Thomas C. Turner, Jr. has written a great brief summary of oil and gas law in New Mexico. A great resource for anyone who owns minerals in New Mexico. You can buy it on Amazon.
EP Energy E&P Co., L.P. v. Storey Minerals, Ltd., 2022 SL 223253 (Tex.App.-San Antonio 2022, pet. denied)
The Texas Supreme Court recently refused to review the opinion of the San Antonio Court of Appeals in this case, involving construction of a favored nations clause in an oil and gas lease. The court of appeals held that, under the favored nations clause, EP Energy owed the lessor an additional $41 million bonus. One judge dissented.
The case also recounts the “colorful history” of the Altito Ranch, covering about 23,000 acres in La Salle County. EP Energy’s brief describes that history:
This report from the Environmental Integrity Project, an organization of former EPA enforcement attorneys, provides a detailed account of the Texas Commission on Environmental Quality’s failure to enforce its rules against repeated failures by the production, midstream and refining industry to limit harmful emissions.
From the report:
In Texas, a relatively small number of polluters are responsible for most of the 21,769 illegal air pollution events reported over a six–year period. More than 1,600 of these events took
place for more than a week, in many cases releasing thousands of pounds of pollution into the air, worsening regional air quality and harming public health. Despite this, the TCEQ
only designated 119 of these events as “excessive” during this time, a designation that would be necessary to sufficiently penalize polluters for egregious or repeated emission events.
https://www.visualcapitalist.com/cp/charting-consumption-production-fossil-fuels/?utm_source=Visual+Capitalist+Infographics+%28All%29&utm_campaign=acdd483a1d-EMAIL_CAMPAIGN_2023_03_10&utm_medium=email&utm_term=0_31b4d09e8a-acdd483a1d-44364005
Today the Texas Supreme Court issued its opinion in Devon v. Sheppard, No. 20-0904, again addressing post-production cost deductions from royalties. The Court affirmed the court of appeals’ ruling in favor of the royalty owners.
Sheppard leased minerals in the Eagle Ford Shale in 2007, before the first successful well in the Eagle Ford. Sheppard is a lawyer in Cuero, Texas. His lease required payment of royalties on gross proceeds of sale, without deduction of post-production costs. The lease also contained this provision:
If any disposition, contract or sale of oil or gas shall include any reduction or charge for the expenses or costs of production, treatment, transportation, manufacturing, processing or marketing of the oil or gas, then such deduction, expense or costs shall be added to … gross proceeds so that Lessor’s royalty shall never be chargeable directly or indirectly with any costs or expenses other than its pro rata share of severance or production taxes.
Recently the US Supreme Court heard argument in Biden v. Nebraska, in which several states challenge the President’s authority to forgive student loans. Lost in much of the coverage was the administration’s challenge to the states’ standing to bring the case. “Standing” is a difficult concept to get your arms around. Courts cannot issue advisory opinions. Under Article III of the US Constitution, courts can decide only a “case or controversy.” That means the plaintiff must have a stake in the outcome different from the general public. To have standing, a plaintiff must have sustained or be threatened with an injury different from or in addition to the general public. The Biden administration argued that the states who sued would not suffer any injury because of Biden’s forgiveness of student loans, and therefore do not have standing to sue.
The concept of standing is important to the separation of powers in our federal and state judicial systems. It is a check on the power of courts. Nebraska could not simply ask the court to declare Biden’s loan forgiveness an unconstitutional exercise of executive power without first showing how the state would be injured by Biden’s action. Such an opinion would be an “advisory opinion.”
What does this have to do with Railroad Commission v. Apache?
I ran across this blog recently, which is producing a series of blog posts on modern techniques of exploration and production, from leasing through well production and plugging. Excellent tutorial for the lay person.
https://rbnenergy.com/blog-series/square-one
Occasionally I run across interesting stories that have nothing to do with oil and gas, and I am somewhat of a Texas history buff. I came across this story in the most recent issue of the Journal of the Texas Supreme Court Historical Society. My summary below is from the articles by John Browning, its Editor in Chief, and John Moretta, author of “William Pitt Ballinger: Texas Lawyer, Southern Statesman, 1825-1888” (Tex. State Hist. Ass’n 2000), and from Jason A. Gillmer, “Lawyers and Slaves: A Remarkable Case of Representation for the Antebellum South, published in the University of Miami Race & Social Justice Law Review.
David Webster was a prominent citizen of Galveston in the years after Texas joined the union, accumulating substantial real estate holdings across the new state, including some 5,000 acres across East Texas. He never married, and he was a slave owner. Betsy, one of the slaves he first purchased when he lived as a young man in Mobile, Alabama, became his lifelong companion.
By 1840 David had moved to Florida and was listed in the census as owning 84 slaves. But he then lost most of his investments, including all of his slaves except Betsy, and in 1846 he moved with her to Galveston. David’s relationship with Betsy was described as “of the most intimate character.” David was an extraordinary character; he played the guitar and lute, was a ship’s carpenter in his early life, and was a leading Galveston businessman, a city then one of the most populous in the state and a growing seaport.
Today the Texas Supreme Court handed down its opinion in Van Dyke v. The Navigator Group, resolving a ten-year dispute over the ownership of royalty interests and $44 million in royalties.
In 1924, the Mulkeys conveyed their ranch to White and Tom, with the following reservation:
It is understood and agreed that one-half of one-eighth of all minerals and mineral rights in said land are reserved in grantors … and are not conveyed herein.
Last year the 14th Court of Appeals in Houston issue an opinion that should serve as a warning to mineral owners, Thistle Creek Ranch v. Ironroc Energy Partners, No. 14-20-00347-CV.
Thistle Creek sued IronRoc to terminate an oil and gas lease it claimed had expired for lack of production in paying quantities. The lease is on a form I have seen before. The habendum clause provides:
Unless sooner terminated or longer kept in force under other provisions hereof, this lease shall remain in force for a term of three (3) years from the date hereof, hereinafter called “primary term,” and as long thereafter as operations, as hereinafter defined, are conducted upon said land with no cessation for more than ninety (90) consecutive days.
