Let’s proceed directly to the takeaways from Fort Apache Energy, Inc. v. Short OG III, Ltd., et al, a Southern District of Texas bankruptcy district court opinion. (Gray Reed partners Jim Ormiston, Gabe Vick and Kristen Kelly represented Short OG III)
The other guy’s operations will not extend your lease beyond the primary
Co-author, Gray Reed partner Jim ReedThe common thread throughout the myriad oil and gas royalty cases decided recently by Texas courts could be “harmony”, the reading of different, seemingly conflicting, contract provisions so as to give meaning to all.
In Enervest Operating, LLC v. Mayfield and Ingham the Fourth Court of Appeal harmonized a
At issue in RKI Exploration and Production LLC v. AmeriFlow Energy Services LLC and Crescent Services, LLC. were two Master Service Agreements. RKI was the operator of a well in Loving County; AmeriFlow and Crescent were contractors. A sand separator exploded at the well site injuring or killing three workers who worked for another subcontractor. The result was three suits in New Mexico and a mazelike series of indemnity demands, denials, settlements, and judgments, including settlement of one death case for $9.1 million.
To preserve your patience, and mine, let’s focus on the takeaways from this 72-page behemoth of an opinion based on a 10,000-page record.
Grammar lessons
The court defined a phrase common to Master Service Agreements: “arising in connection herewith”. Indemnitees AmeriFlow and Crescent argued that the phrase “encompasses all activities reasonably incident to or anticipated by the principal activity of the MSA, which was oil well operation”. No, it doesn’t. The court determined that the phrase requires a causal connection between the MSA and the claims for which the indemnitee sought indemnity. The scope of work envisioned in the MSA was defined by work orders, and the indemnity could go no further than the scope of work.
Continue Reading Texas Court Addresses MSA Indemnity Obligations
Non-operators under the 1989 Model Form JOA have been hoping to drive a stake through the dark heart of Reeder v. Wood County Energy, LLC. Bachtell Enterprises, LLC v. Ankor E&P Holdings Corp might be a start. The question was whether the Article V.A. exculpatory clause exonerated the operator who intentionally
Co-author Jamie Mills*Is it worth spending extra dollars, days, and windshield time to discover what mischief your oil and gas operator might be making on your property? The landowner-plaintiffs in Mustafa v. Americo Energy would certainly say so.
The “discovery rule” offered them no help in their suit against their lessee for negligence when visible soil contamination occurred over two years before suit and was filed and the landowners had not visited the property in over six years. The two-year statute of limitations barred the landowners’ claim.
Continue Reading Landowners Vanquished by the Discovery Rule
Co-author Justin CowanDoes a former working-interest owner of a well bear continuing responsibility for a defective gas line despite having conveyed its ownership interest? The line was constructed by the former owner as operator of record, and it received a fee as operator. (One could assume there was a RRC Form P-4 on file
Co-author Stephanie Snyder-Zuasnabar*
A subcontractor’s mineral lien in Texas is invalid when, at the time the mineral owner receives notice of the lien affidavit, the mineral owner is not yet obligated to pay the contract price to its contractor. So says Pearl Resources Operating Co., LLC v. Transcon Capital, LLC,
The real takeaway that
Foote and Cypert v. Texcel Exploration and Decker determined that cattle loitering uninvited around a well and tank battery and causing destruction are trespassers, not licensees.
How it happened
Foote arranged with Yates to graze 650 head of cattle on Yates’ pasture and paid Cypert to take care of them. Texcel operated the Hertel oil
Co-author Brittany BlakeyIn Texas, what happens to an obligation to bury pipelines when, after creation of the obligation, the surface and minerals are severed? Henry v. Smith explains.
Henry et al own the surface estate of the Camp Creek Ranch, a 15,000-acre tract in Archer County. Smith et al are lessees in three oil
Lollygag: To fool around and waste time; dawdle. As in, “I lollygagged for 15 years after filing my suit and obtained a less-than-optimal result.”
Gramwich Oil and Gas Corporation et al v. Meng addressed claims for lease termination, repudiation, laches, cessation of production, and failure to produce in paying quantities. The facts are dense and the savings clause at issue is sui generis, so I won’t go into lots of detail. The takeaway: If you have a claim, prosecute it.
The facts
Continue Reading Lessor Prevails in Texas Lease Termination Dispute