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I ran across a fascinating opinion from the 10th Circuit Court of Appeals that provides a window into Wyoming history. Iron Bar Holdings v. Cape, No. 23-8043, decided March 18.

The facts are these: Iron Bar Holdings owns a ranch in southwest Wyoming covering 50 square miles. But within its boundaries are some 11,000 acres of federal and state public lands, some of which are completely enclosed by Iron Bar’s lands. In 2020, three hunters from Missouri decided to travel to Wyoming to hunt elk on public land within Iron Bar’s ranch. They could get to one section wholly surrounded by Iron Bar sections only by crossing over the corner touching two sections of federal land. So they stepped across the corner from Section 14 to Section 24, without setting foot on Section 13 or Section 23.

iron-bar-1As stated by the court, “Iron Bar is not friendly to corner-crossers.” It erected no trespassing signs at the corners, and its employees harassed the hunters. But in 2020 they did hunt on Section 24. They returned in 2021 to do the same, but this time Iron Bar convinced the local prosecuting attorney to prosecute the hunters for criminal trespass. They were acquitted in a jury trial. Not satisfied, Iron Bar sued the hunters for civil trespass, seeking $9 million in damages. It is this civil case that eventually ended up in the 10th Circuit.

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The Delaware Mountain Group is a group of formations including the Bell Canyon, Cherry Canyon and Brushy Canyon formations, deposits in ancient canyons filled in over the ages, and are productive of oil and gas. These formations lie above parts of the Wolfcamp formation in the Permian Basin. Disposal of produced water in the Permian has become a big problem, and the Texas Railroad Commission has granted permits for disposal wells that inject produce water into depths within the Delaware Mountain Group. These disposal wells have caused water to migrate to producing wells in the Delaware Mountain Group, killing those wells. The disposed water from these wells has also migrated to long-abandoned wells causing gushers of produced waters from the abandoned wells.

In Basic Energy Services v. PPC Energy, No. 08-23-00218-CV in the El Paso Court of Appeals, PPC Energy operated several marginal wells producing from the Delaware Mountain Group. It sued several disposal well operators in the vicinity for killing nine of PPC’s producing wells, resulting in a total loss of their remaining reserves. PPC settled with all disposal well operators except Basic. (Basic’s well was 6,300 feet from PC’s nearest well.) At trial, the jury found that Basic’s disposal well was responsible for 60% of PPC’s losses, and the trial court entered a judgment for PPC of $13 million, including interest. Basic appealed.

Basic complained that the charge to the jury was erroneous. The jury was asked:

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The podcast The Disconnect has begun Season Three, about the role of gas producers and pipelines in the Big Freeze of 2022., This is the third of a series by Mose Buschele, energy and environmental reporter at KUT and NPR. The first two episodes are out, and you can listen here. Mose has done a great job making the complex Texas grid understandable and calling out those responsible for the 2022 blackout. The Texas grid is not out of the woods yet.

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I have been reading a biography of Roger Williams, the founder of Rhode Island, by John M. Barry: Roger Williams and the Creation of the American Soul – Church, State, and the Birth of Liberty.

Williams was born in 1603 and as a young man became a friend and assistant to Lord Edward Coke, who at the time was sixty years of age. Coke is known by lawyers as a pillar of the development of the common law in England. Williams greatly admired Coke and was heavily influenced by him. Coke sometimes called Williams his son, and after Coke’s death Williams referred to him as his “much honored friend, that man of honor, and wisdom, and piety.”

Roger Williams immigrated to Massachusetts Colony in 1631. He was minister in Salem, but his theological differences with the Pilgrim fathers resulted in his expulsion from the colony in 1636. He went to what is now Rhode Island and founded the Providence Plantation. He believed that government should not meddle in matters of the church—that a “wall of separation” should be erected between them–a principle which became embodied in the Constitution’s First Amendment: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”

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Our firm represented the Opielas in two cases involving a Magnolia horizontal well in Karnes County: a suit against Magnolia in Karnes County, and a suit against the Texas Railroad Commission in Travis County. In both cases the Opielas contended that Magnolia had no right to drill a horizontal well located partly on their land.

Because this was a significant case addressing allocation and PSA wells, this post will go into the somewhat complex facts and history in some detail.

The Opielas’ lease covers some 640 acres; they acquired the property subject to an old existing lease that was held by production from vertical wells. Enervest and Magnolia drilled some horizontal EagleFord wells located wholly on the lease. The old lease provided for 1/8 royalty, and 3/4 of the royalty had been reserved or transferred to other owners long before Enervest acquired the lease, so the Opielas owned only 1/4 of 1/8 royalty. But the old lease prohibited pooling for oil wells. Enervest sought a lease amendment permitting pooling, but they were not able to reach agreement with the Opielas.

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On the last day of 2024 the Texas Supreme Court issued its opinion in ConocoPhillips v. Hahn, No. 23-0024, putting to rest a long-running dispute between Kenneth Hahn and ConocoPhillips (COP). The opinion deals with a fixed vs. floating NPRI reservation, and a stipulation of interest addressing the reservation.

Kenneth Hahn owned the surface estate and 1/4th of the minerals in 37 acres of land in DeWitt County. In 2002 Hahn conveyed the tract to William and Lucille Gips, reserving

an undivided one-half non-participating interest in and to all of the royalty [Hahn] now owns (same being an undivided one-half of [Hahn’s] one-fourth or an undivided one-eighth royalty) ….

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Another case interpreting a royalty reservation in an old conveyance has been decided by the 11th Court of Appeals in Eastland: Boren Descendants and Mabee Descendants v. Fasken Oil and Ranch, Ltd., two consolidated appeals, Nos. 11-22-00365-CV and 11-23-00001-CV. This is the first skirmish in a fight that will undoubtedly end up in the Texas Supreme Court.

In 1933, Midland Farms Company sold to J.E. Mabee 60,000 acres of land in Andrews and Martin Counties. The deed reserves “an undivided one-fourth (1/4th) of the usual one eighth (1/8th) royalty.” The Boren and Mabee descendants are the successors-in-interest of J.E. Mabee in the minerals under this 60,000 acres. Fasken Oil and Ranch, Ltd. is the successor to Midland Farms Company and owner of the reserved royalty. Fasken is also the operator of wells on the 60,000 acres.

Fasken sued the Boren and Mabee descendants in 2019, contending that the 1933 deed reserved a floating 1/4th of the royalty. The Boren and Mabee descendants raised several affirmative defenses, including waiver, division order estoppel/estoppel by contract, judicial estoppel, estoppel by deed, limitations, ratification and/or quasi-estoppel, and presumed grant. The trial court sided with Fasken on construction of the royalty reservation and entered partial summary judgment denying the Boren and Mabee affirmative defenses, leaving only the question of damages. The judge suggested, and the parties agreed, to appeal the legal issues in both cases. The Eastland Court of Appeals affirmed the trial court’s rulings and remanded the cases.

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MIT’s Casey Crownhart publishes a newsletter called The Spark. Here is his list of greenhouse gasses and their potency:

Carbon dioxide: The leading actor

I couldn’t in good conscience put together a list of greenhouse gases and not at least mention the big one. Human activities released 37.4 billion tons of carbon dioxide into the atmosphere in 2023. It’s the most abundant greenhouse gas we emit, and the most significant one driving climate change.

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In Fasken Oil and Ranch, Ltd. v. Puig, No. 04-23-00106-CV, the San Antonio Court of Appeals was asked to construe a royalty reservation in a 1960 deed:

There is saved, excepted and reserved, in favor of the undersigned, B.A. Puig, Jr., out of the above described property, an undivided one-sixteenth (1/16) of all the oil, gas and other minerals, except coal, in, to and under or that may be produced from the above described acreage, to be paid or delivered to Grantor, B.A. Puig, Jr., as his own property free of cost forever. Said interest hereby reserved is Non-Participating Royalty.

Fasken operates wells on the property; the Puig descendants sued Fasken for deducting post-production costs from their royalty. The trial court agreed with Puig, and the court of appeals affirmed, in a well-reasoned opinion relying on the Supreme Court’s opinion in Chesapeake Exploration v. Hyder, 483 S.W.3d 870 (Tex. 2016). “Free and of all cost forever” means what it says and includes both production costs and post-production costs. The court distinguished Heritage Resources v. Nationsbank, 939 S.w.2d 118 (Tex. 1996) because unlike Heritage the royalty clause in this reservation “does not contain a valuation point.” The lease in Heritage provided that royalty was payable on the market value “at the well,” the point at which royalty was valued for purposes of calculating royalty; so even though the lease also provided for no deductions from the lessors’ royalty, the Supreme Court said post-production costs incurred downstream of the well could be deducted.

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John McFarland
 Graves, Dougherty, Hearon & Moody, P.C.
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