Oil and Gas Lawyer Blog

Published on: December 3, 2020

Another Case on Post-Production Costs

Netty Engler Energy, LP has asked the Texas Supreme Court to review the decision of the Fort Worth Court of Appeals in Netty Engler Energy, LP v. Bluestone Natural Resources II, LLC, 2020 WL 3865269 (July 9, 2020).

Engler owns a royalty interest in a section of land in Tarrant County on which Bluestone owns a lease and operates gas wells. Engler’s royalty interest originated in a deed in which the grantor reserved a one-eighth non-participating royalty interest. The deed provides that the grantor reserves “a free one-eighth (1/8) of production … to be delivered to Grantor’s credit, free of cost in the pipe line, if any, otherwise free of cost at the mouth of the well or mine.”

Bluestone contracted with Crestwood Equity Partners to gather its gas through a gathering system owned by Crestwood and deliver it to various delivery points into a pipeline owned by Energy Transfer, where the gas is sold. Bluestone deducted the gathering fees charged by Crestwood from Engler’s royalty. Continue reading →

Published on: December 1, 2020

The Passing of a Judicial Giant

By John McFarland

Thomas M. Reavley, senior judge on the 5th Circuit Court of Appeals, died today at age 99. Judge Reavley was on the Texas Supreme Court when I clerked there in 1975-76. The obituary below is from the Texas Supreme Court.

Tom Reavley, who served for nine years on the Texas Supreme Court before President Carter appointed him to what would become a 41-year career on the Fifth Circuit U.S. Court of Appeals, died Tuesday in Houston. He was 99.

When he died he was the oldest active federal judge. During his federal judicial tenure he decided cases as a visiting judge on every U.S. court of appeals but one. His legal career spanned more than six decades.

As a lay Methodist minister and Sunday School teacher, his moral bearing earned him the sobriquet “Pope of the Fifth Circuit.”

Chief Justice Nathan L. Hecht said: “Sailor, scholar, lawyer, advisor to governors and presidents, judge, writer – Tom Reavley was all these things, and always with unfailing wisdom, humility, civility, decency, kindness to all and good humor. He was a towering figure in Texas and a true champion of justice for the state and the country.” Continue reading →

Published on: November 20, 2020

Something Completely Different

By John McFarland

Today is the birthday of Benoit Mandelbrot (b 11-20-1924, d 10-14-2010), a mathematician and discoverer of the Mandelbrot set and studied fractal geometry. He was Sterling Professor of Mathematical Science at Yale University, the oldest professor in Yale’s history to receive tenure. Below is an image of the Mandelbrot set. You can go here to view an animation of the set.

Published on: November 17, 2020

Another Bankruptcy Court Weighs In On Rejection of Gas Contracts

By John McFarland

On October 28 Judge David Jones, US Bankruptcy Court for Southern District in Houston, issued a memorandum opinion in Chesapeake Energy’s bankruptcy (Case No. 20-33233), granting Chesapeake’s motion to reject its contract to sell gas to ETC Texas Pipeline.

The Bankruptcy Code allows a debtor in bankruptcy to “reject” an “executory contract.” As the court explained,

In simple terms, Sec. 365(a) allows a debtor to re-evaluate the wisdom of continued performance of a particular contract based upon the circumstances faced by the debtor during the bankruptcy case. By rejecting an executory contract, a debtor is permitted to disavow further performance of its obligations under a burdensome contract. … The rejection of an executory contract constitutes a breach by the debtor of the contract immediately before the petition date. … In general terms, this breach results in a general unsecured claim against the bankruptcy estate for the damages caused by the debtor’s future nonperformance. … Thus, any allowed claim would be paid pro rata with the debtor’s other unsecured creditors.

Chesapeake considered its gas purchase contract with ETC to be burdensome and so sought permission from the court to reject the contract, leaving ETC with an unsecured claim for damages caused by Chesapeake’s breach. Continue reading →

Published on: October 28, 2020

Mineral Title Dispute Before Texas Supreme Court

By John McFarland

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 →