The result was like others we’ve seen. Lessors Win. These wells are in Johnson and Tarrant County, Texas. Lessee Chesapeake Exploration sells to affiliate Chesapeake Marketing through affiliate-operator Chesapeake Operating. Plaintiffs sued Exploration and Operating for underpayments of royalty and overrides.
The Takeways
What is your guiding principle when writing agreements?
“The more the words the less the meaning, and how does that profit anyone?” Ecclesiastes 6:11.
or
“The beginning of wisdom is the definition of terms.” Socrates
The Legal Issue
A lease grants “a perpetual, cost-free (except only its portion of production taxes) overriding royalty of five
MDU Barnett Ltd. P’ship v. Chesapeake Exploration Ltd. P’ship is at least three things:
In 2005 Chesapeake and Conglomerate Gas entered
Chesapeake Exploration, L.L.C. v. Hyder is another hair-splitting Texas decision about “cost-free royalties”.
The Facts
The Hyder family executed a lease covering 1,037 acres. Chesapeake drilled 22 wells on the leased premises. The Hyders believed their lease provided for a “cost free” royalty; that is, no post-production deductions. Chesapeake deducted post-production