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From Democracy in America by Alexis de Tocqueville, 1835-1840:

“Political parties in the United States, like political parties everywhere, feel a need to rally around an individual in order to communicate ore effectively with the masses. Thus they generally use the name of the presidential candidate as a symbol: they make him the personification of their theories. Hence the parties have a great interest in winning presidential elections, not so much in order to secure the president’s aid in achieving the triumph of their doctrines as to demonstrate by electing him that those doctrines enjoy the support of the majority.

“Long before the appointed date arrives, the election becomes everyone’s major, not to say sole, preoccupation. The ardor of the various factions intensifies, and whatever artificial passions the imagination can create in a happy and tranquil country make their presence felt.

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In 2018 I commented on a case in the 9th Circuit court of Appeals, Murray v BEJ Minerals, LLC, holding that fossils of two “dueling dinosaurs”, a 22-foot-long theropod and a 28-foot-long ceratopsian, “engaged in mortal combat” when “entombed under a pile of sandstone,” were “minerals” under Montana law. Well, not so fast. The federal court decided to ask the Montana Supreme Court to weigh in on the question. It’s answer? Dinosaur bones are not minerals after all. Murray v. BEJ Minerals, 464 P.3d 80 (MoDueling-dinosaursnt. 2020). Including one dissenting opinion, the court took 21 pages and 23 footnotes to reach its conclusion. In the meantime, the Montana legislature weighed in with a statute clarifying the definition of fossils and distinguishing them from minerals. Read more about the bones and the dueling over ownership here.

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Last night I watched the presidential debate. This morning I watched the Texas Supreme Court oral argument in State of Texas v. Harris County Clerk Chris Hollins, in which the Texas Attorney General is seeking to enjoin the Harris County Clerk from mailing out applications to vote by mail to all voters in Harris County.

Webster’s defines argument as “a coherent series of reasons, statements, or facts intended to support or establish a point of view; a form of rhetorical expression intended to convince or persuade.”

Webster’s defines debate as “a regulated discussion of a proposition between two matched sides; a contention by words or arguments.”

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U.S. District Judge Matthew Kacsmaryk, in Amarillo, recently wrote an opinion in Mayo Foundation for Medical Education and Research v. BP America Production Company, 447 F.Supp.3d 522 (March 3, 2020) dealing with the enforceability of a lease provision requiring the lessee to obtain the lessor’s consent to assign an oil and gas lease. The opinion addresses issues that, remarkably, have never been discussed by a Texas court. Judge Kacsmaryk provides a detailed discussion and analysis of legal arguments on the construction and enforceability of consent-to-assign clauses in oil and gas leases.

Barbara Lips owned a ranch in Roberts and Ochiltree Counties. She signed an oil and gas lease to Alpar Resources in 1994. Ms. Lips died in 1995 and devised the ranch to the endowment arm of the Mayo Clinic. Bank One was hired as agent to manage the Clinic’s interest. The lease was later amended to contain the following provision:

The rights and obligations of the Lessee hereunder are not assignable or transferable in any respect by it, except upon the written approval of Bank One Trust Company, N.A., as Agent, or any successor Agent, which approval shall not be unreasonably withheld.

The lease, as to a portion of the land, came to be owned by BP America, which asked Bank One for permission to assign its interest in the lease to Courson Oil & Gas. Bank One refused to grant consent, citing past business dealings and litigation with Courson. Mayo Foundation then sued BP seeking an injunction to prevent the assignment. Continue reading →

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On June 25 the 13th Court of Appeals in Corpus Christi issued is opinion in Devon Energy Production Co. v. Michael A. Sheppard, et al., No. 13-19-00036-CV making a deep dive into when post-production costs can be deducted from the plaintiffs’ royalty.

Plaintiffs’ leases provided for royalties on oil and gas to be based on gross proceeds of sale received by the lessee. The leases also contained the following provision:

Payments of royalty under the terms of this lease shall never bear or be charged with, either directly or indirectly, any part of the costs or expenses of production, gathering, dehydration, compression, transportation, manufacturing, processing, treating, post-production expenses, marketing or otherwise making the oil or gas ready for sale or use, nor any costs of construction, operation or depreciation of any plant or other facilities for processing or treating said oil or gas. Anything to the contrary herein notwithstanding, it is expressly provided that the terms of this paragraph shall be controlling over the provisions of Paragraph 3 of this lease to the contrary and this paragraph shall not be treated as surplusage despite the holding in the cases styled Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996) and Judice v. Mewbourne Oil Co., 939 S.W.2d 135-36 (Tex 1996).

Top-TenFinally, the lease had this “unique” paragraph 3(c):

If any disposition, contract or sale of oil or gas shall include any reduction or charge for the expenses or costs of production, treatment, transportation, manufacturing, process[ing] or marketing of the oil or gas, then such deduction, expense or cost shall be added to the market value or gross proceeds so that Lessor’s royalty shall never be chargeable directly or indirectly with any costs or expenses other than its pro rata share of severance or production taxes.

This last provision–the “add-back” clause–is the clause on which the case turned. Continue reading →

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The Texas Supreme Court has agreed to hear argument in BPX Operating v. Strickausen, Case No. 19-0567, an important case for royalty owners. I wrote about this case when it was decided last year by the Corpus Christi Court of Appeals (Strickhausen v. Petrohawk Operating, No. 04-18-00636-CV). That court ruled for Ms. Strickhausen, the royalty owner, on the issue of whether she had ratified a pooled unit by accepting royalties, despite protests by her and her lawyer that Petrohawk (now BPX) was not authorized by her lease to form the pooled unit. Briefs in the case can be found here.

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I read recently that, because of increased wind and solar generation capacity in Texas, no new gas-fired generating plants are being built, and some are being mothballed. Then I read this week of rolling blackouts in California, being blamed on the unreliability of wind and solar power and the need to build more gas-fired plants.

EIA has projected the consumption of global energy by source out to 2040. Its projections don’t bode well for reducing carbon emissions. A depiction of its projections is below. By 2040 world energy consumption will increase 22%. Energy from oil, gas and coal will increase 11%. Coal consumption will be essentially flat. Energy from all other sources will increase 70%. Energy from wind and solar will increase a whopping 333%. But total energy production from sources other than oil, gas and coal will increase only from 19% to 26% of total energy production. (click on image to enlarge)

global-energy-mix

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The Texas Observer has a great article about Texas solar energy development, Texas Solar Hits a Turning Point, by Nancy Nusser. The article focuses on a new solar farm on the Chadbourne Ranch in Nolan County, owned by Garland Richards. The Holstein solar farm has 709,000 solar panels on 1,300 acres and can generate 200 megawatts of electricity, enough to power about 40,000 homes.solar-farm

According to the article there are now 17 solar facilities in Texas, 13 of which can produce at least 100 megawatts. And more coming. Solar capacity in the ERCOT service area is expected to increase 150 percent this year to 5,777 megawatts, and next year to 13,449 megawatts. Still, solar provides only about 2 percent of Texas’ electricity generation. If 1,300 acres of solar farm generates 200 megawatts, and if Texas needs 300,000 megawatts of electricity, and if solar were to provide 20% of that, it would take 300 solar farms like the one above to provide that power, or almost 400,000 acres of solar farms – 600 square miles.

fortChadbourne Ranch is the site of Fort Chadbourne, established by the army in 1852 in what is now Coke County, to protect the western frontier. The fort surrendered to confederates on February 28, 1861, before the confederate shelling of Fort Sumter on April 12 of the same year. It was reoccupied by federal troops from 1865 to 1867, and is on the National Register of Historic Places. Garland Richards helped form the Fort Chadbourne Foundation, which has preserved the fort, reconstructed some buildings, and built a museum housing artifacts discovered during restoration of the site. Restored barracks below.barracks

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