Royalty Disputes

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

Co-author Chance Decker

You’ve secured the right leases.  You’ve drilled nice wells in the right locations.  Now, who will pay the royalty owners?  Follow Devon Energy Production Company, L.P. v. Apache Corporation, to be sure.

The takeaways

Co-author Paul Yale

Issues surrounding the legality of allocation wells in Texas have been percolating for some time, and lately we’ve heard of potential litigation. So, what’s the fuss about? The results in Klotzman (a Texas Railroad Commission dispute) and Spartan et al v. EOG (a district court case) didn’t resolve the legal questions. Both settled before a ruling. Browning Oil Company v. Luecke provided theoretical underpinnings but didn’t go far enough.

Why does the controversy exist? Continue Reading Is the Allocation Well Debate About to Boil Over?

Co-author Trevor Lawhorn

*Kind of; this is a federal court predicting what the Ohio Supreme Court would do.

In Ohio, in calculating royalties in a market-value-at-the-well lease (as distinguished from a “proceeds” lease), post-production costs are to be shared proportionately by the working interest and royalty owners. The lessee’s duty to market does not extend to expenses incurred in sales not at the well-head. This is consistent with other producing states such as Texas and Pennsylvania.  Continue Reading Ohio Takes a Position on Market-Value-at-the-Well Royalty Clauses*

Co-author  Chance Decker

What does it take these days to get money from a Texas jury? Not much, it seems; in XTO v. Goodwin the trick was convincing a higher court that you should keep it.

Let’s start with the minefield that is the law of evidence:

  • Expert opinion testimony must be based on facts, and sound reasoning and methodology.
  • Conclusory or speculative opinion testimony is not relevant.
  • An opinion with no factual substantiation is speculative or conclusory.
  • Expert testimony based on unreliable data or flawed methodology is unreliable and does not satisfy the relevancy requirement.
  • Unreliable expert testimony is legally no evidence.

Continue Reading Trespass But no Damages in a Texas Case

Updated for a math infraction, thanks to several astute readers.

In Glassell Producing Company v. Naquin, the question was:

Did a conveyance among siblings create a real right in property, or was it an appendage of a lease that ceased to burden the property once that lease was terminated? Continue Reading An “Appendage” Determines a Louisiana Royalty Dispute

Co-author Chance Decker

How many times must an operator suffer for a mistake in a unit declaration? Samson Exploration LLC v. T. S. Reed Properties Inc. makes it twice. (See Hooks v. Samson Lone Star for the first round). The Texas Supreme Court ruled that a lessee could not avoid a contractual obligation to pay royalties from a zone shared by two pooled units. Continue Reading Unit Operator Pays For a Problem of its Own Making

Like Les, except with an offense, Coach O congratulates the Tigers for subscribing to Energy and the Law

Lenders to Louisiana operators are likely to be reconsidering their business practices in light of Gloria’s Ranch v. Tauren et al.

A rather ordinary lease termination suit resulted in the lender Wells Fargo being solidarily liable with the lessees for $22.8 million in lost leasing opportunities, $242,000 in unpaid royalties, $484,000 in statutory damages, and almost $1 million in attorneys’ fees.

Here’s why: Continue Reading A New Day for Louisiana Oil and Gas Lenders?

Co-author Chance Decker

“The only sensible way to live in this world is without rules”. The Joker to Batman, The Dark Knight

Subject-to, reservations-from, and exceptions-to problems have been lurking in the shadows of Texas jurisprudence for a while now, and the courts have been all over the map in recent holdings (Title nerd and proud of it? Compare this example with this one.)

In Wenske v. Ealy, the Supreme Court channeled our superhero’s painted friend, essentially jettisoning the old rules and confirming the new rule in deed construction cases: There are no “rules”.  Continue Reading Does Texas Have a New “Rule” in Conveyancing?