You would think that a Master Service Contract concerning boats and oilfield operations in the Gulf of Mexico would be governed by federal maritime law. In some situations you would be mistaken, says Offshore Oil Services, Inc. v. Island Operating Company, Inc.  

The facts

Fieldwood and Island Operating entered into a MSC through which Island performed production services on Fieldwood’s Gulf of Mexico platforms. Most of the categories of “Work” identified in the MSC were those traditionally associated with production activities. Fieldwood contracted with OOSI for marine transport of equipment and Island’s workers on the platforms.

In the MSC Island agreed to indemnify third-party contractors such as OOSI against claims resulting from injuries to Island employees.

Fieldwood and Island agreed to a work order in which Island would fill “A Operator” positions. These operators would conduct BESE compliance testing and a host of other activities.

Island employee Felix sustained injuries while disembarking from a vessel. OOSI filed a Complaint for Exoneration From and/or Limitation of Liability and Felix filed a personal injury claim. OOSI demanded indemnification from Island.

The question for the court

Did federal Maritime law or Louisiana law govern the dispute? The question was whether transportation vessels would play a substantial role in the performance of the MSC and whether the parties expected as much.

There was no question that the indemnity provision required Island to indemnify OOSI for Felix’s personal injury claims; however Island argued that the Louisiana Oilfield Anti-Indemnity Act rendered the indemnity provision unenforceable. OOSI said federal maritime law controls. The trial court granted summary judgment for Island, concluding that the LOAIA governed the dispute based on a finding that the MSC did not provide that the vessels would play a substantial role in the completion of the contract and that the parties did not expect vessels to play such a role.

The Fifth Circuit affirmed the take-nothing judgment against OOSI. The court applied the choice of law analysis in the Outer Continental Shelf Lands Act. Whether federal maritime law applied of its own force to the MSC depended on the answer to two questions:

Was the contract to provide services to facilitate the drilling or production of oil and gas in navigable waters? The answer was “yes”. Then the court asked if the contract provided or did the parties expect that the vessel would play a substantial role in the completion of the contract? To this question the court said “no”. The result of that “no” was the MSC was a non-maritime contract. There was not a direct and substantial link between the contract and operation of the ship, it’s navigation or its management afloat.

The result was based on the testimony of the parties. A Fieldwood employee testified to the effect that they typically don’t use equipment associated with a vessel but it had been done. Island’s president testified that operators perform no work on vessels. The provision relating to marine transportation concerned transporting workers to the platform and was not a description of actual work the MSC contemplated.

The trial court, affirmed by the Fifth Circuit, ruled that OOSI take nothing. The MSC was not maritime in nature. Thus, the Louisiana Oilfield Anti-Indemnity Act controlled, nullifying Island’s indemnity obligations. (OOSI agreed that if the LOAIA applied, the indemnity obligation would be null, rendering discussion of that question unnecessary).

Your musical interlude.

Some things aren’t. In keeping with its familiar journalistic standards, the New York Times presents fact-free opinion in a place (page 1, top of the fold) usually reserved for news, this time in its July 26-27 International Edition.  Headline: “Ignoring the planet is now illegal.” First two sentences: “The science on climate change has long been settled. Now the law is, too”.  (It’s behind a paywall; I would publish the article if I could.)

If only it were true.

First, as Daniel Markind points out in Forbes, the “ruling”, from the International Court of Justice (a suggestion box in robes) is binding on absolutely no one, not even those countries who acknowledge its “jurisdiction” and in particular private citizens who were not involved.   

Second, is science ever “settled”? The American Council on Science and Health posits that “settled” does not mean “proved”, and use of the term is often based on ignorance (in both directions).

Website Ponderly ponders the question.  Consider the “yes” side of the debate and make you own conclusion about whether climate “science” meets the standard.

Now, opinions, facts and observations challenging climate alarmism. Don’t take my word for it, Read and decide for yourself.

David Blackmon reports in the Daily Caller on the politicalization of the allegedly neutral International Energy Agency, and Irina Slav reports on her Substack its “forecasts” that the world is moving toward renewable energy are being abandoned because they are based on ”nothing”.  

Anthony Watts challenges the Guardian’s attribution of heat waves to operations of 14 fossil fuel companies.

Judith Curry, respected climatologist, comments on the negative feedback on the DOE Climate Reassessment Report .

And here is more from Thomas Shepstone on the follly of the Endangerment Finding.

Stephen Heins in his substack corrects the record on alleged heat spikes in the UK (I wish the headlines wouldn’t scream “sensational”.)

Greenpeace founder Patrick Moore explains how the climate change movement is based on false narratives.  

More truth-telling about deception regarding coral reefs from Bjorn Lomborg, Danish economist and political scientist and author of a number of books and articles casting doubt on climate hysteria and the unwise policies resulting therefrom,

Doug Sheridan, commentator and frequent responder to false narratives, describes the uncertainty of measuring climate change. The post is 18 months old but is still relevant, especially in light of the NYT headline.

On our blog, search “climate change” for posts featuring scientists, economists and others who oppose climate alarmism.

Football fans: Five weeks into the season, is this your musical interlude? You’re smug because it’s not? Just wait. The season is long. Your dream is a bad game plan, bungled officiating, turnovers, or overall terrible play away from being crushed by the football gods.

Co-author Gunner West

Defendants – five oil and gas operators – challenged a venue selection clause requiring that suits be filed in Nueces County for disputes over La Salle County acreage. In In re INEOS USA Oil & Gas LLC, (disclosure and shout out: Gray Reed lawyers Justin Lipe, Bill Drabble and David Pruitt represented INEOS) a Texas Court of Appeals deemed the venue clause unenforceable as a “major transaction” when the agreements at issue on its face provided for less than $1 million in aggregate consideration.

The plaintiff, apparently having experience in Congress, engaged in creative math that added contingent drilling costs or potential penalties to the amount of consideration stated in the documents to push the value over that statutory threshold. This was rejected by the Court.

The facts: half-a-million + $10 is not a million

Texas Lone Star Petroleum assigned 14 Eagle Ford leases covering 633 acres through a Purchase and Sale Agreement stating $538,237 as the purchase price and an Assignment for consideration of “ten dollars ($10.00) and other good and valuable consideration.”

The Assignment included a reversionary “take-over” right keyed to production thresholds that allowed Lone Star to terminate and reclaim the acreage. Both agreements contain venue selection clauses designating Nueces County, Texas, as the exclusive venue for disputes.

Lone Star sued in Nueces County alleging breaches related to production levels that triggered Lone Star’s rights under the Assignment. Lone Star claimed equitable title in the leases. The defendants moved to transfer venue to La Salle County, contending that the venue selection clauses were unenforceable because the agreements did not evidence a “major transaction” under Texas Civil Practice and Remedies Code Section 15.020, and that venue was mandatory in La Salle County, the location of the real property at issue.

The trial court denied transfer; defendants sought mandamus relief.

The Court’s analysis

The Court first addressed whether the venue selection clause was enforceable as a “major transaction”. The statute requires that the written agreement evidence consideration with an aggregate stated value equal to or greater than $1 million. The Court explained that the aggregate stated value must be specifically stated on the face of the agreement, and contingent or prospective amounts cannot be considered.

Responding to defendants’ assertion that the agreements reflect payments totaling less than $1 million. Lone Star argued that the drilling obligation, which could cost over $1 million, combined with the purchase price and penalty provisions, should be aggregated to meet the threshold. In rejecting that argument, the Court held that the drilling obligation is a contingent and prospective cost, not a stated value in the agreement. Therefore, the agreements do not evidence a major transaction. The venue selection clause was unenforceable on that basis.

Next, the court considered whether venue was mandatory in La Salle County under Section 15.011, which governs actions related to ownership of real property. The court examined the “essence” or “substance” of Lone Star’s claims, which sought ownership and operation of wells and leases located in La Salle County, as well as constructive trusts on interests in those properties. The Court concluded that the lawsuit constituted an action for recovery of an interest in real property, making venue mandatory in La Salle County.

Because Section 15.020 did not apply, it did not preempt Section 15.011. Thus, venue must be transferred to La Salle County. The defendants carried their burden of proof to establish mandatory venue in La Salle County.

The result

The Court granted the petition for writ of mandamus and ordered the trial court to vacate its prior order denying the motions to transfer and to issue an order granting those motions and transferring the case to La Salle County.

Your musical interlude.

O’Connor v. O’Connor addresses tracing of property in a divorce proceeding and an evidentiary issue, but there are lessons for parties to mineral deeds as well. First, …

A few Texas marital property rules

  • Property acquired by either spouse during the marriage is community property unless it is separate property.
  • Property owned or claimed by a spouse during or on dissolution of the marriage is presumed to be community property.
  • The presumption can be defeated by “clear and convincing evidence” of the separate nature of the property’s ownership.
  • Separate property includes property acquired by the spouse during marriage by gift, devise or descent.
  • Texas law presumes that a parent-to-child transfer of property is a gift.

The lesson

Your mineral deed (or any written transaction for that matter) could be in jeopardy if the recitations in the document do not match the substance of the actual transaction and the intent of the parties. The deed in question used words of conveyance for consideration, not of a gift. Then husband Mike could not trace the funds for the purchase to his separate property. Did the scrivener pull out a document from the form file without thinking through the transaction? Did the parties give the scrivener accurate instructions? Did somebody grab a form off the internet? Mike could not produce sufficient records to support his claim that he used separate property. Maybe the marital relationship was suffused with such bliss at the time of the transaction that nobody (talking to you, married persons who stand to inherit valuable stuff) thought a paper trail mattered.

The facts

Mike and Shannon were married in 1995. Mike’s mother died in 2009 and Dad became trustee of a trust in her name that held mineral interests in McMullen County. By Mineral Deed effective in 2009 Dad transferred minerals to Mike and Mike’s five siblings. The deed recited that “for accurate consideration paid and received”, Dad granted, conveyed, etc.

Trial

The trial court concluded the deed was not a gift. It had no gift language; it recited that the minerals were sold for an unspecified amount of adequate consideration that was tendered at the time of the transaction.

If Mike could not trace the transaction to his separate property then the minerals and proceeds therefrom would be community property. Mike’s tracing failed. He could not establish by clear and convincing evidence that he used separate property to acquire the minerals. Clear and convincing evidence is a measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. That burden is high.   

Mike alleged that the trial court failed to admit evidence showing his father intended to transfer the mineral interests as Mike’s separate property when he directed conveyance of the interests from the trust to Mike and gave Mike $12,000 with which to purchase the interests.

The rejected exhibit was fully redacted in the reporter’s record. It did not indicate the substance of its contents or what Dad’s intent was. The appellate court was unable to determine the harm resulting from the trial court’s refusal to admit the exhibit because there is no record of what the exhibit would have shown. The alleged error was not preserved.

Tracing methods

The court discussed the various tracing methods and explained why one applied and the others didn’t:

  • the community-out-method (applied by the trial court):
  • the clearinghouse method,
  • the identical-sum-inference method,
  • the minimum-sum-balance method.

Mixing up your musical interludes:

Diana Krall

Elaine Elias

Eric Clapton

If you are the type to be preoccupied with the nuances (drudgery if you prefer) of federal statutory and regulatory interpretation, or if you have a fetish for acronyms, I recommend that you read all 41 spellbinding pages of W&T Offshore v. U S Department of the Interior. The rest of us will dig into the U S District Court’s consideration of the so-called Auer deference (judicial deference being a hot topic these days) and the fair-notice doctrine under the Fifth Amendment and the Administrative Procedure Act. That is as deep into these weeds as we should dare to venture.

The facts

W&T deducted from royalty payments to the government a transportation allowance under federal law for costs incurred in remediation of the offshore Pluto Flowline. W&T had a Unit Operating Agreement with Mariner, the operator of the Pluto Project. Previous owners were parties to an Operations and Maintenance Agreement that was terminated after several transactions involving interests in the Pluto Project and the Pluto Flowline.

Judicial deference?

Interior (by Minerals Management Service and the Office of Natural Resources Revenue) denied the allowance and demanded an additional $4MM+ in royalties. W&T sued alleging that Interior’s disallowance ran afoul of a host of federal statutes and regulations and was therefore arbitrary, capricious, and an abuse of discretion, and that the rejection violated fair notice requirements.

The court considered Auer deference (an agency’s interpretation of its own regulation is controlling unless plainly erroneous or inconsistent with the regulation). The court performed this analysis:

  • First, determine that the regulation is genuinely ambiguous by “exhausting all the ‘traditional tools’ of construction.” (Applying Texas law, the law of the contracts).  
  • Second, determine that the interpretation is reasonable. 
  • Third, evaluate whether the character and context of the agency interpretation entitles it to controlling weight.  See pp. 9-11 of the opinion for the factors.

Under the UOA, W&T was obligated to reimburse operator Mariner for costs of unit operations, but the Pluto Flowline was not listed as joint property under the UOA.

The court found:

  • The regulation upon which the agency’s ruling was based was not ambiguous.
  • Interior’s interpretation was reasonable. Therefore, Skidmore deference did not apply (based on the interpretation’s persuasiveness, a weaker form of deference than Auer).
  • Interior’s interpretation did not invoke the agency’s substantive expertise (offshore oil and gas activities). The question whether W&T incurred the costs under an arms-length transportation contract was based on general common-law principles of contract interpretation.
  • Interior’s interpretation was not arbitrary and capricious.
  • Auer deference and Skidmore deference did not apply to the agency’s decision.

The flaw in W&T’s position was that the UOA was not a transportation contract, which was a requirement for the allowance.    

The fair-notice doctrine

So far, so good for Interior. But the agency is required to give fair notice to whomever it is regulating that certain conduct is forbidden. Interior violated the doctrine:

  • Interior had never before interpreted the regulation at issue to hold that W&T’s method of remediation was unreasonable.
  • Interior knew that terms such as ”reasonable”, “moderate” and “fair” made the regulation subject to ambiguity.
  • Mariner had obtained several layers of approval in which the procedure was described and was never put on notice that it was not reasonable.  
  • Interior did not cite any statute, regulation or prior adjudication finding the procedure was not reasonable.

There is much more to the opinion than this summary, but the result is the parties’ dueling motions for summary judgment were denied in part and granted in part, Interior’s Final Decision denying the allowance was reversed, and the case was remanded to the ONRR.

Your musical interlude

She does originals, too.

Co-author Gunner West

City of Crowley v. TotalEnergies E&P USA, is a post-production cost (PPC) case with a predictable result. The Fort Worth Court of Appeals confirmed its reasoning in Shirlaine W. Props. Ltd. v. Jamestown Res., L.L.C from 2021, that under a market-value oil and gas lease, gas sold at the wellhead means that other promises within the lease that royalties will never bear PPCs don’t matter. The lessee will bear its share of costs incurred to make the gas marketable.

Background and legal framework

The lessor’s share of production depends on two factors: the valuation metric (market value, proceeds, or price) and the point of valuation (at the well or other point of the). Together, these factors determine whether the royalty bears PPCs.

Gas sold at the wellhead is valued before PPCs are incurred and the royalty owner typically shares those costs through the workback method (which estimates wellhead value by subtracting PPCs from prices received downstream). In contrast, a gross-proceeds royalty is measured by the lessee’s actual receipts at the point of sale and is free of PPCs when the sales occur downstream.

The lease provisions

The court examined four key provisions of the royalty clause:

  • Payment will be the “Royalty Fraction of the market value at the point of sale, use, or other disposition”. The point of sale here was the wellhead;
  • The market value “will never be less than the total proceeds received by Lessee in connection with the sale  …” .
  • “[I]f Lessee realizes proceeds of production after deduction for any expense of [postproduction] . . . then the reimbursement or the deductions will be added to the total proceeds”; and
  • “Lessor’s royalty will never bear, either directly or indirectly,  . . . any part of [PPCs].”

Shirlaine controls

The court found the lease provisions to be nearly identical to those in Shirlaine. The valuation provision fixed market value at the wellhead – the point of sale. Moreover, adopting the lessor’s reading would improperly rewrite an at-the-well market-value lease into a “total proceeds” lease.

The court’s analysis

The Shirlaine reasoning was logically, legally, and linguistically sound, said the court.

The City’s argument that PPCs constitute “deductions” because gas buyers anticipate incurring them “twists commonsense economics into something it is not.”  Treating the gas buyer’s expectation of downstream costs as a “deduction” from the seller’s proceeds conflates price formation with expense recovery. While the commonly-used workback method anticipates PPCs to estimate wellhead market value, this doesn’t mean the seller actually “realizes proceeds . . . after deduction” of those costs. The workback method is merely a proxy for market value.

Market value at the well means the value before gas is prepared for market. There are no marketing costs to deduct from the value. Post-sale expenses are, by definition, post-sale. Therefore, with the wellhead as the valuation point the lessees do not “realize proceeds . . . after deduction for any [postproduction] expenses.”

The add-on and no-PPC clauses did not apply to these facts; perhaps those clauses could apply if the point of sale was a place other than the wellhead.

The court affirmed summary judgment for the lessees. The lessees did not breach the lease by calculating the lessor’s royalty without including PPCs.

Caveat

Don’t read too much into this or any other PPC case. Our Supreme Court reminds us frequently that the effect of any royalty clause depends on the language of the clause itself. Beware of general statements of the law.

Your musical interlude.

Lagniappe

Its bedtime and your stash of melotonin is depleted? We can help! Read these summaries of cases cited in the opinion to learn more about PPCs:

BlueStone Nat. Res. v. Randle

Burlington Res. Oil & Gas Co. v. Tex. Crude Energy

Devon Energy Production Co. v. Sheppard

Shirlaine

Co-author Gunner West

The Texas Supreme Court in Roxo Energy Company, LLC v. Baxsto, LLC reinforced a fundamental contract principle: when fully integrated agreements plainly conflict with prior oral representations, reliance on those inconsistent prior oral statements is unjustifiable as a matter of law. In other words, a party to a contract cannot justifiably rely on prior oral representations contradicted by written terms.

The Facts

During mineral lease negotiations, Roxo and its backer Vortus assured Baxsto that Roxo would develop the acreage “at the bit”, was not in the business of “flipping” leases, and had committed hundreds of millions to the project—promises Baxsto said induced it to sign. For all we know both Roso’s statements and Baxsto’s reliance are true, but it doesn’t matter.

The transaction documents included a paid‑up lease, an agreement granting Roxo an option to purchase the lease, and a lease memorandum to be recorded only after a $5,000‑per‑acre bonus was paid. Despite this condition, Roxo prematurely recorded the memorandum without Baxsto’s knowledge.

After receiving two option extensions—the first adding a six-month “most-favored nations” clause guaranteeing Baxsto any higher bonus Roxo might pay others—Roxo disclosed that Vortus had scaled back development funding. Roxo then paid the bonus, exercised its option, but declined to drill. Instead, Roxo negotiated to purchase Baxsto’s mineral interests before ultimately flipping the lease to another operator for $11,000 per acre.

Baxsto sued for fraudulent inducement. The trial court granted summary judgment for Roxo; the Eastland Court of Appeals reversed, finding justifiable reliance because the written agreements didn’t “plainly contradict” the oral representations nor contain sufficient “red flags.”

The Analysis

The Supreme Court thought otherwise, and analyzed the representations in three categories, applying a straightforward principle: oral representations directly contradicted by written terms cannot support a fraud claim.

Development and Assignment Promises.

Despite extensive oral assurances about drilling and avoiding lease transfers, the fully integrated written agreements gave Roso the unqualified right to assign. Roxo could transfer the lease at will, and no drilling obligations were imposed. These written terms directly contradicted any oral development promises. Because Baxsto freely agreed to a lease that expressly permitted transfers and omitted drilling requirements, any reliance on contradictory oral assurances was unjustifiable as a matter of law.

Bonus Payment Representations.

Baxsto claimed Roxo fraudulently misrepresented bonus payments by stating the competing operator received only a $3,500 per acre bonus, that Baxsto’s $5,000 per acre bonus was the area high, and that Roxo’s purchase offer constituted a “great deal.” However, the only bonus-related written term was the six-month “most favored nations” clause, which Baxsto did not allege was breached. The absence of a written promise comparing bonuses “should make it obvious to a reasonably sophisticated party like Baxsto that the previous discussions may no longer be part of the deal.”

Non-Disclosure

These claims failed on two grounds. First, Roxo and Baxsto were commercial counterparties, not fiduciaries, creating no duty by Roso to disclose premature recording of public documents that Baxsto could have independently discovered through routine title searches. Second, Baxsto offered nothing more than conjecture that Roxo’s promise to delay recording induced the ultimate sale of Baxsto’s minerals. The Court found this connection too attenuated to support the claim. Accordingly, summary judgment was proper.

What does it mean?

This decision reversed a lower court that found issues of fact sufficient to deny summary judgment for the defendants. With this decision and several others of recent vintage, litigants should now understand that the Texas Supreme Court as it is now constituted will be strongly inclined to disfavor efforts by a party to deviate from the plain meaning of a written contract, including claims that the contract was tainted by false representations during negotiations.  

Your musical interlude

Co-author Gunner West

“He who comes for the inheritance is often made to pay for the funeral”.* When heirs inherit property together and can’t agree on its use, Texas courts strongly prefer dividing the land physically rather than forcing a sale, even when one owner wants to cash out.

Atkinson v. Land Endeavors held that under the Uniform Partition of Heirs’ Property Act, courts must order partition in kind unless the party opposing physical division proves substantial prejudice to all cotenants, not just themselves.

Three Sisters, Two Sales, One Standoff

Joseph Atkinson devised the surface estate of his 152-acre tract in equal, undivided one-third shares to his three daughters. Two sold their interests to Evans and Rossi; heir Paula Atkinson held her share.

Evans and Rossi filed a partition action against Atkinson in accordance with the Act. Atkinson declined the cotenant buyout option under Section 23A.007.

At trial, Atkinson, a California lawyer appearing pro se (after running through three different counsel), requested partition by sale rather than physical division. She contended that carving the tract into smaller parcels would erode its investment value, complicate ongoing oil‑and‑gas operations, and invite surface‑use conflicts with mineral owners.

Despite her challenge, the trial court ruled that the property was susceptible to partition in kind, confirmed each party’s undivided one‑third interest, and appointed a surveyor and three commissioners to divide it into contiguous parcels wherever feasible. Atkinson appealed.

Evidence Supporting Partition in Kind

The appellate court affirmed the trial court, grounding its analysis in Section 23A.008’s directive that, in the event of an unsuccessful buyout, the court shall order partition in kind unless the court, after consideration of the seven factors listed in Section 23A.009, concludes that sale is proper. The trial court found that partition in kind would not result in substantial prejudice to the cotenants as a group.

The court applied the seven factors:

  • Practical divisibility: the property—a rectangular, fully wooded, vacant tract in an un‑zoned area—could be divided practicably; appraisal maps and testimony from Evans and Rossi confirmed workable physical boundaries.
  • Value impact: Atkinson offered no evidence demonstrating that subdividing the wooded land would depress aggregate fair‑market value below the proceeds of a unitary sale. Rather, the appraisals characterized the tract’s highest and best use as recreational, rural‑residential, or agricultural, not commercial timber.
  • Duration of ownership favored neither side, as the land had been held jointly by all three heirs before they conveyed their shares;
  • Atkinson’s sentimental attachment was outweighed by her own request to liquidate the asset;
  • Alleged interference with oil‑and‑gas operations was unsubstantiated, and minerals are presumed equally distributed absent contrary proof — none was offered;
  • No evidence showed unequal contributions to taxes, insurance, or improvements; and
  • Miscellaneous considerations (wetlands, existing easements, limited access points) did not foreclose a fair geographic split.

Because Atkinson bore the burden to prove the tract was incapable of equitable division and failed to supply contrary valuations or operational impediments, the court concluded that partition in kind would not substantially prejudice any cotenant.

Atkinson’s several other points of error were overruled. One was unpreserved because she never raised the issue or obtained a ruling in the trial court. The other, including a “laundry list of multifarious complaints,” (the legal term is “bellyaching”) lacked supporting legal authority or adequate briefing and thus was waived (which looks like what you get when you represent yourself).

Your musical interlude.

*Said to be a proverb. We got it from the internet.

Co-author Gunner West

It seems to be fairly well settled that you can’t use trespass-to-try-title to recover a nonpossessory royalty interest in Texas. What if you call the interest a “mineral interest stripped of every attribute except the right to receive royalty”? The result is the same; you can’t.

In Devon Energy Production Company, L.P. v. McClure Oil Company, a Texas appellate court held that parties seeking title to a nonpossessory interest must pursue declaratory relief, not trespass-to-try-title claims (which we will refer to as TTT). This procedural miscalculation proved fatal for nearly all parties who prevailed at the trial court. Deficiencies in the movants’ pleadings undermined the relief they obtained.

Competing Deeds

The dispute originated from two 1928 deeds from J.V. Heyser concerning mineral interests in five Glasscock County sections:

  • the “Dean Deed” (January 17, recorded February 14), conveyed a 3/8ths interest in oil, gas, and other minerals to Dean;
  • the “Boston Deed” (February 1, recorded February 4), conveyed Heyser’s remaining interest to Boston, reserving a 3/8ths NPRI and rentals under existing oil and gas leases and a 3/8ths NPRI of the standard 1/8th royalty on future leases.

Operator Laredo Petroleum (now Vital Energy) interpleaded royalties due to uncertainty over which deed controlled and how to calculate the Boston reservation’s royalty. The Boston Deed reserved a double‑fraction NPRI and current leases paid more than 1/8th. So, should the NPRI be calculated as fixed or floating?

Many successors in title joined the litigation, tracing title through one deed or the other.

  • The Dean Deed successors sought to recover their mineral estates.
  • The Boston Deed successors sought bona‑fide‑purchaser protection under the Texas recording acts and argued that the Boston Deed could not convey interests already granted to Dean.

After a marathon of summary judgment filings determining deed priority, construing the Boston reservation, adjudicating TTT claims and defenses, and awarding ownership interests—the trial court held the Dean Deed (first-executed, second-recorded) prevailed over the Boston Deed, rejected the Boston Deed successors’ affirmative defenses, and granted title and royalty rights to the Dean Deed successors.

A strategy gone wrong

Dean Deed successor SH Permian’s deed-priority MSJ argued explicit alternative theories: TTT if the Dean Deed prevailed, declaratory relief if the Boston Deed prevailed. Despite opportunities to correct course, including the trial court’s invitation to “clean up [its] pleadings,” SH Permian maintained its position.

The Dean Deed appellees – winners at the trial court – ultimately asserted claims for trespass to try title only, if the Dean Deed prevailed, and thoroughly briefed their positions before and after the deed-priority ruling. Thus, when the trial court ruled the Dean Deed took priority, those parties were bound by the parameters of the order that locked in the trespass-to-try-title theory.

The defect surfaced at final judgment. SH Permian asserted it owned “a mineral interest equal to an undivided 1/8th royalty interest,” while Devon claimed “an undivided 4% floating royalty interest.” Through summary judgment grounded in their trespass‑to‑try‑title pleadings, the trial court awarded the Dean parties nonpossessory interests.

Procedural Mismatch

On appeal by the Boston Deed successors the appellate court determined that the prevailing parties’ pleadings failed to support the nonpossessory interests awarded in the trial court’s partial summary judgment favoring the Dean Deed.

The court emphasized the procedural mismatch, reminding the parties (and anyone reading this blog) that TTT is generally not the appropriate action to be asserted when recovery is for nonpossessory interests. TTT requires possession. No possession = no trespass.

The court rejected arguments that the error was harmless. Even when characterized as “mineral interests stripped of every attribute except the right to receive royalty”, the interests at issue were “in the nature of a royalty”. Such interests cannot support possessory remedies, regardless of how they’re labeled.

The dominos fall

Once the trial court had ruled on deed priority based on TTT claims, that determination infected all subsequent proceedings. Even when SH Permian later attempted to amend its pleadings to add declaratory relief two and a half years late ( one imagines after a few sleepless nights), the court denied the motion; the amendment came too late to cure the deficiency.

The “pleadings‑relief” deficiency cascaded through the litigation, affecting the other Dean-Deed appellees as well. Devon Energy “hitched its wagon to SH Permian’s filings” by joining the deed-priority motion, and the “Birds parties” adopted SH Permian’s pleadings throughout. Vital later acquired a portion of another parties’ claimed interest and reentered the case but sought the interest through TTT.

The appellate court reversed and remanded on all issues—deed priority, affirmative defenses, and title determinations. Only one Dean Deed successor escaped reversal because its pleadings matched its prayer.

Your musical interlude.

State of Texas. V. Reimer et al. studied lawyer-nerdy questions of standing to bring a lawsuit and statutes of limitations as applied to inverse condemnation suits.  Spoiler alert: To the chagrin of the landowners, waiting over 30 years to assert your takings claim is not the best course of action.     

The facts

In 1965 the Sanford Dam created Lake Meredith, significantly reducing downstream flow of the Canadian River through the six-mile stretch at issue. The reduction exposed previously submerged land.

Beginning in 1982 the State granted oil and gas leases on portions of the riverbed to Huber. The 10-year leases were consistently renewed for decades with Huber establishing numerous productive wells. During the litigation Huber operated 21 wells in the area. The litigation began in 1993 when the State sued a Reimer forefather for trespass when he erected a fence blocking oil and gas lessee Huber’s access to producing wells. The Landowners asserted an unconstitutional taking of their oil and gas interests without compensation sometime between October 1999 and April 2000.

The Legislature at one time directed the GLO to make a survey marking the boundary of the river, which the GLO never did. Instead, Huber commissioned his own survey. In January 1982 Huber’s surveyor Shine filed his survey, which the GLO adopted. The survey identified the gradient boundary of the river locating the last natural riverbed before the dam’s completion. According to the Court, January 28, 1982, was the day when the State began taking the Landowners’ mineral interests.

Standing – constitutional or prudential?   

The state challenged the Landowners’ standing to bring the suit on three grounds:

  • they did not own the land when the taking occurred and had no assignment;
  • existing mineral leases prevented the Landowners from developing minerals themselves;
  • Huber acquired ownership through adverse possession, the Landowners had no compensable interest.

The Landowners satisfied constitutional standing by alleging concrete injuries to claimed property interests, traceable to the State’s conduct, with likelihood of redress through favorable judgment. Thus, the challenge was not to subject matter jurisdiction (Had the Court found there was none, it would be compelled to dismiss the case without addressing the merits).

The State’s challenge was to prudential jurisdiction because it involved the general prohibition on a litigant raising a claim on another person’s legal rights without proper assignment or authority. It is not standing as much as it is a substantive limitation on the landowner’s legal capacity. Regardless, the Landowners’ claim was barred as a matter of law.

Limitations

The Landowners’ claims were barred by limitations as a matter of law. Texas has no dedicated statute of limitations for inverse condemnation claims. Using the law of adverse possession as an analogy, Texas courts have concluded that inverse condemnation claims are barred by expiration of the 10-year limitations period in Texas Civil Practice & Remedies Code §16.026. The taking begins when the physical taking occurs or entry on land is made. The Landowners claimed the 25-year limitations in §16.028 governed. The 25-year limitations did not apply.

Simply put, the Court looked at the plain language of the two statutes and gave the unambiguous statutory language its plain meaning. The Court declined to judicially amend the statute by adding words that are not implicitly contained in the language of the statute.

The Court denied the Landowners’ aggregation theory (involving separate properties owned by different landowners) because it could lead to an absurd result.

The judgment

Reversing the trial court, the Court rendered judgment that the Landowners take nothing.

Your musical interludes, lady singers now and before. Pick as many as you want:

Calista Clark

Arleigh Kincheloe

The Castellows

Peggy Lee

Janice Joplin

Nina Simone