With it being Lent and all, we ask, are this year’s Ferrymen of the River Styx using these 40 days to turn from wickedness and find their way to repentence? Who knows, but we do know that as alternative energy rises, so do associated grifters, frauds and thieves. And political malpractice is a new category.

Break like the wind

Perps: Joey Douglas Davis and Philip Vincent Ridings of Arkansas

Crimes: fraud, wire fraud, aiding and abetting wire fraud, money laundering, aiding and abetting money-laundering

How they did it: Told investors that the money would be used to build a prototype wind turbine and develop wind farms in Iowa and other states. Told investors the Department of Defense expressed strong interest in acquiring the perps’ wind turbines for use in combat zones and there was a $10 million grant from the DOE.  It was all a lie. They used most of the $700,000 from investors for personal use and the turbines and farms were never constructed.

Sentences: 180 months and $1.138 million in restitution for Davis; 97 months and $1.138 million for Ridings.

A recidivist flies too close to the Sun

Perp: Michael James Sweaney

Charge: One count of mail fraud

How he did it: A Californian, previously convicted of securities fraud in Nevada using a different name, Sweeney scammed $9.5 million in a fraudulent solar power scheme. He would cold-call investors to convince them to invest in Nanotech Engineering Inc., claiming he had created a compact “nano panel” (which does not exist) using “technology” that could generate triple the amount of electricity as traditional solar panels. He used the purloined funds for the traditional lavish lifestyle, including a 46 foot yacht, two Maseratis, gold, a Cartier watch, and cosmetic surgery.

The scam was elaborate. Sweeney and his nephew created a fake prototype to show investors and hired an actor to demonstrate the nanopanel “outperforming” other panels.

Sentence: Six and a half years in prison and seizure of $1.5 million

No thank you for your “service”

Perp: Derek Robert Hamm

Crimes: 33 counts of wire fraud, money laundering, violations of the federal Stolen Valor Act, a felon in possession of guns and ammunition. Pled guilty.

How he did it:  In order to lure invetors in a oil field service company, used a fake military discharge certificate, claimed to be a former member of the Army Special Forces serving multiple tours in Iraq, Afghanistan and other countries; falsely claimed to have a Purple Heart, Silver Star, and Bronze Star; and claimed to be wealthy. He spent $500,000 of investors’ money on personal gifts including jewelry and vehicles.

Sentence: 180 months and forfeiture of $625,000.

Penalty = 12x the bribes

Perp: Swiss commodities company Glencore PLC

Crimes: Seven counts of bribing African officials to gain access to oil.

How did they do it: The company authorized (not merely prevented) spreading $29 million worth of bribes across our oil operations in several African nations in order to secure preferential access to bigger cargoes, more valuable grades of oil, and preferred delivery dates. The payments were concealed as an unspecified service fee, signing bonus, or success fee. Lots of cash was flown by private jets to Cameroon and South Sudan from 2011 through 2016. The firm says it has taken significant action to build a new ethics and compliance program.

Punishment: Ordered by a UK court to pay $314 million as a penalty and the profits from the bribes, the biggest penalty ever handed out for corporate criminal conviction in UK history

Inflation of another sort

Perp: Christopher Russell Bentley

Crime:  One count of fraud.

How he did it: From 2019 through 2021 in managing different oil and gas mineral rights investment funds he allegedly inflated the value of the rights to be sold to investment funds and used their money to obtain a loan of $6.5 million for personal benefit and to fraudulently obtain $3,972,000 from investors.


You can’t say venal without Venezuela

Perps: Yury Orekhov and seven other Russians

Charges: Conspiracy to defraud United Sates, money laundering, oil smuggling, bank fraud, violations of ECRA.

How they did it: See the 59-page indictment for elaborate lesssons on how not to smuggle Venezualen crude oil in violation of sanctions and how not to steal confidential U S military technology.

Punishment: Pending.

There oughta be a law …

While the world needs energy, your Administration commits govenmental malpractice. For examples see your daily newspaper not on one coast or the other.

Your musical interlude

These notables deserve another

Co-author Tiereney Bowman*

Texas courts continue to address the “fixed or floating” non-participating royalty interest question. The El Paso Court of Appeals’ answer in Bridges v. Uhl et al. was floating, based on the language in that particular reservation,

In 1940 the Klattenhoffs sold a 640-acre tract in Upton County to Virgil Powell, reserving, “an undivided one-half (1/2) of the usual one-eighth (1/8) royalty in, to and under the above-described land….” Over the following decades, Uhl collectively came to own 100% of the mineral estate after a series of conveyances. In 2007, Powell’s successors executed an oil and gas lease with Hanley Petroleum. Separately, in 2010, other of Powell’s successors executed a lease with Concho Operating. Both leases provided for a ¼ royalty.

The Klattenhoffs conveyed the reserved NPRI to their daughter, Ms. Bridges, granting an undivided “1/2 of the usual 1/8 royalty interests.” After Bridges learned of production from the land Concho acknowledged her right to royalties, which it calculated as a 1/16 “fixed” NPRI rather than ½ of ¼ of production. Bridges sued alleging several causes of action. The trial court entered a judgment granting Uhl’s motions for summary judgment and denying Bridges’.

On appeal Bridges argued that the trial court erred in interpreting the deed to reserve a fixed 1/16 NPRI, not a ½ floating. She also argued that granting Uhl’s motions was not supported by their affirmative defenses.

The 1940 Deed

In concluding that the deed reserved a floating ½ NPRI, not a 1/16 fixed, the Court applied Texas deed construction principles rather than a purely mathematical approach. According to the Court, “courts must holistically review the language to ascertain the intent of the parties from all of the language in the deed by a fundamental rule of construction known as the ‘four corners rule.’” (The court was reluctant to invoke the estate misconception rule.) A royalty interest may be conveyed or reserved in one of 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 granting language in the text and the deed’s overall structure confirmed the grantors’ intent to reserve a ½ floating royalty. Using the double fraction could demonstrate a grantor’s intent to give the grantee half of his entire royalty interest. When the deed was drafted, 1/8 was the standard royalty for oil and gas leases.

The deed had many recognized features of a floating royalty: (1) it included double fractions; (2) the fractions included multiples of 1/8; (3) repeatedly referenced the “usual 1/8 royalty”, which relates to the parties’ use of the then-standard 1/8 royalty as a proxy for the landowner’s royalty; and (4) the prospective contemplation of the royalty taking effect at a later time is reflected by the phrase, “if, as and when production is obtained.” The deed was not ambiguous, and reserved a floating ½ NPRI.

Among other unsuccessful affirmative defenses, Uhl argued quasi-estoppel and waiver, asserting that the Bridges was “on notice” about the nature of her royalty payments as a fixed 1/16, which constituted waiver. The Court disagreed. The fact that she previously accepted royalty payments was not dispositive because Uhl failed to show conclusive evidence of Bridges’ knowledge of what she was receiving and what she should have been receiving, and she changed her position. That affirmative defense could not support summary judgment for Uhl.

The Court reversed summary judgment for Uhl, rendered partial summary judgment for Bridges, declared that the deed reserved a floating ½ royalty interest, and remanded the cause for further proceedings.

Your musical interlude.

*Tiereney is in her third year at SMU Law School and an intern at Gray Reed.

Co-author Travis Nadilini

Ellison v. Three Rivers Acquisition LLC et al., on remand from the Texas Supreme Court, is the third round of a boundary dispute between mineral lessees in Irion County.  

For the history of Ms. Ellison’s odyssey from court to court to court, see our 2019 post discussing the first Court of Appeals decision, and our 2021 post discussing the Supreme Court decision. But first,

The players

Ms. Ellison: Lessee of one of the tracts at issue, plaintiff in the trespass to try title action alleging the boundary stipulation was void.

Samson: Lessee of the Suggs lease on the adjoining tract; its landman negotiated the boundary stipulation with her late husband.

Three Rivers: Acquired the Suggs lease and wells from Samson.

Concho: Acquired the Suggs lease and wells from Three Rivers.

The decision

The Supreme Court had held that the boundary stipulation at the heart of this dispute was valid and that the defendants conclusively established their ratification defense, and remanded to the Court of Appeals.  

In addressing Concho’s breach of contract counterclaim, the Court noted the Supreme Court’s holding in favor of Concho that the absence of the contemplated “more formal and recordable document” was not fatal to the ratification defense. The Supreme Court held that “in light of the boundary stipulation and the signed 2008 letter, Ellison as a matter of law ratified the boundary line in the stipulation as the boundary of Ellison’s leasehold.” The Court overruled Ellison’s issue related to the existence of a contract.

Meeting of the minds

Ellison contended that the 2008 letter was unenforceable as a contract because there was no “meeting of the minds” as to all the material terms. Specifically, terms such as consideration, effective date, grantee identification, warranty of title information, specific well location, and the “form of the Second Document were missing” Because Ellison’s denial was not verified, Ellison waived this argument.

Ellison argued that the lack of an effective date meant that the contract was void. However, the material terms of a contract are determined on a case-by-case basis. And Ellison failed to present an argument as to why an effective date would be considered an essential material term.

Ellison provided no support for her contentions that title warranties should be an essential term, and that the well’s location was material to the contract.


Ellison argued that Concho, as assignee of Samson’s lease, lacked standing to sue for breach of contract because the cause of action was never assigned to Concho.  But because Concho had acquired all of Samson’s assets related to the 2008 letter agreement, it necessarily obtained privity with the contract. As an assignee of Samson’s contract, Concho had standing.

Public Policy

Ellison asserted that the 2008 letter was illegal and thus unenforceable as against public policy, because Concho made misrepresentations in an attempt a “land grab” to “steal” her land and oil. However, “When the illegality does not appear on the face of the contract, it will not be held illegal and thus void unless the facts showing its illegality are before the court.”

The 2008 letter was not facially illegal; it merely set out boundaries and sought acceptance of the boundary line as set forth in the stipulation. Accordingly, Ellison had the burden to plead and prove the illegality, which she did not do. Ellison waived her illegality claim.

Other issues

The Court reversed Concho’s $493K damage and $850K attorney fee award because the Property Owner Rule to establish damages does not apply when specialized knowledge is required.

And there were evidentiary and jury charge issues not relevant to this discussion.

Your musical interlude

Co-author Travis Nadalini

The negotiators and scriveners of the purchase and sale agreement in Matter of PetroQuest Energy, Incorporated would have been well served to consider all the potential ramifications, however remote, flowing from the definitions in their agreement. (Potential reply: “Who woulda thunk THAT would happen?”)

The Fifth Circuit, applying Louisiana law, held that in a federal offshore Gulf of Mexico lease trade, if a purchaser assumes liabilities for “Assets” under a purchase and sale agreement that does not require the Assets to actually transfer between the parties, then a lack of consent from the Bureau of Ocean Energy Management (or other agencies) does not invalidate the purchaser’s assumption of the liabilities. The case turned on the specific language of the agreement.

Sanare Energy Partners purchased a mineral lease and related contracts from PetroQuest and assumed liabilities for the “Assets”. PetroQuest filed for bankruptcy. Sanare, trying to avoid responsibility for the Assets, filed an adversary proceeding in the bankruptcy on the theory that the wells and lease in connection with the sale were not “Assets” for which all obligations and liabilities were assumed by Sanare.

Sanare: The interests are not “Assets”

Sanare argued that PetroQuest failed to obtain third-party consent from the BOEM, whose consent is required for mineral lease transfers on federal lands.

Sanara also argued that “absurd results” would follow if the PSA’s definition assigned liabilities to Sanara for Assets that still belonged to PetroQuest.

The Court: Yes they are

The Fifth Circuit denied the first argument, concluding that the definition of “Assets” unambiguously included the wells and lease, and the definition was not changed by the BOEM’s failure to consent. Furthermore, the court found that the consent requirement did not extend to “customary post-closing consents,” such as BOEM’s. Even so, the “Bureau’s withheld consent may prevent a post-closing transfer from occurring, but it does not change the PSA’s definitions.”

The Court also denied the absurd result argument, noting that “these absurdities do not arise from the purchase agreement’s internal definition of Asset.” Rather, they arise only if the purchase agreement requires title to an Asset to actually transfer between the parties even without the necessary consents. There was no such requirement.


Words have meaning! The properties were “Assets” under the PSA, even if the Bureau’s failure to grant consent prevented record title for the Properties from transferring to Sanare.

Your musical interlude


More on how the climatistas resort to personal destruction of serious, mainstream scientists who dare fail to conform to the orthodoxy. In this case its Steven Koonin, former Obama undersecretary of energy and author of Unsettled: What Climate Science Tells Us, What it Doesn’t, and Why it Matters”. The Powerline post is worth a read.

Delay in filing suit too often spells doom for the plaintiff, as we learn in Zadeck Succession et al v. Treme et al.

Treme (as in the family collectively) claimed their father, Vandiver, was conveyed a 5% working interest in mineral leases in DeSoto Parish, Louisiana, as compensation for his work in re-completing the Harrison Brown #1 well in 1993. There was no written document, but accounting records of the various operators credited him with a working interest in the well and he received payments associated with that working interest and paid for his share of costs. The lease was transferred several times and Vandiver and his heirs continued to pay their share of costs and receive their share of revenues.

Comstock (not a party) now owns the leases. Treme claimed Zadeck included Vandiver’s 5% in his conveyance to Comstock. Comstock drilled several wells and did not pay Vandiver and his heirs the revenue attributable to an override reserved to Zadeck, and Vandiver received no compensation in the conveyance to Comstock.

In 2009 Vandiver asked his lawyer about a potential claim against Zadeck for the 5%. Treme learned of the exchange in 2009. In 2020 Treme sent a letter to Zadeck Energy claiming that Zadeck conveyed the 5% working interest. In January 2021 Treme filed a proof of claim in Zadeck’s succession claiming a portion of the consideration Zadeck received from the Comstock conveyance, a portion of the override, and a formal assignment.

Taking the offensive, Zadeck sued in February 2021, alleging that any claim Treme may have had to the leases or profits was a time-barred personal action. Treme contended that the claims were real actions that are imprescribable because their action was to determine the rights of the parties in the leases. The transfer to Comstock was merely a sublease, they said.

Real right or personal action?

A real right under the civil law is synonymous with a proprietary interest, both of which refer to a species of ownership. Ownership of a real right defines the relationship of a person to things, and may therefore be declared against the world. (Quoting A. N. Yiannopolous, “Yippie” to his LSU law students back in the day).

On the other hand, a personal right is a legal power that a person has to demand performance from another person. Actions seeking recognition of ownership or enforcement of the rights in property are real actions, not personal actions.

A request for judgment for a 5% working interest in the leases appears to be a real action, except that Zadeck no longer owned the property even if Treme had owned the 5% interest that was conveyed to Comstock. Because Treme could not recover a property interest in the leases, they did not have a real action.

Treme had a personal action against Zadeck for conduct that may have deprived them of the property before the conveyance to Comstock. Because they knew of this action in 2009 the personal action they may have had was extinguished by the ten-year prescriptive period.

Treme claimed that if Comstock determined it no longer wished to drill on the leases it could release them and the working interest would revert to defendants. But there was no language in the Comstock conveyance suggesting such a right.

The court declined to rule on the substantive claims because Treme’s counterclaims had prescribed. Judgment rendered for Zadeck.

Willie laments the passage of time along with the Treme’s?

Burt Bacharach RIP

The issue in QBE Syndicate 1036 v. Compass Minerals Louisiana, LLC  was whether the scope of the Louisiana Oilfield Indemnification Act applies to operations involving salt mining?

QBE issued a commercial general liability insurance policy to FSS and MC Electric. Clements, an employee of MC Electric, was electrocuted while working in the Cote Blanche salt mine owned by Compass Minerals, by touching a live electrical line.  His heirs, plaintiffs in a wrongful death suit, alleged that an FSS technician erroneously advised Clements that the fire suppression system had been de-energized.  Compass requested coverage, defense, and indemnity from QBE under both insurance policies.  The request was based on indemnification provisions in purchase orders issued for the work Clements was engaged in.

QBE responded that the indemnification provisions were unenforceable under the LOIA, which was enacted to protect Louisiana oilfield contractors (imagine your cousin Boudreau from Cankton with a two-man operation) from overreaching principals (imagine Exxon) to force the contractors through indemnity agreements to bear the risk of the principals’ negligence.

Whether the LOIA applied turned on a two-part test: First there must be an agreement that “pertains to” an oil, gas or water well. If there isn’t such an agreement, the query ends. If the contract has that nexus, the second step is to examine the contract’s involvement with “operations related to the exploration, development, production, or transportation of oil, gas or water.” An agreement pertains to a well under the LOIA if the services provided under the agreement are necessary to sustain the manpower or equipment needed to produce oil and gas from wells.

The agreement here did not satisfy the two-part test because it did not pertain to a well. Services were provided under purchase orders issued in connection with mining operations at the mine and those operations did not involve, nor did the services provided, pertain to a well.

QBE focused on one clause in the LOIA: an agreement pertaining to drilling for minerals which are in a “solid, liquid, gaseous or other state”. QBE argued that the term “minerals” covers all minerals, not just oil, gas or water.

The court described Compass’s “drill and blast” mining method. QBE argued that the agreements at issue pertained to drilling for minerals and are subject to the LOIA.  QBE did not establish that Compass’s mining practices amounted to drilling for minerals as that phrase is used in the LOIA.

The court declined to construe the word “drilling” in the Act to cover any activity involving a drill, from a large offshore oil and gas drilling platform down to an industrial hand-operated drill. The court construed that in “drilling for”, use of the preposition “for” suggests drilling performed to create a well for the exploration and production of minerals. The clause in the anti-indemnification provision, “an agreement pertaining to a well for oil, gas or water”, appeared to the court to refer to an existing well. The drilling involved at the mine did not involve the creation of a well for purposes of exploring for producing salt. Rather, holes were drilled for the purpose of loading explosive charges to break the salt wall into smaller pieces. That drilling is but one step at a lengthier process of breaking down a salt wall for further processing.

Simply put, Compass did not “drill for salt” in the mine. The method did not involve creation of a well.  Therefore, the purchase orders did not pertain to a well. The LOIA did not invalidate the indemnification provisions in the purchase orders.

Your musical interlude

The question in Brooke-Willbanks v. Flatland Mineral Fund LP, et al was which party to a Texas mineral deed would bear the burden of two previously reserved nonparticipating royalty interests.

The facts

Kay Brooke-Wilbanks owned a 45/100 mineral interest in 320 acres in Howard County, which is equivalent of an undivided 144-acre mineral interest. Her conveyance to Flatland was of an “undivided 72 net mineral acres in 320 acres” and was subject to subsisting oil and gas leases. There were no reservations or exceptions. At the time of the conveyance there was a lease with a 3/16 royalty. During negotiations for a sale of 36 net mineral acres to Expedition, Flatland became aware of two NPRI’s arising out in the 1940’s that burdened the mineral interest. Flatland asked Brooke-Willbanks to execute a correction deed. She refused and sued Flatland to quiet title and for a declaratory judgment.

The question

Did the parties intend that the previously reserved NPRIs would burden Brooke-Willbanks only or the parties proportionately?

The parties disagreed as to the meaning of “net mineral acre”, which treatises have defined this way (thank you Cliff Squibb): “One net mineral acre is typically considered to equal the fee simple mineral estate in one gross acre of land.”  The court determined that “net mineral acre” as used in the granting clause was subject to only one reasonable meaning: an undivided fee simple mineral interest in the 72 acres that Brooke-Willbanks conveyed to Flatland, including the right to receive royalty payments therefrom.

The court harmonized all parts of the deed to give effect to all of its provisions. The subject-to clause further clarified the intent of the parties. In the ordinary sense, subject-to clauses limit the estate and associated rights that are granted to a party. At the time of the conveyance, Brooke-Willbanks owned only a possibility of reverter and a royalty interest.

The court determined that the parties intended that Flatland would take its interest subject to the outstanding existing oil and gas lease and receive the same interests that Brooke Willbanks possessed, which was a future reversionary interest and a royalty interest in the 72 acres.

The subject-to clause also clarified the amount of royalty interest conveyed. A severed fraction of a royalty interest such as an NPRI generally would burden the entire mineral estate because it necessarily limits the royalty interest attached to the underlying mineral interests. This principle informed the court’s interpretation of the deed but did not compel an outcome because parties are free to contract for whatever division of interest suits them.

The subject-to clause clarified that Brooke-Willbanks granted “ …. the above stated interest and the grantor’s interest in the royalties … “, which was the royalties in 72 acres. The clause limited Flatland’s interest as grantee to what Brooke-Willbanks possessed at the time, which was royalties associated with 72 acres. There was no express intent to convey anything otherwise.  By the use of “net mineral acres” the parties expressed an intent to convey a fixed amount of mineral acres.

The court declined to follow the estoppel principle defined in the Duhig Rule.  The court also relied on the recitation that it was the specific intent of the instrument to convey “the right to receive all royalties associated with the interests conveyed”.  This indicated that the intent was for Flatland to take the royalty interests associated with the undivided 72 acres as it existed at the time of the conveyance.

The answer

The outstanding NPRI’s burdened the parties’ royalty interest proportionately.

David Crosby, RIP.

You have your

Byrds Crosby

CSN Crosby

Solo Crosby

Co-author Brittany Blakey

The takeaway from Hahn v. ConocoPhillips Company is that in Texas a NPRI holder may not diminish his rights by ratifying pooling of an oil and gas lease unless there are provisions explicitly purporting to do so.

 Kenneth and brother George each owned ½ of the surface estate of a tract and ¼ of the mineral estate. Siblings and Charles owned the rest. Kenneth and George partitioned the tract into Tract A and Tract B. Kenneth sold his interest in Tract A to the Gipses, excepting  ¾ of the minerals, which belonged to his three siblings, as well as this NPRI:

“ … a … [1/2] non-participating interest … (Same being an undivided [1/2] of [Kenneth’s 1/4] or an undivided [1/8] royalty)…”.

The Gipses entered into an oil and gas lease with Conoco, reserving a ¼ royalty. Conoco then pooled Tract A into the Maurer Unit B, which Kenneth ratified, and Kenneth and the Gipses executed a stipulation of their interests in Tract A, stating that “it was the intent of the parties in the deed from [Kenneth] to [the Gipses] . . . that the interest reserved was a one-eighth (1/8) ‘of royalty’ … .”

Kenneth then leased his ¼ interest in Tract B to Conoco, which was also pooled into the Maurer Unit B. Kenneth was advised by Conoco that it would “no longer be crediting him with his ¼ mineral interest in Tract B.” Based on the 2002 partition deeds, Conoco believed Kenneth conveyed all of his surface and mineral rights in Tract B to George, and George conveyed all of his surface and mineral rights in Tract A to Kenneth.

Prior Appeal

Kenneth sued the Gipses and Conoco to confirm his ownership in Tracts A and B. The Court of Appeals in 2015 determined that the parties had these interests:*

OwnerTract ATract B
George0% surface or mineral interest100% surface & ¼ mineral interest
Kenneth0% surface and 1/8 fixed NPRI0% surface and ¼ minerals
Gipses100% surface, ¼ minerals less Kenneth’s 1/8 NPRI0% surface or minerals

After the case was remanded to the trial court a royalty calculation dispute arose. Conoco and Kenneth disagreed as to whether Kenneth’s NPRI should be reduced by the Gipses’ ¼ lessors’ royalty. Stated another way, Conoco argued that notwithstanding the court’s conclusion that Kenneth reserved a fixed 1/8 NPRI in Tract A, his ratification of the Gips lease transformed his fixed NPRI into a floating one. Therefore, said Conoco, Kenneth was to receive 1/8 × 1/4 of the royalties.

On Appeal

The appellate court disagreed. In Texas, pooling effects a cross-conveyance among the owners of minerals under the tracts of royalty or minerals in a pool so that they all own undivided interests under the unitized tract in the proportion their contribution bears to the unitized tract.”

Also, an executive lacks the power to pool a NPRI absent the NPRI owner’s consent, such as by ratification. If the NPRI owner ratifies, the lease effects a cross-conveyance of interests and a pooling of his or her royalty interests.

By ratifying the lease Kenneth agreed to nothing more than subjecting his fixed 1/8 NPRI to Tract A’s tract participation factor in Maurer Unit B. The court rejected Conoco’s assertion that Kenneth could not ratify the Gips lease for pooling purposes only, distinguishing prior Texas case law on ratifications and NPRIs.

The effect of Kenneth’s ratification of the Gips lease was only to bind him to the lease’s pooling provision. Therefore, Kenneth was due his fixed 1/8 royalty from Tract A.

For you trial lawyers, the court also addressed the “law of the case” doctrine.

*We ignore the other two siblings for this report.

Jeff Beck RIP.

The question in Kim R. Smith Logging Inc. v. Indigo Minerals LLC  was whether a disgruntled Louisiana royalty owner sent its demand for unpaid royalties to the right party.  It turns out that it did.

Mineral interest owner Cherry executed an oil and gas lease. Plaintiff Smith Logging purchased the property and Cherry retained his mineral interests. Operator Indigo/SWN* drilled four Haynesville wells.  

The original lessee assigned the lease to Hopkins. Effective as of August 1, 2019, Hopkins assigned the lease to Valor.  By a December 12, 2019, agreement, also effective as of August 1, 2019, Valor transferred its interests to Indigo/SWN and reserved an override

On November 1, 2019, Smith Logging made a 30-day demand to Indigo/SWN for payment of unpaid royalties under the lease. Counsel for Indigo/SWN confirmed that the royalty was owed.  Indigo/SWN made three payments. The assignment to Indigo/SWN has not been recorded at the time of Smith Logging’s demand.

Smith Logging sued Indigo/SWN, Valor, and Hopkins for cancellation of the lease, damages in the amount of unpaid royalties, damages in the amount of double the unpaid royalties, and attorney fees, alleging on information and belief that Indigo/SWN was the lessee.

Indigo/SWN asserted a dilatory exception of prematurity and a peremptory exception of no cause of action. They argued plaintiff’s claims were premature because it failed to make written demand on Valor, Hopkins, or their predecessors. Alternatively, it failed to state a valid cause of action because Hopkins was lessee of record at the time demand was made. The trial court sustained the exceptions.


The question in a prematurity exception is whether the cause of action had yet to come into existence because some prerequisite condition had not been fulfilled. Indigo/SWN’s objection was that notice was improper. Here is the statutory scheme for a suit for unpaid royalties:

  • Written notice of failure to pay royalties is a prerequisite to the judicial demand for damages or dissolution (R. S. 31:137).
  • After written notice, the lessee is given 30 days to respond (R. S. 31:138).
  • The royalty owner has remedies if the failure to pay was because of fraud or was wilful and without reasonable grounds (R. S. 139).
  • If the lessee pays within 30 days, dissolution is not available. If the lessee fails to pay or inform the lessor of a reasonable cause why he didn’t pay, the court may award damages of double the amount of royalties due and attorney fees (R. S. 31:140).

Indigo/SWN became sublessee of the lease on August 1, 2019, and was sublessee when the demand for royalties was made. Because Smith Logging did not send the demand to Hopkins and Valor, notice of cancellation was not effective against them.

A sublessee becomes responsible directly to the original lessor for performance of the lessee’s obligations. Thus, as of August 1, 2019, as sublessee Indigo/SWN was responsible directly to Smith Logging for performance of its lease obligations.

Notice and demand to Indigo/SWN was sufficient. The trial court erred in sustaining the exception of prematurity.

No cause of action?

A no cause of action exception is tried on the face of the pleadings. All well-pleaded allegations of fact are accepted as true and correct and doubts are resolved in favor of sufficiency of the petition. The petition alleged facts sufficient to state a cause of action against Indigo/SWN.  The district court erred in sustaining this exception.

* At some point Indigo was acquired by SWN Production (Louisiana) LLC; hence “Indigo/SWN”.

Your musical interlude.

Precious little legal analysis is required to grasp the lesson from Springbok Royalty Partners v. Cook.  No mode or manner of legal gymnastics is likely to save parties from the legal effect of a contract they didn’t bother to read before they signed it.

The agreement

Following a lengthy conversation between the Cooks and a Springbok employee, the parties agreed to a price for the sale of the Cooks’ minerals and signed a letter agreement entitled “Offer to Purchase Mineral Interests in Lands”. Springbok made a cash offer of $575,000 in consideration for a mineral deed for all of the right, title and interest they held and/or owned in and to 111 net mineral acres under land in DeSoto Parish, Louisiana.

The agreement included language to the effect: It would form a binding agreement; the Cooks would be deemed to have received good, valuable and sufficient consideration for their execution and delivery of their counterpart of the letter and performance of their obligations thereunder; they would not take a position to the contrary; if they signed the agreement they would be obligated to execute and deliver a mineral deed covering all their interest in the property.

The suit

Springbok sued the Cooks to enforce the letter agreement. The Cooks refused to conclude the sale after receiving a better offer. Summary judgment in favor of Springbok was affirmed.

The Cooks’ summary judgment affidavits testified that they thought they were selling half of their interests and that they never intended to sell the entirety. They also testified that they did not read the agreement prior to signing it.

The Cooks’ futile arguments

The contract was ambiguous:  The agreement was clear and explicit and led to no absurd consequences. It unambiguously stated that they were selling all of their mineral interests. When Mr. Cook read the contract two days after he signed, it became clear to him then that they had sold the entirety of their interests.

Unilateral error: Consent may be vitiated by error, fraud or duress only when it concerns a cause without which the obligation would not have occurred and that cause was known or should have been known to the other party. Unilateral error will not vitiate consent to a contract unless the error was inexcusable.  The Cooks were sophisticated landowners who had previously executed leases and engaged in other complicated property transactions.

Fraud:  The Springbok employee knew or should have known that their intent was to only convey half of their minerals. Fraud does not vitiate consent where the party against whom the fraud was directed could have ascertained the truth without difficulty, inconvenience or special skill. The record showed no evidence of fraud.

Accounting was error. because Springbok did not plead for it. The trial court had discretion to allow enlargement of the plaintiff’s recovery to conform to the evidence. The final judgment must grant the relief to which the party whose favor it is rendered is entitled even if the party has not demanded such relief in his pleadings and there is no prayer for general and equitable relief.

New Orleans’ own Walter “Wolfman” Washington RIP

Anita Pointer RIP