Lease Disputes

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Co-author Brittany Blakey*

Louisiana practitioners and their clients tend to know this particular point of Louisiana law, but it could surprise out-of-staters (known in their native habitat as “Texans”), so it’s worth a reminder:

Under Louisiana Mineral Code art. 122 and art. 129, a lessee in a mineral lease is not relieved of its statutory duty to perform the lease as a reasonably prudent operator unless the lessor has expressly discharged the lessee in writing. The original lessee, along with all assignees and sublessees, are solidarily liable to the lessor for the whole performance of the obligations imposed by the lease. Continue Reading Original Louisiana Lessee Can’t Escape Liability

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. Continue Reading Texas Supreme Court Decides Another Fixed-or-Floating Royalty Case

Co-author Chance Decker

In Murphy Exploration & Production Co. — USA v. Adams the Texas Supreme Court held that an offset well clause in an oil and gas lease did not require the lessee to drill wells calculated to protect against drainage. Four dissenting justices believed the majority disregarded the well-established meaning of “offset well” used in the oilfield for decades. Continue Reading Texas Supreme Court Redefines an Offset Well Clause

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.  Continue Reading Ask and You Shall (Not?) Receive: Retained Acreage Clauses and the Texas Supreme Court

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 mineral interest owners who have leased to a different working interest owner.

The questions raised by the answer

When are mineral owners who have leased to a non-participating working interest owner entitled to royalties under their lease … before or after payout? Arguably, the lessor (to the non-participating WI owner) is not entitled to lease royalties from the lessee of its cotenant (the operator) until after payout of the well.

Well then, what’s keeping the lease alive if it is past the primary term? Absent pooling, the answer could be “nothing”.

As promised, here is more on these questions in “Show Me the Money: Who is a Payor under the Texas Natural Resources Code?” prepared by my very knowledgeable Gray Reed colleagues Paul Yale, Chance Decker and Ethan Wood.

And a musical interlude about venue.

It is often a worthy strategy for the lessee to be aggressive with counterclaims against the lessor. Or how about we’re the Wehrmacht and the other guy is Poland.

Lessees should think twice about that strategy if it means complaining about the lessor’s public statements. In Lona Hills Ranch v. Creative Oil & Gas Operating LLC et al, that strategy ran afoul of the Texas Citizens Participation Act, Texas’s “anti-SLAPP” statute (“Strategic Lawsuits Against Public Participation”).

The TCPA authorizes dismissal of a legal action based on, relating to, or in response to a party’s exercise of the right of free speech, right to petition, or right of association. Continue Reading Texas Anti-SLAPP Statute Stalls Lessee’s Counterclaim

There are specific requirements for proving that an oil and gas lease has survived past its primary term. Fail to hit them all when the lease is challenged at the courthouse, and disappointment will be order of the day.

The heart of the dispute in J&L Oil Company v. KM Oil Company was whether plaintiff J&L satisfied the requirements of a Pugh clause in a 1951 lease. J&L sued KM for impinging upon J&L’s lease on 55 acres in Caddo Parish, Louisiana. Summary judgment in favor of KM, the alleged impinger, was affirmed. Continue Reading Lack of Proof Dooms Pugh Clause Defense

Co-author Chance Decker

The Texas Supreme Court recently heard oral argument in three intriguing oil and gas cases.  Here’s what you need to know about two of them (We’ll address the third case soon).

Adams v. Murphy Exploration & Production Co. USA

Did lessee Murphy comply with an offset-well clause that doesn’t state where the offset-well must be drilled?  When a well was drilled on an adjacent tract, Murphy drilled its offset-well more than 2,000 feet from the triggering well. Continue Reading Opinions to Expect From the Texas Supreme Court