The question in Rock River Minerals, LP and Carr v. v. Pioneer Natural Resources, et al.: Did an assignment of overriding royalty interests in Texas oil and gas leases include a depth limitation? No.
To understand why, we need to study the instrument (Spoiler, see Exhibit A). Cass executed an Assignment of a 2.125% override in favor of Parker & Parsley (which became Pioneer, who assigned to CrownRock). The Assignment conveyed:
- “all of the rights, interests and properties described… ” in 10 paragraphs listing categories of interests being conveyed.
- The 10 paragraphs either directly or indirectly referenced Exhibit A to more particularly describe the lands and leases.
- Exhibit A described “all land from the surface of the earth to all depths located within the geographic boundaries of the North Pembroke Sprayberry Unit as identified in the Unit Agreement … .” (my emphasis)
- The leases were described in Exhibit A as “all oil and gas leases, royalty interests … included within the [Unit] as to the lands included within such Unit, from the surface of the earth to all depths.” (emphasis mine again.)
Rock River acquired some of Cass’s interests below the Sprayberry. CrownQuest drilled 12 wells within the geographic boundaries of the assigned interests. The wells produce from the Wolfcamp, which is deeper than the Sprayberry.
Cass sought a declaration that he continues to own his interests in depths below the Sprayberry. Cass/Rock River’s point: Because the Assignment incorporated the Unit Agreement by reference, it conveyed only the interests that were subject to the Unit Agreement (only the Sprayberry). The geographic boundaries meant not just the horizontal surface boundaries but also the vertical subsurface boundaries of the unitized formation.
Pioneer et al.’s point: There was no depth limitation because Exhibit A stated that the Assignment was to all depths.
The result
Pioneer et al wins. The Assignment conveyed Cass’s override to all geological depths, including depths below the base of Sprayberry, within the geographic boundaries of the Unit.
The parties agreed that an exhibit that describes property can limit the property conveyed. Exhibit A here limited the conveyance to those interests within the geographic boundaries of the Unit.
The Unit Agreement had a map showing the parcels of land which comprise the Unit Area. The Unit Agreement defined the “Unitized Formation” as the “subsurface portion of the Unit Area commonly known as the Sprayberry formation”.
The court concluded that the Unit Agreement determined the boundaries of the surface of the land but not the depth. Incorporation of the Unit Agreement did not necessarily mean that every provision of the Unit Agreement was relevant to the dispute.
What is “geography”?
Relying on their handy disctionary, the court looked up the plain meaning of “geography” and said it is “a science that deals with the description, distribution and interaction of the diverse physical, biological, and cultural features of the earth’s surface.” Even if geographic boundaries encompass subsurface depth boundaries, the grant was of the interests in all lands from the surface to all depths located within the geographic boundaries of the unit.
Words matter
The parties chose the word “Unit”, not “Unitized Formation” to define the boundaries of the conveyance. The Assignment defined the “Unit Area” as the lands described in certain parcels of land. On the other hand, the Unitized Formation was a subsurface portion of the Unit Area. Had Cass intended to convey only interests in the Unitized Formation he could have said so.