Co-author Chance Decker

Is an overriding royalty interest lasting beyond the term of a lease-now-in-effect impossible to create?  You saw the recent Texas Supreme Court opinion invalidating an anti-washout clause in TRO-X v. Anadarko Petroleum Corp. Now, you see Tommy Yowell et al v. Granite Operating Company et al.  In light of these opinions one could wonder if an override is as valuable a tool in an oil and gas trade as it used to be.

An assault on overrides?
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The pitches in your arsenal are your fastball and your curveball; it’s the late innings; third time around the batting order; they’re sitting on the fastball. Once they catch up to it (and they will unless you’re Justin Verlander which, face it, you are not), goodbye game. Why not go to the bender to keep ’em uncomfortable and give you options? In Lackey v. Templetonplaintiffs stayed with the heater. Goodbye game.

The lesson to be learned
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Co-author Ethan Wood

Coke or Pepsi? Elvis or the Beatles? Should there be a designated hitter? Fixed or floating royalty? Among the great debates of recent decades, few have proven quite as frustrating as the great “Fixed v. Floating” royalty debate in Texas jurisprudence.

A royalty can be conveyed or reserved in two ways: as a fixed fraction of total production (fractional royalty interest) or as a fraction of the total royalty interest (fraction of royalty interest). The fractional interest is “fixed” because it is untethered to the royalty in a particular oil and gas lease. A fraction of royalty is “floating” because it varies depending on the royalty in the lease.
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Co-author Trenton Patterson*

We’re not saying you should do it, but there is a recipe for ridding oil and gas leases of pesky burdens: Enter into a new lease covering the same interest as the earlier lease and omit any reference to an intent that the later be subordinate to the earlier. You don’t even have to release the earlier lease. So says TRO-X, L.P. v. Anadarko Petroleum Corp.

You might remember a report on this case at the court of appeal, where we marveled at the skillful (or fortuitous, we’ll never know) way the Anadarko landman won the day via email.
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Co-author Brittany Blakey*

A few things you should know about the acreage retention clause:

  1. Foremost and always, read the instrument – not all clauses are created equal. But you know that.
  2. Consider the clause before perfunctorily filing P-15’s, plats, and other RRC forms.
  3. Absentmindedly relying on field rules to determine how much acreage you can retain? Do so at your peril.  And while your’re reading, read the rules pertaining to your acreage!

Two Texas Supreme Court decisions published on the same day confirm that retained acreage clauses that vary in language from one instrument to another will likely vary in effect. Depending on the language, the lessee might not be able to maintain all the acreage it planned on holding. 
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Co-author Chance Decker

Recall the Battle of the Bastards: The heroic Lady Sansa and the duplicitous Lord Baelish gallop over the hill to save the foolish Jon Snow from the heinous Ramsey Bolton. In similar fashion, but without the malnourished canines, the Texas Supreme Court in Conoco Phillips Company v. Koopmann saved the Koopmanns and you, the document drafters and title examiners, from brutal application of the Rule Against Perpetuities.
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Let’s get right to the takeaway: Despite the humble hourly rate operators are typically willing to fork over for title examination, the job isn’t easy and you’d better put your trust in a practitioner with expertise, patience, and an eye for detail.

It took a court of appeal two tries to get this one right, after being enlightened by an aggrieved party. These errors are typically discovered in the real life of a producer when an aggrieved royalty owner says you’ve overpaid somebody else. Let’s hope the well is still producing when they bring the matter to your attention.
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