Oil and Gas Lawyer Blog
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.
The trial court sided with Samson’s position, in effect holding that the 1927 deed was limited to 147 acres. The Court of Appeals in Corpus Christi reversed, holding that the deed conveyed all of the land north and west of the road. Quoting from Stibling v. Millican DPC Partners, 458 S.W.d 17 (Tex. 2015), the court said that “mere inconsistencies between the metes-and-bounds and the general description [acreage] do not themselves render the metes-and-bounds doubtful.” In other words, the discrepancy in acreage – even by 154 acres – does not make the deed ambiguous.
The court then had to deal with Ellison’s claims for monies due on the oil produced from her lands without a valid lease. Samson drilled four wells, one on the 154 acres in dispute, and three located on the land south of the road. Samson commingled the production from the wells as from one “lease.” Samson sold the oil to Sunoco. Samson later sold the lease to Concho. Ellison sued all three for conversion and for payment of amounts due under the division order statute, Texas Natural Resources Code section 91.404. Ellison settled with Samson, but Samson remained in the case because Sunoco cross-claimed against Samson for indemnity.
The court held that Ellison has a conversion claim against Sunoco for wrongfully taking oil from the well on Ellison’s tract. But that claim is subject to the two-year statute of limitations for conversion, and so Ellison could recover only for oil produced within two years prior to filing suit.
Sunoco disputed that it had any liability to Ellison under the division order statute (with a four-year limitations statute), arguing that it is not a “payor” as defined in the statute and so has no liability to Ellison. The statute says that the “payor” for purposes of liability under the statute is the first purchaser of production unless the operator agrees with the purchaser that the purchaser will pay all proceeds to the operator and it will be responsible for paying the royalty owner. Sunoco argued that it had such an agreement with Samson and so Samson was the “payor,” and there cannot be two payors liable for payment under the division order statute. Without any real discussion, the court held that Ellison had “at least raised a genuine issue of material fact concerning who is a statutory payor in this suit,” and it remanded the case for further proceedings.
There are other issues in the case, and my summary only touches on the main issues. Among other things, it will present the Supreme Court with an opportunity to examine the division order statute.