Earlier this year, the Corpus Christi Court of Appeals was called on to interpret the rights provided by a production sharing agreement. A production sharing agreement is an agreement between an oil company-lessee and the lessor mineral owners setting out how a horizontal well’s production will be allocated to the various mineral owners. In Hamilton v. Conoco Phillips, the Plaintiff and Defendant had signed a production sharing agreement. The production sharing agreement contained the following language: 5. Surface Use, To the extent Owner may own any interest in the surface estate within the ..read more

In a recent case, the Texas Supreme Court considered whether interest on late royalty payments was supposed to be simple or compound interest. In Samson Exploration, LLC v. Bordages, 662 S.W.3d 501, 2024 (Tex. June 7, 2024), the Plaintiff’s oil and gas leases had a late charge provision that provided for interest on unpaid royalties at a rate of 18% and said the charge was due and payable on the last day of each month. When Samson paid previously unpaid royalties to the Plaintiff, it included simple interest. The Plaintiff claimed that the interest should be compounded. The Court looked at cas ..read more

Lithium mining is apparently becoming the next boom activity in Northeast Texas, particularly in Cass, Franklin, Morris and Titus Counties. There are a few things to know about lithium leasing. First, be aware that Northeast Texas is becoming Ground Zero for lithium production. It is estimated that the lithium contained in brine from the Smackover Formation that underlies Southwest Arkansas and Northeast Texas contains some of the highest lithium concentrations in the country. Historically, lithium mining involved pumping the brine into huge evaporation ponds on the leased property and retriev ..read more

The Texas Supreme Court recently considered oil and gas leases that involved the interaction of the “free use of gas” clause and the royalty due on gas used off the leased premises. In Carl v. Hilcorp Energy Co., ___ S.W.3d ___, 2024 WL ___ (Tex. May 17, 2024), individuals brought a class action against Hilcorp, claiming Hilcorp owed royalties on gas used off-lease for post-production activities. According to the leases, royalties were paid based on the value of gas at the well, and this language allows deduction of post-production expenses. The leases stated that Hilcorp must pay as royalties ..read more

In Hogg v. Blackbeard Operating, 656 S.W.3d 671, 673 (Tex. App.—El Paso 2022, no pet.), the El Paso Court of Appeals evaluated an assignment of leases in Winkler County, Texas. The owner of the minerals in question executed two leases for their interests, one in 1994 and one in 1998. In 2005, their lessee executed an assignment of leases to Standolind Oil and Gas.  The exhibit to the assignment listed the 1994 lease but not the 1998 lease. The Court noted that the language of the assignment was broad. It assigned “all of the assignor’s interest in “the land conveyed by the Leases” and lan ..read more

The El Paso Court of Appeals recently interpreted two deeds with conflicting fractions that each exhibited the estate misconception theory. In Davis v. COG Operating, LLC, 658 S.W.3d 784 (Tex.Civ.App.—El Paso 2022, no pet.) the original mineral owners executed two deeds to two different grantees. In the first deed to W. H. Haun, the interest conveyed is described as a “1/32 interest in and to all of the oil, gas, and other minerals.” Another clause described the interest as including “1/4 of all of the oil royalty and gas rentals, or royalty” under an existing lease. Another clause indicated t ..read more

The Texas Supreme Court recently decided a case in which an oil company’s withholding of production payments was contested. In Freeport-McMoRan Oil & Gas LLC v. 1776 Energy Partners, LLC, ___ S.W.3d ___, 2023, WL ___ (Tex. May 19, 2023), two oil companies, Ovintiv and 1776 Energy, entered into an agreement to jointly develop and produce minerals from certain leases they owned in Karnes County. Ovintiv  was in charge of distributing production payments. A third oil company sued 1776 to require it to transfer leases to the third company, and obtained a constructive trust on production p ..read more

In Bridges v. Uhl, No. 08-21-00130-CV,  (Tex. App.—El Paso 2022, no pet. h.) the El Paso Court of Appeals added it’s decision to the already substantial volume of court decisions grappling with the question of whether the royalty language in a deed was a fixed or a floating royalty. The distinction has substantial economic consequences. As the Court describes it: “(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) … A fra ..read more

I recently had occasion to reread an article from 2021 by Jude Clemente, a contributor to Forbes and the Principal at JTC Energy Research Associates, LLC. The article contains an excellent analysis of the benefits of fracking and the problems with the arguments against it. The article is entitled “Why Do ‘Fracking’ Opponents Ignore Its Moral Benefits” and you can read it here. The article is well researched, and I recommend it to any of you interested in the pros and cons of fracking, regardless of your personal view. The post An Interesting Analysis of the Pros and Cons of Fracking appeared f ..read more

The Texas Supreme Court has just issued an opinion in Point Energy Partners Permian LLC v. MRC Permian Co., ___ S.W.3d ___, 2023 WL ___, (Tex. Apr. 21, 2023) that involves the application of the force majeure language in an oil and gas lease. Force majeure is a legal doctrine that excuses performance under a lease for certain unforeseen circumstances or “Acts of God”. In this case, the oil and gas lease required the oil company to commence drilling a new well by a certain date in order to prevent the lease from terminating at the end of the primary term. The oil company scheduled the drilling ..read more