Oil and Gas Lawyer Blog

Published on: October 28, 2020

Mineral Title Dispute Before Texas Supreme Court

The Texas Supreme Court will hear arguments in December in Concho Resources v. Ellison, No. 19-0233, a fight over ownership of the minerals in 154 acres in Irion County. (The population of Irion county was 1,599 in 2010. Its county seat is Mertzon. The county was once the hideout of outlaw Tom Ketchum. Irion County was the home of Mont Noelke, a rancher, writer and renaissance man who wrote a column for many years beloved by the readers of the Livestock Weekly.)

In 1927, the Sugg family agreed to a land swap with the Noelke family, and to effectuate the swap, the Suggs executed a deed conveying a tract described as follows:

All of Survey 1, Block 6, HTC Ry Co land located North and West of the public road which now runs across the corner of said Survey, containing 147 acres, more or less.”

A later survey in 1939 determined that in fact the portion of Section 1 lying north and west of the public road contained 301 acres. The crux of the dispute is whether the 1927 deed conveyed only 147 acres or instead conveyed all of the 301 acres north and west of the highway (which everyone agreed remained as it was in 1927). Samson, based on a lease from the successors in title to the land lying south and east of the road, claimed that the boundary was not the road but was limited to a 147-acre tract lying north and west of the road. Samson drilled a well on the disputed 154-acre tract, leading to the litigation. Marsha Ellison, claiming to own the minerals in the 154 acres (as successor to Noelke), brought suit. Continue reading →

Published on: October 20, 2020

Exxon and Trump

By John McFarland

From The Hill:

At the rally in Arizona on Monday afternoon, Trump had said he could easily out-fundraise Democratic presidential nominee Joe Biden if he just reached out to oil and Wall Street executives.

“Don’t forget, I’m not bad at that stuff anyway, and I’m president. So I call some guy, the head of Exxon. I call the head of Exxon. I don’t know,” Trump said before playing out a conversation.

Continue reading →

Published on: October 12, 2020

Democracy in America

By John McFarland

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.

Continue reading →

Published on: October 5, 2020

GDHM Land & Mineral Owner Webinars

By John McFarland

Published on: October 2, 2020

An Update: Dinosaur Fossils as “Minerals”

By John McFarland

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 (Mont. 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.

Published on: September 30, 2020

Debate, Argument and the Rule of Law

By John McFarland

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.”

Continue reading →

Published on: September 28, 2020

Consent-to-assign Provisions in Oil and Gas Leases – Mayo Foundation v. BP America

By John McFarland

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 →

Published on: September 23, 2020

EIA Data on US Energy Flow 2019

By John McFarland

Another great chart from the US Energy Information Administration, showing sources and uses of energy in the US last year. Click on image below to enlarge. You can also view it on the EIA website. Hydrocarbons continue as by far the largest sources of energy consumed by the US.

Published on: September 3, 2020

Corpus Christi Court of Appeals Opines on Post-Production Costs

By John McFarland

On June 25 the 13^th 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).

Finally, 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 →

Published on: August 28, 2020

Supreme Court agrees to hear BPX v. Strickhausen

By John McFarland

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.