How many different meanings can parties attribute to a term in an oil and gas lease?  Answer: As many as they want, but the court will only use one, says King Operating et al v. Double Eagle Andrews, LLC et al.

The facts

The Robisons own 50% of the minerals in Tract 1, and 100% of the minerals in Tracts 2, 3 and 4 in Scurry County, Texas. They do not own the executive rights in Tract 1. They signed the Robison lease in 2008. In 2015 the Williamses signed the Williams lease on Tract 1 with DEA. In 2016 the Robisons signed a lease with DEA for Tracts 2 and 3, and a lease with MEI in Tract 4. King/LaRoca drilled a producing well under the Robison lease on Tract 1. There were no operations on Tracts 2, 3 and 4.

DEA sued, claiming a superior right to title to the minerals in Tracts 2 and 3 on the basis that the Robison Lease had expired after the end of the primary term.  (MEI made the same claims to Tract 4).  DEA and MEI asserted that their leases were the valid leases on Tracts 2, 3 and 4. King/LaRoca counterclaimed alleging that Tracts 2, 3 and 4 were maintained by the well on Tract 1.

King/LaRoca acknowledged that the Robison lease failed to convey any interest in Tract 1 but that the term “leased premises” referred to the land within the described boundaries and not to the interest conveyed and that by including Tract 1 in the property description the Robison’s intended that production anywhere within the boundaries of the described land would be sufficient to hold all the land regardless of whether the Robisons actually conveyed any interest in a portion of the leased premises.

The result

Not so, said the court. King/LaRoca’s interpretation would require the court to construe “leased premises” to have different meanings in different parts of the lease. Specifically it would require “leased premises” to include Tract 1 for purposes of extending the primary term but not include Tract 1 for purposes of leasing the mineral interests in the Robison lease.

The court assumed that identical words used in different parts of the same instrument would generally be given the same meaning (“Leased premises” was used in at least six places in the lease).

Because the Robisons did not own the executive right in Tract 1, they did not have the right to lease those minerals so that the lessee could drill a well on that tract or to pool that tract with other lands.

The court discerned no intent by the parties that “leased premises” was not to be used consistently throughout the lease. The leased premises were those tracts in which the Robisons actually conveyed a leasehold interest:  Tracts 2, 3 and 4. Tract 1 was not covered by the Robison lease and therefore not part of the “leased premises”. The habendum clause applied only to Tracts 2, 3 and 4 and production on Tract 1 did not hold the lease as to Tracts 2, 3 and 4.

Attorney’s fees

The court considers the substance of a party’s pleading rather than its form to determine whether a claim sounds in trespass to try title. There was no question but that the claims of all parties were for trespass to try title. The trial court’s award of fees to DEA on the basis that it successfully defended King/Laroca’s declaratory judgment counterclaim was reversed.

Full disclosure: My firm and I represented King in the suit.

Your musical interlude.