The question posed in our recent discussion of Devon Energy v. Apache Corporation was the meaning of “payor” under the Texas Division Order Statute. The answer, as far as it went, was that in a well drilled without a joint operating agreement the statute does not require the operator to pay lease royalties to
Big Damages in a Texas Trade Secret Case
Co-author Sonya Reddy
Defendants accused of stealing trade secrets often claim that publicly available information can’t constitute a trade secret. Sometimes yes, but mineral ownership that can be determined from the public record only after lengthy, expensive, and labor-intensive research in the county courthouse can have trade-secret protection, according to Eagle Oil & Gas Co. v. Shale Exploration, LLC.
It began like a routine exploration venture …
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Farmout Agreement Worked Over by the Court
Co-author Chance Decker
What could go wrong when the well recovers two times its costs in nine months? Plenty, as we see in Dimock v. Sutherland Energy.
In a Seismic Exploration and Farmout Agreement, Dimock farmed out a 15-section area in Hardeman County, Texas, to Sutherland to drill the Hamrick #3. Project payout was that point when revenues equaled two times Sutherland’s capital costs. The parties disagreed over whether payout occurred. The question was whether a $1 million seismic shoot after the well was drilled was a capital cost.
First, why do I care?
- “Boilerplate” in contracts is there for a reason.
- Should important terms be defined? This case suggests yes.
- Grammar matters. An errant comma cost one of the parties money and time.
- Defending a fiduciary duty claim will not be an enjoyable experience due to the high standard of behavior required of fiduciaries in Texas. Avoid fiduciary duties if you can. Seek them from the other guy if you can.
Fraud Claim Rejected for Unreasonable Reliance
Co-author Chance Decker
The ruling from the Supreme Court of Texas in JP Morgan Chase Bank, N.A., et al v. Orca Assets, G.P., L.L.C. was foreseeable. Experienced energy professionals who pass on the opportunity to examine title for themselves are not sympathetic plaintiffs in a suit claiming reliance on oral statements of the lessor.
How did this happen?
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An Indemnity Agreement Means What it Says
We are reminded in Claybar v. Samson Exploration that a court will (if it’s doing its job) enforce an agreement according to what it actually says, not by that which one party or the other would have liked it to say or imagines that it said.
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Landman Defeated by the Statute of Frauds
Proving once again that gratitude is the rarest of human emotions, a contract between a landman and his client was deemed unenforceable, leaving the landman with nothing, even though he actually secured oil and gas leases for the client (at least he said that he did). In Moore v. Bearkat Energy Partners, LLC, independent landman Moore signed a contract with the purported agent of Lane. Lane would pay Moore “$600 per mineral acre for each and every lease [Lane] enter[ed] with [Moore’s] assistance.” Moore said he helped Lane secure numerous leases, but Lane refused to pay.
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Can Emails Establish an Easement in Texas?
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.
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A Twist in Oil Patch Arbitration
Would you trust your $12 million arbitration to accountants rather than lawyers? Sometimes it makes sense. In_Apache v. YPF SA, delegating an accounting dispute to accountants was right. The problem was in the procedures and protections for a party believing the accountants got it wrong.
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The Oil Patch, the Single Business Enterprise Doctrine, and Veterans Day
Let’s suppose that someone (You? The other guy?) who operates wells in which others have an interest organizes the enterprise so that the owner of the leases, the owner of the overrides, the operator, several service companies, the employer of the workers, and on-an-on are all separate entities. Money is owed, liability is alleged, litigation
Oil, Gas and the Electronic Transactions Act
Co-author Chance Decker
In the spirit of Halloween, Le Norman Operating v. Chalker Energy Partners III is about a scary statute: The Texas Uniform Electronic Transactions Act, the UETA.
The Facts
A group of sellers led by Chalker went “by the book” in selling oil and gas assets in the panhandle. They set up a formal bidding process and hired Raymond James to advise. When LNO expressed interest, the parties signed a confidentiality agreement providing that Chalker would not be bound, “ … unless and until a definitive agreement has been executed and delivered[.]”
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