Co-author Trevor Lawhorn

If you have ever wondered how many ways a cocktail of stupidity*, treachery and feckless government can inflict financial harm on the undeserving, including the citizens the feckless government leaders are supposed to serve, see City of Dallas v. Trinity E. Energy, LLC.

 Facts

In 2008 during the Barnett Shale drilling boom

Co-author David Leonard

If perpetuation of a mineral lease beyond the primary term is contingent upon continuous operations, do traditional notions of “production in paying quantities” always matter? Spoiler: No.

In Thistle Creek Ranch, LLC v. Ironroc Energy Partners, LLC, an appellate court affirmed partial summary judgment in favor of lessee Ironroc Energy Partners under these odd clauses in the Kettler lease.

The habendum clause:

Unless sooner terminated …  this lease shall remain in force for a term of three (3) years from the date hereof, hereinafter called “primary term,” and as long thereafter as operations, hereinafter defined, are conducted upon said land with no cessation for more than ninety (90) consecutive days.

The lease defined “operations” as:

“ … any of the following: drilling, testing, completing, reworking, recompleting, deepening, plugging back or repairing of a well in search for or in any endeavor to obtain production of oil [or] gas, …  production of oil [or] gas, … whether or not in paying quantities.

The oddity, of course, is that the lease could be perpetuated by operations, whether or not there was production in paying quantities.
Continue Reading Lease Perpetuated Beyond Primary Term Without Production in Paying Quantities

Co-author Julia Edwards

This “most-favored-nations” clause in three oil and gas leases on land in LaSalle County, Texas, was at issue in EP Energy E&P Co., L.P. v. Storey Minerals, Ltd.:

If … the lessee … acquires an Oil and Gas Lease [on certain lands] on such terms that the … bonus … [is] greater than th[at] provided to be paid to lessor hereunder, lessee  …  agrees that it will execute an amendment to this lease, effective as of the date of the third party lease on the leased premises, to provide that the lessor hereunder shall receive thereafter the same percentage (per net mineral acre) … bonus … as any subsequent lessor of the leased premises to the extent that such … bonus … [is] greater than those provided to be paid herein. … “

In the end, as a result of lessee EP’s subsequent leases lessors (MSP) were entitled to increased bonuses on leases from the time prior to execution of the triggering lease. Once again, a court applied the plain, ordinary, and generally accepted meaning of the contract.
Continue Reading Most-Favored-Nations Clause Costs Lessee