profound legal error”, noting it is next to impossible to prove an offset-well actually prevents drainage. In response, the lessors argue the court of appeals merely enforced the lease as written, and if oil and gas producers don’t like it they should draft leases with more flexibility.

See the briefs.

ConocoPhillips Co. et al v. Koopmann, et al.

Does a term NPRI for 15 years “and so long thereafter… ” violate the Rule Against Perpetuities?  Grantor the Strieber Estate and its lessees ConocoPhillips and Burlington say yes; this type of reservation creates a “springing executory interest” for the grantee when the production stops at some potentially distant time in the future, thus violating the Rule.  The grantees – Koopmann – argue no; instead, a conveyance with this reservation conveys a future interest in the property subject to the NPRI in the grantees, which vests immediately even if they are not yet entitled to possession.

The two lower courts sided with the Koopmanns on the Rule of Perpetuities claim.

The Strieber parties argue the court of appeals “eviscerated” the Rule and invented a “legal fiction” to avoid enforcing the Rule, and Supreme Court’s acceptance of Strieber et al’s contention that term NPRI reservations like this one violate the Rule would be a watershed opinion “potentially opening the floodgates of litigation.”  Predicting a lawsuit tsunami isn’t a bad pitch to this court, given its makeup ever since way back when, when Jimmy Johnson gave way to Barry Switzer.

Incidentally, when the Texas Oil and Gas Association filed an amicus brief against them the Koopmans alleged the Association is “controlled by, funded by, and biased” in favor of the industry! Wow! Now we understand Captain Renault!

See the briefs.

Merry Christmas. Have it your way: Holy or otherwise.

 

To begin, choose from these candidates for the all-world spendthrift hall of fame:

  • Imelda Marcos.
  • Every Congress since you and I were little babies.
  • Any MLB team that would trade for Giancarlo Stanton.
  • All Power Five football schools not named Vanderbilt.
  • The eventual winner of the Amazon HQ2 sweepstakes.
  • Robert Baratheon, Lord of the Seven Kingdoms.

In Bradley v. Shaffer, Darrell, a beneficiary of a mineral trust established by his grandparents, purported to convey to Bradley his mineral interests that were subject to the trust and any interest held in trust that he might acquire in the future. The trustees sued, alleging that Darrell had no authority to convey his beneficial interest. Bradley argued that an extension of the trust violated the Rule Against Perpetuities.  Spoiler: It didn’t.

A primer on Texas trust law … who owns what and other rules:

Continue Reading Mineral Conveyance Thwarted by a Spendthrift Provision


Co-author Trevor Lawhorn

*Kind of; this is a federal court predicting what the Ohio Supreme Court would do.

In Ohio, in calculating royalties in a market-value-at-the-well lease (as distinguished from a “proceeds” lease), post-production costs are to be shared proportionately by the working interest and royalty owners. The lessee’s duty to market does not extend to expenses incurred in sales not at the well-head. This is consistent with other producing states such as Texas and Pennsylvania.  Continue Reading Ohio Takes a Position on Market-Value-at-the-Well Royalty Clauses*