News

EnerVest Operating, LLC v. Mayfield, No. 04-21-00337, WL 4492785 (Tex. App.—San Antonio, Sep. 28, 2022).

Deduction of Fuel Gas from Total Royalties Owed to Lessor.

In EnerVest Operating, LLC v. Mayfield, the Fourth Court of Appeals held that per the subject oil and gas leases, deductions from royalties were proper when attributed to post-production costs, reversing the lower court’s decision. Accordingly, the Court analyzed whether fuel gas was a properly deducted post-production cost from the lessors’ total royalties under the specific language of the leases at issue. The appellate court concluded royalty deductions for fuel gas use in this instance were proper.

EP Energy E&P Co., L.P. v. Storey Minerals, LTD, No. 04-19-00534-CV, 2022 WL 223253 (Tex. App.—San Antonio Jan. 26, 2022, pet. filed). Construction of Most-Favored-Nations clause in Oil and Gas Lease.

At issue in this case is the construction of most-favored-nations (MFN) clauses contained in identical oil and gas leases. Specifically, the number of additional bonuses due to lessors upon the triggering of said clause, and whether the lower court failed to consider surrounding circumstances while construing the clause.

Davis v. COG Operating, LLC, No. 08-20-00205-CV, 2022 WL 17477948 (Tex. App. –Eastland 2022, no pet. h.). Double Fractions.

In Davis v. COG Operating, the Eighth Court of Appeals interpreted a 1926 deed in which the granting clause purported to convey a 1/32 mineral interest and the rest of the document purported to convey 1/4. In holding that the deed unambiguously conveyed a 1/4 mineral interest, the court noted that 1/32 is the product of 1/4 and 1/8 and that 1/8 was the standard royalty reserved under an oil and gas lease at the time the deed was executed. Additionally, the court held that a subsequent 1939 deed that purported to except the same 1/32 mineral interest effectively put the parties on notice of the 1926 conveyance of 1/4 of the mineral estate.

Platinum Energy Solutions, Inc. v. Lazarus Operating LLC, No. 13-20-00279-CV, 2022 WL 120151 (Tex. App.—Corpus Christi-Edinburg Jan. 13, 2022, no pet. h.). Attachment of Mineral Liens.

At issue in this case was whether a lien holding mineral contractor could foreclose on a ranch’s mineral estate. The court relied on Section 56.003 of the Texas Property Code, and distinguishing case law, to rule the lien never attached to the fee title of the property. Secondarily, the court overruled the lienholder’s unsupported claims and statute of limitations defense.

Nettye Engler Energy, LP v. BlueStone Natural Resources II, LLC, 639 S.W.3d 682 (Tex. 2022). Post-Production Costs.

In Nettye Engler Energy, LP v. BlueStone Natural Resources II, LLC, the Supreme Court of Texas affirmed the Second Court of Appeal’s decision that, based on the specific language used in creating the in-kind non-participating royalty interest (“NPRI”) at issue, the royalty interest was free of production costs but burdened by postproduction costs. The Supreme Court of Texas qualified the court of appeal’s decision by noting that the court of appeals had reached the correct result, but misconstrued the opinion in Burlington Resources Oil & Gas Co. v. Texas Crude Energy, LLC, as establishing a rule that delivery “into the pipeline,” or similar phrasing, is always equivalent to an “at the well” valuation point. The Supreme Court clarified that the Burlington Resources opinion merely emphasized that all contracts are construed as a whole to ascertain the parties’ intent from the language they used to express their agreement.