Contract Disputes

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What could possibly go wrong when drill pipe and a delivery ticket are sent to a well location? Well …

The facts

In Knight Oil Tools v. Rippy Oil Company, Knight rented drill pipe to Rippy for an Eagle Ford well.  A delivery ticket represented that the pipe complied with API premium class standards. The pipe, marked with two white bands, was supposed to meet standards for API premium class pipe. Some of the pipe did not comply with the standards.

(The physical condition of used drill pipe is indicated by an industry-recognized system of colored bands, with each color representing a certain physical condition.)

The pipe broke in the hole because of what the parties agreed was fatigue. Rippy abandoned the well and an offset well was unsuccessful. Rippy sued Knight to recover damages for the lost well and Knight counterclaimed for unpaid invoices.

Partial summary judgment for the customer…
Continue Reading Defective Drill Pipe+Delivery Ticket=Lawsuit

Co-author Skyler Stuckey

In Endeavor Energy Resources, L.P. v. Energen Resources Corp. et al. the Supreme Court of Texas construed a continuous development clause in an oil and gas lease covering 11,300 acres in Howard County. After the primary term, lessee Endeavor could retain acreage by drilling a new well every 150 days. The clause gave Endeavor “ … the right to accumulate unused days in any 150-day term during the continuous development program in order to extend the next allowed 150-day term between the completion of one well and the driling of a subsequent well.

After the primary term, Endeavor drilled 12 wells that extended the lease. Endeavor began drilling a 13th well 320 days after completing the preceding well. In the ensuing period Energen top-leased the supposedly non-retained parcels. Litigation ensued.

The dispute focused on how to calculate the number of “unused days”. Endeavor argued that it could carry forward unused days across multiple 150-day terms.  Energen argued that unused days in any given 150-day term could be carried forward only once, to the next term.…
Continue Reading Texas Supreme Court Deems Continuous Development Clause Ambiguous

Enterprise Products Operating v. Trafigura, A G. asks, Who should pay when a “black blob” that had “the stench of a skunk” was left behind after $27 million worth of an odorless product is delivered from a ship? The case holds that:

  • a plaintiff can recover for losses paid by its insurance company and
  • the parol evidence rule can be avoided in favor of the parties’ course of dealing.

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Continue Reading Contaminated Butane and Propane Creates Fight Over General Terms and Conditions

Co-author Rusty Tucker

BlueStone Nat. Res. II, LLC v. Nettye Engler Energy, LP is another Texas case deciding whether language creating a nonparticipating royalty interest prohibited deduction of post-production costs. (Spoiler alert: it didn’t. Read on to learn why.)

The Deed

By a 1986 Deed Engler’s predecessors conveyed land to BlueStone’s predecessor. Grantor reserved an undivided 1/8th NPRI in the minerals and was entitled to 1/8th of gross production, “ … to be delivered to Grantor’s credit, free of cost in the pipe line, if any, otherwise free of cost at the mouth of the well or mine … .” (emphasis ours).…
Continue Reading Texas NPRI Burdened with Post-Production Costs

Co-author Rusty Tucker

In re Plains Pipeline, L.P., is a suit to adjudicate title to groundwater. Did the trial court err in allowing a party to drill seven test holes on a tank farm? (Spoiler alert: It didn’t.) This decision evaluates an order in a unique civil discovery situation, and the underlying claims exemplify approaches to disputes over groundwater rights.…
Continue Reading A Unique Discovery Request in a Texas Water Rights Fight

Co-author Rusty Tucker

Jatex Oil & Gas, L.P. v. Nadel & Gussman Permian, L.L.C. presents several teachable moments:

  • The Texas Property Owner Rule does not allow a non-expert to testify on matters requiring expert testimony.
  • The operator may pay proceeds from a well to the lender to whom the working interest owner made a collateral assignment of net revenues from the well.
  • A claim for failure to act as a reasonbly prudent operator for failing to comply with an operating agreement is a contract claim, not a tort claim.

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Continue Reading Lessons from an Operating Agreement Dispute

Co-author Rusty Tucker

San Miguel Electric Coop is a Texas nonprofit electric cooperative that owns and operates a power plant that supplies electricity to 38 Texas counties. After a four-week absence, they return to these pages, this time in DCP Sand Hills Pipeline, LLC v. San Miguel Elec. Coop., Inc. Read on to learn about the “paramount importance doctrine”.
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Continue Reading Lignite Lease Prevails Over Pipeline Easement

A fellow walks into a bar in New Orleans. “What’ll it be?” “A Corona and two Hurricanes,” says he. “Here you go. That’ll be $20.20.”

Co-author Rusty Tucker

Now, on to operations in hurricane-free New Mexico. Lessons from BEPCO, L.P. v. RMTDC Operations, LLC d/b/a Total Energy Services:

  • Hire a good company man and trust him
  • Get a good expert for trial
  • Prep your witnesses well for deposition and trial

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Continue Reading Company Man Wins MSA Dispute

Co-author Rusty Tucker

In Evans Resources, L.P., et al. v. Diamondback E&P, LLC, two agreements left the terms “constructed” and “utilized” undefined. If the terms had been defined would the outcome have been different? Maybe. Should parties define every term in an agreement? No, if they are content to rely on the ordinary meaning of the words.

The agreements

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Continue Reading “Construction” of a Well Pad Requires More than a Survey