Lightning Oil v. Anadarko will be argued before the Texas Supreme Court on March 21. I wrote about the court of appeals’ opinion here. The issue: whether the owner of a mineral estate has a cause of action for trespass if a horizontal well is drilled through the tract to produce from an adjacent tract. The parties’ briefs may be found here.
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Texas Supreme Court Declines to Address Injunctive Relief as Remedy to Prevent Groundwater Contamination in ExxonMobil v. Lazy R Ranch
On February 24, the Texas Supreme Court issued its opinion in ExxonMobil Corporation v. Lazy R Ranch, LP, et al., No. 15-0270. ExxonMobil v. Lazy R Ranch The 8-0 opinion was authored by Chief Justice Nathan Hecht. The case provides important reminders to landowners who have oil and gas operations on their property.
In 2008, Exxon sold its lease on the Lazy R Ranch, a 20,000-acre ranch near Monahans, where it had conducted operations for almost 60 years. The ranch owners hired an environmental engineer to investigate whether Exxon’s operations had caused contamination that should be remediated. The investigator found four sites with contamination and warned that the contamination could threaten groundwater. Exxon refused to remediate the sites, and the landowner sued.
The suit sought monetary damages for the contamination and injunctive relief to require Exxon to remediate the four contaminated sites. Exxon filed a summary judgment motion arguing that the claims were barred by limitations. The trial court granted Exxon’s motion. The 8th Court of Appeals reversed and remanded. Continue reading →
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Burlington v. Texas Crude – Another Post-Production Cost Case
The Court of Appeals in Corpus Christi issued its opinion today in Burlington Resources Oil & Gas Company LP v. Texas Crude Energy, LLC, et al. Link to the opinion is here: burlington v texas crude
This is the first case to follow Chesapeake v. Hyder, the Texas Supreme Court’s most recent case addressing deductability of post-production costs from royalty payments.
Like Hyder, the instrument construed in Burlington v. Texas Crude involved an overriding royalty interest. The language construed by the court in Burlington provided that the overriding royalty would be paid on the “amount realized” by the lessee, and said that the overriding royalty would be paid “free and clear of all development, operating, production and other costs.” The Court of Appeals concluded that the Supreme Court’s ruling in Hyder controlled its construction of the language and that Burlington had to pay the overriding royalty without deducting post-production costs.
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What Does the Country Really Think About Global Warming?
I ran across this website from the Yale Program on Climate Change Communication, an interactive map that allows one to view different perspectives about global warming across the country. Fascinating to play with. Remarkably, for instance, a large majority of the population in the Rio Grande Valley and far West Texas believe that global warming is happening and a majority there believe it is caused mostly by human activities. Likewise in most of New Mexico and Arizona. While much of the country’s opinions about global warming does appear to be split along ideological and urban/rural lines, that is not necessarily the case. The data, from 2016, shows that 53% of the country believes that global warming is caused mostly by human activities. 58% of the population is “worried about global warming.” 82% of those polled support funding research into renewable energy sources, and 75% think CO2 should be regulated as a pollutant.
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What Landowners Need to Know about Field Rules
Two recent appellate opinions illustrate why landowners and their counsel need to know the basic fundamentals of field rules and how they can affect provisions in oil and gas leases. I wrote about those cases in 2015. Both involve the interaction between field rules and lease provisions. ConocoPhillips Co. v. Vaquillas Unproven Minerals, Ltd., 2015 WL 4638272 (Tex.App.-San Antonio Aug. 5, 2015), was appealed to the Texas Supreme Court but settled before the court acted on ConocoPhillips’ petition. Endeavor Energy Resources, L.P. v. Discovery Operating, Inc., 448 S.W.3d 169 (Tex.App.-Eastland 2014), has been briefed on the merits and is awaiting the court’s decision on whether to grant review. You can read my summary of the two cases here.
The root of the issue is that oil and gas lease forms typically refer to and adopt field rules to regulate how large pooled units and earned acreage units can be. For example, a printed form oil and gas lease that has been commonly used in Texas for many years contains the following provision:
Lessee is hereby granted the right, at its option, to pool ur unitize any land covered by this lease with any other land covered by this lease, and/or with any other land, lease, or leases, as to any or all minerals or horizons, so as to establish units containing not more than 80 surface acres, plus 10% acreage tolerance; provided, however, units may be established … so as to contain not more than 640 acres plus 10% acreage tolerance, if limited to … gas, other than casinghead gas…. If larger units than any of those herein permitted, either at the time established, or after enlargement, are required under any governmental rule or order, for the drilling or operation of a well at a regular location, or for obtaining maximum allowable from any well to be drilled, drilling or already drilled any such unit may be established or enlarged to conform to the size required by such governmental order or rule.
To understand how the italicized sentence in this lease form works, one must know what governmental rules govern the size of units for drilling wells at a “regular” location, and for “obtaining maximum allowable” from a well. These regulations are included in “field rules” adopted by the Texas Railroad Commission. (Warning: this post is longer than usual, so be prepared.) Continue reading →
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TAMU Energy Law Symposium
Texas A&M has asked that I post notice of its 2017 Energy Law Symposium on “The Future of Energy”. The symposium, scheduled for March 23–24, 2017, will convene industry experts, academic commentators and public officials to discuss a wide range of issues bearing on anticipated needs, policy challenges and proposed reforms in the U.S. and global energy markets. Panel, debate and keynote sessions will address legislative and regulatory priorities, power generation, allocation wells, trans-boundary resource management, environmental considerations, bankruptcy and much more. $50 Registration / $150 Registration + CLE (12.75 CLE credit hours pending approval). The agenda for the symposium can be viewed here: energy-symposium-agenda-2feb17(4)
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Jack Pope, Former Chief Justice of Texas Supreme Court, Dies at age 103
I served as a clerk for Justice Ross Doughty from 1975-1976, after graduating from UT Law School. Justice Pope was serving on the court at the time. Jack Pope served on the Supreme Court from 1964 until his retirement in 1985, and served as Chief Justice from 1982 to 1985, following the retirement of Chief Justice Joe Greenhill. There were many great jurists on the court in that era, including Greenhill, Steakley, Reavley, Walker, Norvell, and Johnson. They were truly servants of the law, and Justice Pope was among the best.
Requiscat in Pace.
Here is an obituary from Osler McCarthy’s Texas Supreme Court Advisory:
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Railroad Commission Enforcement Data Online
Below is a press release from the Texas Railroad Commission about the “enhancement” of its website to provide reports of enforcement data related to oil and gas operations. The web page where the data can be viewed is here.
I have written before about the need for the RRC to put enforcement data online. At present it is not possible for landowners to track RRC actions in response to landowner complaints about operator activities. Compare the non-specific data provided on the RRC website to the specific online complaint-tracking process made available to Colorado residents by its Oil & Gas Conservation Commission, found here. The RRC wants you to know that it is doing its job, without disclosing details of any particular enforcement action. The Colorado Oil & Gas Commission provides useful information to landowners on how to make and track their complaints involving oil and gas activities.
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High Tech to detect pipeline leaks
Southwest Research Institute in San Antonio is developing smart technology to improve the industry’s ability to detect pipeline and industry facility emissions of hydrocarbons into the atmosphere. The system uses smart computer algorithms that learn to distinguish emissions from natural atmospheric conditions and report them to be repaired. Watch the story here. Great idea. Let’s hope the industry embraces it.
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Texas Supreme Court Agrees to Hear Three Cases of Interest to Land and Mineral Owners
Last week the Texas Supreme Court granted petitions to hear appeals of two cases that could significantly affect the rights of Texas land and mineral owners: Atmos Energy Corp v. Town of DISH, 15-0613, and Lightning Oil Co. v. Anadarko E&P Onshore LLC, 15-0910. Last month, the court agreed to hear Sabine Oil & Gas Corporation’s appeal in Forest Oil Corp. v. El Rucio Land and Cattle Company, 14-0979, a case in which the court had previously denied the petition for review. Oral argument in the Forest Oil case is set for February 8. Dates for oral argument in Atmos v. DISH and Lightning Oil v. Anadarko have not yet been set.
In Atmos v. DISH, the town of DISH and residents of the town are seeking damages for injuries they claim are caused by noise and emissions from defendants’ gathering and compression facilities located in and near the town. The trial court dismissed plaintiffs’ claims, but the Amarillo Court of Appeals held that the plaintiffs had stated causes of action and were entitled to trial. For a more detailed description of the case, read my post here. Among other arguments, the pipeline companies assert that plaintiffs’ claims are barred because their activites were authorized by governmental regulations and imposing liability for lawful activities would allow judicial regulation of activities sanctioned by statute and regulation. The Amarillo court disagreed: “Just because Appellees are operating their natural gas compression facilities within the applicable regulatory guidelines does not mean that Appellants have not suffered compensable injuries as a result of those operations.”
Sabine Oil & Gas makes a similar argument in Forest Oil v. El Rucio. (My prior posts on this case can be found here and here.) Sabine (formerly known as Forest Oil) argues that Jimmy McAllen’s $20 million arbitration award for damages caused by pollution of his ranch should be reversed because the case interferes with the Railroad Commission’s jurisdiction over oil field contamination. The RRC has jurisdiction over cleanup of environmental contamination related to oil and gas activities and has an open proceeding relating to Sabine’s efforts to remediate contamination on McAllen’s ranch. The Corpus Christi Court of Appeals held that Texas law expressly grants a landowner a private cause of action for damages caused by violation of Texas conservation laws and that McAllen’s claims should not be barred or stayed by the ongoing remediation activities supervised by the RRC. The court made reference to sections 85.321 and 85.322 of Texas Natural Resources Code, the first of which expressly grants a private cause of action for damages for violation of Texas conservation laws, and the second of which provides that nothing in the law governing Railroad Commission jurisdiction “shall impair or abridge or delay a cause of action for damages or other relief that an owner of land …. may have or assert against any party violating any rule or order of the commission or any judgment under this chapter.”