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

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

The Texas Supreme Court recently issued an opinion in a case in which royalties were calculated to be greater than gross proceeds. In Devon Energy Prod. Co. v. Sheppard, ___ S.W.3d ___, 2023 WL ___ (Tex. Mar. 2023) [20- 0904], the leases being considered provided for royalty payments based on gross sales proceeds. However, in what is frankly unusual language for leases, the leases stated that if “any reduction or charge for [postproduction] expenses or costs” has been “include[d]” in “any disposition, contract or sale” of production, those amounts “shall be added to the . . . gross proceeds ..read more

The Texas Supreme Court interpreted yet another confused mineral reservation in a deed in the case of Van Dyke v. Navigator Grp., ___ S.W.3d ___, 2023 WL ___ (Tex. Feb. 17, 2023). The 1924 deed contained a reservation of “one-half of one-eighth” of the mineral estate. The question was: did the grantor reserve a one-half interest in the minerals or a 1/16 interest in the minerals? The evidence in the case reflected that the grantor and the grantees and even third parties for decades had treated the deed as having reserved a one-half interest in the mineral estate to the grantor and conveyed one ..read more

Texas oil and gas companies can engage in a variety of procedures as part of their exploratory process before they drill an oil and gas well. One such procedure is seismic testing or a seismic survey. Seismic testing is a process that results in an image of the subsurface of property. The kind of seismic testing done most often in Texas uses a “thumper truck” which contains a large plate in the center of the truck that is thumped on the ground. The shock waves emanating from the thumping result in data that can be collected digitally and result in a map of the subsurface. Seismic testing can a ..read more

In a case last year before the Texas Supreme Court, BPX Operating Co. v. Strickhausen, 629 S. W. 3d. 189 (Tex. 2021), the Court addressed whether the acceptance of royalty checks by a lessor constituted a ratification of the oil company’s pooling of the leased premises in violation of the anti-pooling clause in the lease. Margaret Ann Strickhausen signed and oil and gas lease with BPX Operating that specifically prohibited pooling without the express written consent of the lessor. BPX sent her a ratification of pooling which she refused to sign. BPX pooled her property anyway. BPX continued to ..read more

The Texas Supreme Court recently issued its long-awaited opinion in Terrance J. Hlavinka et al v. HSC Pipeline Partnership, LLC, —S.W.3d— (Tex. May 27, 2022). There were two important issues in this case: (1) whether a pipeline company transporting polymer-grade propylene can be a common carrier with condemnation authority under Texas Business Organizations Code Section 2.105 and (2) whether a property owner may testify during condemnation proceedings about recent arms’-length transactions with other pipeline companies as evidence of the current highest and best use of the property in determin ..read more

In a recent case decided by the Eastland Court of Appeals in Texas, Foote v. Texcel Exploration, Inc., the Court held that the operator of an oil well was not liable for cows apparently killed by an oil and salt water spill. The Plaintiff leased property for grazing 650 head of cattle. Texcel Exploration Inc. operated an oil and gas lease on the property. The lease did not require Texcel to fence off the well and associated equipment, however Texcel had installed an electric fence around the tank battery (where produced oil and gas and salt water produced along with the oil and gas were stored ..read more

The Texas Supreme Court recently issued its decision in Nettye Engler Energy L.P. v. BluStone Natural Resources II, LLC, Cause No. 20-0639, which has added to the Texas jurisprudence on the frequently litigated subject of post-production costs that can be deducted from a royalty interest. The deed that conveyed the mineral interest to the grantee reserved a nonparticipating royalty interest “in kind,” which as the Court notes, differs from the standard monetary royalty because the grantor retained ownership of a fractional share of all minerals in place. The deed required delivery of the grant ..read more