Co-author Rusty TuckerIn 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
Continue Reading “Construction” of a Well Pad Requires More than a Survey
Co-author Chance DeckerThe Texas Supreme Court has agreed to hear oral arguments in a dispute over an “accumulation” provision in a continuous development clause of an oil and gas lease. The case is Endeavor Energy Resources L.P. v. Energen Resources Corp. et al. Here’s the language:
…this lease shall terminate … [150] days
Co-author Kelley Clark MorrisSuing a state and its public officials is difficult because of the doctrine of sovereign immunity. There are exceptions. State of Texas v. Signal Drilling, et al. presents several of them.
The rules
The State and its agencies are immune from:
There are exceptions. For example:
Continue Reading No Sovereign Immunity for the Texas Land Commissioner
Quick answer: It depends on what the lease says. Last week featured a tug-of-war between a producer and the community in which it operates; this week in HJSA No. 3 LP v. Sundown Energy LP it’s the producer and the lessor.
HJSA owns the mineral estate under 30,540 acres in Ward County, Texas. Sundown is the lessee. After six years the lease could be maintained only as to individual tracts from which there was production in paying quantities and as to other tracts only if Sundown was engaged in a “continuous drilling program”.
Dueling lease provisions (emphasis mine)
Paragraph 7B says:
The first such continuous development well shall be spudded in on or before the sixth anniversary of the Effective Date, with no more than 120 days to elapse between completion or abandonment of operations on one well and the commencement of drilling operations on the next ensuing well.
Paragraph 18 is a 90-day temporary cessation clause that defines drilling operations as:
“ … actual operations … (spud-in with equipment capable of drilling to Lessee’s objective depth); reworking operations, including fracturing and acidizing; and reconditioning, … “.
Continue Reading Spudding? Reworking? What are “Operations” Under an Oil and Gas Lease?
Co-author Paul YaleWhat’s good for the goose is not always good for the gander, at least in some places. It appears that the North Dakota Supreme Court has adopted the minority “ Marketable Product Rule” in connection with a 1979 North Dakota state oil and gas lease. We say “it appears” because not so long ago, in its 2009 decision in Bice v. Petro-Hunt, LLC, the Court held that North Dakota was an “at the well” state, like Texas and the majority of other oil producing states. This latest decision is Newfield Exploration Company, et al v. State of North Dakota et al.
The difference between the “Marketable Product Rule” and the “at the well” rule has to do with the deductibility of post-production costs of transporting, compressing, treating and processing from royalty payments. In an “at the well” state such costs are charged proportionately against the royalty owner. In a “Marketable Product” state they are not.
Continue Reading North Dakota: A Different Rule for Post-Production Costs In a State Lease.
Co-author Ethan WoodLet’s begin with a quiz. True or false:
If you answered “false” to all four, congratulations. In each category the latter companies are reputable independent oil and gas producers. The former are … well, let’s just call them “mineral buyers” (seemingly coordinated in their efforts in some murky way), one of which was the winner – for now – in Ridge Resources, LLC et al v. Double Eagle Royalty, LP
Continue Reading An Arbitration Ruling That’s About More Than Arbitration
Co-author Chance DeckerIs 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?
Continue Reading Anti-Washout Clause Defeated by the Rule Against Perpetuities
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 Brittany Blakey*
The Louisiana Supreme Court’s reversal of lower courts in Gloria’s Ranch, L.L.C. v. Tauren Expl., Inc. eliminates a major source of anguish for Louisiana energy lenders and their borrowers. You might recall our report on the court of appeals opinion.
Continue Reading Louisiana Lender Not Liable for Lease Violations