Oil and Gas Lawyer Blog

On May 22 the Texas Supreme Court issued opinions in Boerschig v. Rio Grande Electric Cooperative, No. 24-0213. Four Justices joined the majority opinion by Justice Busby; Justice Hawkins also filed a concurring opinion; and Justice Bland, joined by Chief Justice Blacklock and Justices Lehrmann and Huddle, filed a dissent.

The case concerns an old electric line running across property owned by John Boerschig. Rio Grande Electric wanted to update and add to the line, and Boerschig objected. The result was a lawsuit, filed in 2014, tried to a jury, and finally reaching the Texas Supreme Court. The implications of the case troubled the electric and pipeline industries who filed several amicus briefs, including the the Texas Electric Cooperatives, the Texas Pipeline Association, Oncor Electric, Southwestern Public Service, Texas New Mexico Power, American Electric Power, and CenterPoint Energy. Two amicus briefs were filed by those advocating for Mr. Boerschig’s position, Texas Farm Bureau and Texas Land & Mineral Owners Association.

Rio Grande Electric was formed in 1945 by ranchers in South Texas as part of the electrification of rural America. A member-owned non-profit utility, it began acquiring easements to lay electric lines using “blanket” easements that only describe the land across which the line will be laid and not the actual line location. Such blanket easements were common for electric lines and pipelines in the early part of the last century. Between one-third and one-half of Rio Grande’s lines are built on such easements. In 1947 Rio Grande acquired such an easement from the Estate of Mary Clamp to place electric lines on her 5,684-acre Ranch. Rio Grande constructed a line across some 1.6 miles of the Clamp property.

On April 24, the Supreme Court issued an opinion in two consolidated appeals, Boren Descendants v. Fasken Oil and Ranch, Ltd., and Mabee Ranch Royalty Partnership LP v. Fasken Oil and Ranch, Ltd. I wrote about the Eastland Court of Appeals, decision in these cases in December 2024. The issue is construction of a 1933 deed of 60,000 acres in which the grantor reserved “an undivided one-fourth (1/4th) of the usual one eighth (1/8th) royalty.” Fasken owns the reserved royalty and the Boren and Mabee descendants on the fee mineral interest. Relying on the Supreme Court’s guidance on how to construe such deeds in Van Dyke v. Navigator Group, the Eastland Court held that the deed reserved a “floating” 1/4th of the royalty.

The more interesting part of the case is the applicability of the presumed grant doctrine, also addressed in Van Dyke. The appeal of the Fasken cases was a permissive interlocutory appeal; the Eastland Court refused to consider the the Boren and Mabee parties’ contention that the presumed grant doctrine applied, concluding that it was not one of the issues referred by the trial court for the interlocutory appeal.

The Supreme Court has elected to return the case to the Eastland Court for further proceedings. First, it told the Eastland Court that it should consider the Supreme Court’s more recent opinion in Clifton v. Johnson, which addressed a another fraction-of-royalty issue. Second, it said the Eastland Court should have considered the Boren and Mabee parties’ claim that the presumed grant doctrine applied.

On March 3, 2026, the Texas Supreme Court issued its opinion in Fasken v. Puig, No. 24-1033. It reversed the courts below and held that the words “free of all costs” in a reservation of a non-participating royalty interest did not include post-production costs. The reservation, in a 1960 deed covering lands in Webb County, reads:

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 . . . .

In Chesapeake v. Hyder,  483 S.W.3d 870 (2016), the Texas Supreme Court ruled on a similar issue. The Hyders’ lease contained an unusual provision granting them an overriding royalty on production from horizontal wells the surface location of which was on the Hyders’ land but whose lateral produced from adjacent land. The reservation of overriding royalty provided that they would receive “a perpetual, cost-free (except only its portion of production taxes) overriding royalty of five percent (5%) of gross production” from such wells. Chief Justice Hecht, joined by four other justices, held that the overriding royalty must be paid free of post-production costs. Justice Hecht said that “We disagree with the Hyders that ‘cost-free’ … cannot refer to production costs. … But Chesapeake must show that while the general term ‘cost-free’ does not distinguish between production and post-production costs and thus literally refers to all costs, it nevertheless cannot refer to post-production costs.”  Four justices dissented; they concluded that, because the overriding royalty was based on “gross production,” it was valued at the well, and so the Court’s prior decision in Heritage v. NationsBank meant that, not withstanding the cost-free language, post-production costs can be deducted.

On December 2, 2025, the Texas Supreme Court issued its opinion in Clifton v. Johnson, No. 23-067. This is the first Supreme Court case on fixed vs. floating since its decision Van Dyke v. The Navigator Group, 668 S.W.3d 363 (Tex. 2023), its effort to clarify how double-fraction conveyances and reservations should be construed.

The reservation construed in Van Dyke was a mineral reservation:

It is understood and agreed that one-half of one-eighth of all minerals and mineral rights in said land are reserved in grantors … and are not conveyed herein.

The Corpus Christi Court of Appeals, in Devon Energy Production Co. v. Robert Leon Oliver, No. 13-25-00131-CV, has reversed a $9 million judgment against Devon in a suit for failure to pay royalties in accordance with Oliver’s leases. The court followed the reasoning of the Texas Supreme Court’s opinions in Heritage Resources v. NationsBank, 989 S.W.2d 118 (Tex. 1996), holding that Oliver’s lease provision prohibiting post-production-cost deductions from Oliver’s royalty was “surplusage,” and that Oliver’s royalty should be based on the “market value at the well.”

Oliver’s leases were on a printed form with an addendum that provided the addendum’s provisions would prevail over any conflicting language in the leases. The royalty clause in the lease form provided that the royalty on oil would be

1/5th of all oil produced and saved by lessee from said  land, or from time to time, at the option of lessee, to pay lessor the average posted market price of such 1/5th part of such oil at the wells as of the day it is run to the pipeline or storage tanks, lessor’s interest, in either case, to bear 1/5th of the cost of treating oil to render it marketable pipeline oil. …