Oil and Gas Lawyer Blog

Published on: July 19, 2017

Denbury-Texas Rice Fight Continues

Denbury Green Pipeline and Texas Rice Land Partners have now fought for ten years over Denbury’s right to condemn an easement across Texas Rice’s land for a CO2 pipeline. The fight is once again, for the third time, back before the Texas Supreme Court.

The fight began in 2007, when Texas Rice challenged Denbury’s right to condemn an easement for its pipeline. That case went to the Supreme Court, which issued a controversial decision holding that Denbury had not proven its right to condemn the easement. Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 363 S.W.3d 192 (Tex. 2012). The case went back to the trial court and through the Beaumont Court of Appeals, and in January of this year, the Supreme Court issued its second opinion, Denbury Green Pipeline-Texas, LLC v. Texas Rice Land Partners, Ltd., 510 S.W.3d 909 (Tex. 2017), this time ruling that Denbury had proven its right to condemn as a matter of law. See my discussion of these cases here. The case was remanded for trial on the amount of compensation to be awarded for the easement.

The most recent dispute began when Denbury sought access to its pipeline for inspection and Texas Rice refused. Texas Rice argued that Denbury had no right of access because it had been enjoined from taking the compensation funds deposited by Denbury into the court registry eight years earlier. Denbury then asked the trial court to allow it access to the pipeline, but the trial court sided with Texas Rice, agreeing that it had not complied with the requirements of condemnation statutes because Texas Rice was enjoined from withdrawing the condemnation award. Denbury then sought mandamus relief in the Beaumont Court of Appeals, which ruled that it did not have jurisdiction. Now Denbury has sought mandamus relief in the Texas Supreme Court, Case No. 17-0556.

Published on: July 11, 2017

End of the Road for DISH

By John McFarland

The Texas Supreme Court has refused to allow DISH, a small town in Denton County north of Fort Worth, and several of its residents, to proceed with its suit against four companies who operate gas compressor stations near the town. The plaintiffs alleged that they were harmed by the noise, odors, light and chemicals from the compressors. The Court held that their claims were barred by limitations, reversing an opinion by the Amarillo Court of Appeals that would have allowed the case to proceed.

DISH caused quite a stir beginning in 2010, out of proportion to its size (it had a population of 201 in the 2010 census). Originally named Clark, the town changed its name to DISH as part of a deal with Dish Network in which all residents received free basic television service for ten years. Continue reading →

Published on: July 3, 2017

85th Legislature – Legislation of Interest to Land and Mineral Owners

By John McFarland

The Texas legislative session recently ended without any major reforms of the Texas Railroad Commission. Bills to reform the Commission failed in the previous two legislative sessions, after Sunset Commission reports recommending significant changes in the structure of the RRC. This session, the Legislature had no heart for tackling those reforms and instead gave the RRC renewed life through September 1, 2029.

The bill authorizing continuance of the RRC, HB 1818, includes a provision requiring the RRC to track its oil and gas monitoring and enforcement activities and publish an annual report on its website. But a bill (HB 247 by Anchia) to require the RRC to publish on its website details of violations and enforcement actions by operators, searchable by county, operator and well, failed to pass. As did a bill to change the RRC’s name to the Texas Energy Commission. Another bill by Anchia, HB 464, restricting the time periods when Commissioners could accept political contributions and prohibiting contributions by companies with contested cases before the RRC, also died. HB 567, which would have increased penalties for operator violations of RRC rules and required the RRC to allow public input on its penalty guidelines, failed to get out of committee.

The Legislature’s budget bill includes an appropriation of $38.2 million from the state’s rainy day fund for plugging of orphaned oil and gas wells. The RRC website lists more than 5800 orphaned wells in Texas – wells for which no operator can be found who can be made responsible for plugging the well.

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Published on: June 19, 2017

TAMEST Report on Impacts of Shale Development in Texas

By John McFarland

The Academy of Medicine, Engineering and Science of Texas (TAMEST) has issued a report on the environmental and community impacts of shale development in Texas. The report can be viewed on the TAMEST website. Its authors reviewed available literature on on six areas of impacts: seismicity, land, water, air, transportation, and economic and social impacts. Its authors make recommendations on further needed research and studies.

TAMEST members are the Texas-based members of the National Academies of Medicine, Engineering and Sciences, and the state’s nine Nobel Laureates. It hosts an annual conference and educational programs on key issues, and offers awards to aspiring researchers. Two years ago TAMEST organized a task force to review available research on the impacts of shale development in Texas.

Its shale report task force includes members of TAMEST and members from the oil and gas industry. The report was funded by the Cynthia and George Mitchel Foundation (“committed to promoting energy efficiency and minimizing the air and water impacts from energy production”). Each chapter of the report was authored by three of the task force members, with one of the TAMEST members serving as the lead author.

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Published on: June 13, 2017

Beware the Blanket Conveyance Clause in a Mineral Deed

By John McFarland

In March, the Texas Supreme Court decided James H. Davis, Individually and d/b/a JD Minerals, and JDMI, LLC v. Mark Mueller, No. 16-0155. (Davis v. Mueller) The Court construed a mineral deed to JD Minerals covering interests in Harrison County. The deed described particular interests owned by the grantor and then added the following:

The “Lands” subject to this deed also include all strips, gores, roadways, water bottoms and other lands adjacent to or contiguous with the lands specifically described above and owned or claimed by Grantors. If the description above proves incorrect in any respect or does not include these adjacent or contiguous lands, Grantor shall, without additional consideration, execute, acknowledge, and deliver to Grant[ee], its successors and assigns, such instruments as are useful or necessary to correct the description and evidence such correction in the appropriate public records. Grantor hereby conveys to Grantee all of the mineral, royalty, and overriding royalty interest owned by Grantor in Harrison County, whether or not same is herein above correctly described.

The particular tract descriptions were vague and not sufficient to satisfy the statute of frauds. So the issue was whether the deed conveyed anything. JD Minerals contended that the last sentence quoted above was sufficient to convey all interests owned by Grantor in Harrison County, even if all other descriptions in the deed were not sufficient under the Statute of Frauds. The Supreme Court agreed with JD Minerals. It agreed that the particular descriptions were too vague to convey anything, but it followed the Texas rule that a “blanket” conveyance of all of the grantor’s property a named county (or indeed in the State of Texas) is sufficient to convey all property owned by the grantor in the county. The fact that this sentence was in the same paragraph as the Mother Hubbard clause of the deed did not make it ambiguous.

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Published on: June 9, 2017

Oil and the Navy

By John McFarland

I highly recommend a recent article by Liam Denning in Bloomberg, “Oil’s New World Disorder.” The US’s decreasing dependence on oil imports, and China and India’s increasing dependence on oil, coincide with the possible changing roles of those countries’ navies in policing oil shipping routes from the Middle East. The US currently has 50% of the world’s combined naval fleet. Should the US continue to be the policeman of the seas?

Naval power and oil have been inextricably intertwined since before World War II. Their relationship is part of the story of oil told in Daniel Yergin‘s two epic histories of the oil industry, The Quest and The Prize, both of which I highly recommend.

Published on: June 1, 2017

In Honor of Memorial Day

By John McFarland

This was written by the late Joe Edwards, a Jazz pianist from Missouri:

World War II Love Story

It was a time of Harry James and Betty Grable; a time of seams in the ladies stockings, of Rosie the Riveter, ration stamps for gasoline, shoes, fuel oil, sugar and tires.

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Published on: May 30, 2017

BP America v. Red Deer Resources – the Shut-in Royalty Clause

By John McFarland

On April 28, the Texas Supreme Court issued its opinion in BP America Production Company v. Red Deer Resources, LLC, No. 15-0569, a unanimous opinion written by Justice Green. The case concerns operation of a shut-in royalty clause in a lease granted in 1962 covering 2,113 acres in Lipscomb and Hemphill Counties. BP had one gas well on the lease that produced less than 10 mcf per day. In 2011, Red Deer obtained a top lease on the 2,113 acres. BP turned off the valve on the well on June 12, 201 and tendered a shut-in royalty payment to the lessors on June 13. The well last produced gas on June 4. In August 2012, Red Deer sued BP, alleging that the lease had terminated for lack of production in paying quantities prior the date the well was shut in.

The shut-in royalty clause reads:

Where gas from any well or wells capable of producing gas … is not sold or used during or after the primary term and this lease is not otherwise maintained in effect, lessee may pay or tender as shut-in royalty …, payable annually on or before the end of each twelve month period during which such gas is not sold or used and this lease is not otherwise maintained in force, and if such shut-in royalty is so paid or tendered and while lessee’s right to pay or tender same is accruing, it shall be considered that gas is being produced in paying quantities, and this lease shall remain in force during each twelve-month period for which shut-in royalty is so paid or tendered ….

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Published on: May 23, 2017

Railroad Commission: Follow Pennsylvania’s Lead

By John McFarland

One of the complaints made against the Texas Railroad Commission in the current legislative session was that it provides very little information about its environmental compliance efforts in the oil field. The Commission provides little information about the number of violations, how they were resolved, the identity of the violators, the type of violations, or the location of the violations.

The Pennsylvania Department of Environmental Protection has issued its 2016 Oil and Gas Annual Report, an interactive report that provides detailed information about its regulation of the industry. Pennsylvania now produces more natural gas than any state except Texas, since development of the Marcellus Shale. The report provides is in electronic format, with geolocated data in GIS maps and in real time, based on the DEP’s daily electronic compliance tracking system. An interactive Report Viewer allows searching for violations by company, type, county, and date. Detailed information about each violation is provided.

In Texas, if a landowner files a complaint against an operator and wants to know what the RRC has done about it, the landowner must file an open records request with the RRC.

Published on: May 22, 2017

Lightning Oil v. Anadarko – Supreme Court Rules on Subsurface Trespass Claim

By John McFarland

Last week the Texas Supreme Court issued its opinion in Lightning Oil Company v. Anadarko E&P Onshore, LLC, No. 15-0910, denying Lightning Oil’s trespass claim against Anadarko. Lightning Oil lost in the trial court, the San Antonio Court of Appeals, and now the Supreme Court.

To understand the case, it is helpful to look at the plat below (click to enlarge):

Lightning Oil owns an oil and gas lease on the knife-shaped tract. The surface estate of the tract is part of the Briscoe Ranch in Dimmit County, which includes lands to the north. To the south lies the Chaparral Wildlife Refuge, owned by the State and managed by Texas Parks & Wildlife. Anadarko obtained a lease from the State on the Refuge. That lease made it difficult to use the surface estate of the Refuge to drill wells, and Anadarko made an agreement with the Briscoe Ranch to allow Annadarko to put drilling pads on the Ranch (and on Lightning Oil’s oil and gas lease) to drill horizontal wells that would produce from the Refuge. Lightning Oil sued Anadarko claiming that its wells would trespass on Lightning’s mineral estate, even though no well perforations would be on Lightning Oil’s lease.

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