Articles Posted in Recent Cases

Recently the El Paso Court of Appeals affirmed a judgment denying Tom Craddick’s claim that Cimarex and BPX had conspired to wash out his overriding royalty interest in an oil and gas lease owned by BPX. Craddick v. Cimarex Energy, et al., No. 08-24-00010-CV.

An overriding royalty is created when the owner of an oil and gas lease assigns the lease but reserves a royalty interest in production. An overriding royalty can also be created by assignment from the lessee. Because the overriding royalty is carved out of the lessee’s working interest, it terminates when the lease terminates.

A “washout” of an overriding royalty occurs when the lessee releases the lease even though there is a well or wells on the lease that continues to produce in paying quantities. The overriding royalty is “washed out” by the release.

Last month the Texas Supreme Court decided three cases involving Texas’ Open Beaches Act. The Court issued one opinion in all three cases: No. 24-0237, Texas General Land Office and Dawn Buckingham, in her official capacity as the Texas Land Commissioner, v. SaveRGV, Sierra Club, and Carrizo/Comecrudo Nation of Texas, Inc.; No 24-0407, Cameron County v. SaveRGV, Sierra Club, and Carrizo/Comecrudo Nation of Texas Inc; and No. 24-0457, Ken Paxton, in his official capacity as Attorney General of Texas, v. Save RGV, Sierra Club, and Carrizo/Comecrudo Nation of Texas, Inc.  The cases reminded me of a little Texas history.

The three plaintiffs filed suit because in 2013 the Legislature passed HB 2623, amending the Open Beaches Act, Tex. Nat. Res. Code Chapter 61, to authorize the General Land Office and Cameron County to adopt rules allowing them to temporarily close beaches “for space flight activities.” The bill passed at the request of SpaceX, which maintains a launch site on Boca Chica Beach on the coast in Cameron County (now incorporated as the town of Starbase. The GLO and the county have at restricted access to Boca Chica beach when SpaceX launches take place.

Plaintiffs claimed that HB 2623 violates Article I, Section 33 of the Texas Constitution, approved by voters in 2009, which states:

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. …

After the Texas Supreme Court issued its opinion in Van Dyke v. The Navigator Group, 668 S.W.3d 363 (Tex. 2023), setting out presumptions to apply when construing royalty conveyances and reservations that contain so-called double fractions, it considered Thompson’s petition for review of the San Antonio Court of Appeals’ opinion in Hoffman v. Thomson, 630 S.W.3d 427 (Tex.App.–San Antonio 2021) construing another royalty fraction deed. The Supreme Court remanded the case back to the San Antonio court, instructing it to reconsider its decision in light of the Supreme Court’s opinion in Van Dyke. Thomson v. Hoffman, 674 S.W.3d 927 (Tex. 2023). The San Antonio Court has now issued its second opinion, reaffirming the conclusion it reached in its first opinion. 2026 WL 758737, March 18, 2026.

The deed being construed in Hoffman v. Thomson contains the following relevant language:

[T]here is hereby expressly reserved … an undivided three thirty-second’s (3/32’s) interest (same being three-fourths (3/4’s) of the usual one-eighth (1/8th) royalty) in and to all of the oil, gas and other minerals ….

Today the Supreme court accepted the petition for review in Boerschig v. Rio Grande Electric Cooperative, No. 24-0213, a case in which the trial court granted an easement by estoppel based on a jury verdict.

In 2002 Boerschig purchased the 6,397-acre U-Bar Ranch. At the time there was a 1.6 mile distribution line with wooden poles carrying four wires, constructed in 1947. Boerschig was unable to locate any recorded easement for the line.

In 2012 RGEC bulldozed the 1947 line and began construction of a new line with more, larger poles carrying seven wires, for a new compressor station to be operated by Lone Star NGL Pipeline. Boerschig objected to the line, and litigation followed. After a jury trial, the jury found that RGEC failed to obtain a prescriptive easement, but that it did acquire an easement by estoppel, and that the new line constructed by RGEC was within the scope of that easement. The trial court rendered judgment on the verdict and awarded RGEC its legal fees.