Recent Cases

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 5, 2020

GDHM Land & Mineral Owner Webinars

By John McFarland

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: 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.

Published on: July 23, 2020

Another Chapter in Jimmy McAllen’s Fight with Forest Oil

By John McFarland

It seems that Jimmy McAllen’s troubles over damages and injuries he suffered when Forest Oil buried mercury-contaminated iron sponge wood chips on his ranch will never end. Arbitration of his claims resulted in a $20 million award which was affirmed by the Corpus Christi Court of Appeals, and the Supreme Court denied review.

But shortly thereafter, McAllen got in a dispute over attorneys’ fees related to the case with his lawyer and former son-in-law Chris Amberson. McAllen claimed his lawyer overcharged for fees and submitted bills for fraudulent expenses. That dispute also went to arbitration, and the arbitrator, Tom Collins, entered an award against Amberson for more than $15 million. Collins found that Amberson had billed McAllen almost $1.7 million in “reimbursable expenses” to retain 38 experts for the Forest Oil litigation. “These were made-up expenses,” Collins wrote, adding that “almost 100% percent of the expert retainers were not paid.” Collins found almost $2.6 million in fraudulent charges.

Amberson then asked the district court which appointed the arbitrator to set aside part of the award. But a company owned by Amberson, also a party to the case, has now sought bankruptcy protection, and the case was removed to bankruptcy court. The battle continues.

Published on: June 23, 2020

Pipeline Loses Condemnation Appeal – Hlavinka v. HSC Pipeline

By John McFarland

The First Court of Appeals in Houston agreed with the Hlavinkas that HSC Pipeline Partnership, an Enterprise Products company, had failed to prove it has authority to condemn a pipeline easement across their land in Brazoria County. Hlavinka v. HSC Pipeline Partnership, No. 01-19-00092-CV.

The Hlavinkas purchased 15,000 acres in 2002-2003 “for the primary purpose of generating income by acquiring additional pipeline easements.” When they purchased the land there were more than twenty-five pipelines traversing the property. HSC proposed to acquire an easement across the land for a pipeline from Texas City to a plant in Brazoria County owned by Braskem America which would carry propylene. Propylene is a product of refining crude oil. Enterprise purchases refinery-grade propylene from various refineries and further refines it into polymer grade propylene (PGP) at its facilities in Mont Belvieu. HSC contracted with Braskem to sell it propylene at Mont Belview, and then to ship it for Braskem to Braskem’s plant in Brazoria County.

The Hlavinkas and HSC could not agree on terms for an easement, so HSC sued to condemn the easement. The Hlavinkas challenged HSC’s right to condemn on various grounds, which the trial court overruled. The trial court also excluded testimony of Terrance Hlavinka related to damages and valuation of the easement. After trial, the Hlavinkas were awarded $132,293.36, representing $108,957.35 for crop and surface damages and $23,326 for the easement. The Hlavinkas appealed.

The Court of Appeals ruled in favor off the Hlavinkas on two issues: first, it held that HSC did not prove as a matter of law that it was a common carrier with the power of eminent domain, and that a fact issue was raised on that point by the evidence presented. Second, it held that the trial court should not have excluded Terrance Hlavinka’s testimony on the value of the easement. Continue reading →

Published on: June 15, 2020

Fifth Circuit Upholds Takings Claim Against Groundwater District

By John McFarland

The Fifth Circuit Court of Appeals has held that a landowner has stated a judiciable claim against the Brazos Valley Groundwater Conservation District (BVGCD) for an unconstitutional taking of his groundwater rights. David Strata, et al. v. Jan A. Roe, et al., No. 18-60994. Fascinating facts.

Groundwater Districts were created by the Texas Legislature to manage production of groundwater. Most Districts cover one county. The BVGCD covers Robertson and Brazos Counties. There are nearly 100 Districts encompassing 72 percent of major and minor aquifers in the State. Each District adopts its own rules governing permitting of and production from water wells.

BVGCD’s rules create three categories of water wells: Existing Wells, New Wells, and Wells with Historic Use. Its rules are designed to “minimize as far as practicable the drawdown of the water table and the reduction of artesian pressure, to control subsidence, to prevent interference between wells, to prevent degradation of water quality, and to prevent waste.” The rules provide that Historic Use Wells are generally limited to producing the maximum amount of groundwater used before the effective date of the District’s rules. New Wells have a maximum allowable production based on the number of contiguous acres assigned to the well. When a water well is produced it creates a “cone of depression” in the aquifer – the more water withdrawn, the greater the cone of depression. The District’s rules establish a formula that calculates the amount of water that can be withdrawn from a well based on the number of acres assigned to the well. For example, a New Well producing 3,00 gallons per minute must have 649 continuous acres assigned the well – a circle with a radius of 3,003 feet. No other wells may be permitted in this 649 acres. The District’s rules define “Existing Wells” as those wells “for which drilling or significant development of the well commenced before the effective date of these Rules.” But the rules do not establish production limits for Existing Wells that have no established historic use. Continue reading →

Published on: June 5, 2020

Texas Supreme Court Acts on Two Significant Oil and Gas Cases

By John McFarland

Yesterday the Texas Supreme Court denied a petition in one case and granted a petition in the other, both dealing with provisions in oil and gas leases.

The Court denied Chesapeake’s petition in Chesapeake v. Bell, construing an express drainage offset clause in Bell’s lease. The San Antonio Court of Appeals’ decision in favor of Bell stands – for now. The case goes back to the trial court for trial on the merits. I wrote about the Court of Appeals’ decision here.

The Supreme Court granted Endeavor Energy’s petition for review in Endeavor Energy Resources v. Energen Resources, No. 18-1187, dealing with a continuous drilling provision in a lease retained acreage clause.

Continue reading →

Published on: May 26, 2020

Bush v. Lone Oak Club – Texas Supreme Court Once Again Dives Into the Arcane Law of Water Boundaries

By John McFarland

Lone Oak Club, a hunting and fishing club, owns a tract of land in Galveston County near Galveston Bay, through which runs Lone Oak Bayou:

Members of the public boat up into Lone Oak Bayou and sometimes wade and fish or hunt in its shallow waters. Lone Oak complained about this activity and asserted that it owns the bed of Lone Oak Bayou and that members are trespassing when they set foot on the bayou’s bed. The Club agrees that the public has the right to boat on the public waters of the bayou, but when the fisherman or hunter steps out of his boat, they claimed trespass. The Texas General Land Office disagreed. It said the State owns the bed of Lone Oak Bayou adjacent to the Club’s land because the bayou is influenced by tides from the bay and is below the line of mean high tide, and the State owns all submerged lands within tidewater limits. So the Club sued George P. Bush, Commissioner of the Land Office, to establish its title to the bed of the bayou within the boundaries of its 160 acres.

Nature sometimes does not cooperate with the laws created by humans to establish the boundary between the land and water. In Texas especially these laws, mostly created by courts, can sometimes be confusing and complex. Water boundaries shift with the rise and fall of tides, erosion and evulsion, and changes in watercourses. I learned this when I was asked, in my first year of law practice many years ago, to summarize Texas laws regarding land boundaries and rights of public access for a client who owned land along the coast. Continue reading →

Published on: May 18, 2020

Texas Supreme Court Weighs In On Application of Rule Against Perpetuities to Overriding Royalty Reservations

By John McFarland

Last week the Texas Supreme Court issued its opinion in Yowell v. Granite Operating Company, No. 18-0841, again grappling with the ancient Rule Against Perpetuities in the context of modern oil and gas transactions–the second time in two years in which the court tackled the inscrutable “Rule.”

The facts (simplified): The Yowells own an overriding royalty on production from a 1986 oil and gas lease. Upland Resources owned the lease. In May 2007, Amarillo Production Company took a top lease on the same land as the 1986 lease, and three months later it sued Upland, contending that the 1986 lease had expired. The parties settled: Upland’s 1986 lease wass terminated, Amarillo Production’s 2007 lease became effective.

The overriding royalty owned by the Yowells was created in an assignment of the 1986 lease that contains the following language, known as an “anti-washout clause”:

Should the Subject Leases … terminate and in the event Assignee obtains an extension, renewal or new lease or leases covering or affecting all or part of the mineral interest covered and affected by said lease or leases, then the overriding royalty interest reserved herein shall attach to said extension, renewal or new lease or leases; and an appropriate recordable instrument shall be executed to evidence Assignor’s overriding royalty interest therein. Further, any subsequent extension or renewal or new lease or leases shall contain a provision whereby such overriding royalty shall apply and attach to any subsequent extensions or renewal of Subject Leases.

The successors to Upland, Granite Oil and Apache, refused to recognize the Yowells’ continued overriding royalty in the 2007 lease, contending that the grant of an override in “future leases” violates the Rule Against Perpetuities. Continue reading →