Strip-And-Gore Leads to 30 Acres of Minerals Underlying a Highway

Several reported cases in recent years have involved title to minerals underlying roadways, points out Austin Brister for the McGinnis Lochridge Oil and Gas Law Digest.

“In urban oil and gas plays such as the Barnett Shale, horizontal drilling has ‘paved the way’ for oil and gas operators to drill through and produce minerals underlying highways, streets, and roadways,” he explains. “Even in rural areas across Texas, numerous horizontal wells have been drilled underneath roads and highways.”

The article discusses the case of Green v. Chesapeake in the Fort Worth Court of Appeals as it relates to the the strip-and-gore doctrine.

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Texas Court Addresses the Use of Contract Operators

A recent Texas ruling illustrates the problems that can arise when parties to a joint operating agreement elect to have a non-owner serve as the operator, points out Austin Brister in the McGinnis Lochridge Oil and Gas Law Digest.

The court was called on to determine whether an elected unit operator is permitted to delegate operatorship duties to a contract operator, and whether that contract operator can be liable to nonoperators for breach of any duties imposed on the operator under that unit operating agreement.

PBJV was designated as unit operator, but then PBJV entered into a contract with Apache to perform a number of duties.

The court concluded that Apache was merely delegated duties, based on its observations that PBJV never actually named or designated Apache as the “Unit Operator,” but instead entered into a “Contract Services Agreement” and power of attorney with Apache under which PBJV contractually delegated certain operator duties to Apache.

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Broad Settlement Discharges Mineral Liens

When  you prepare, review and/or sign settlement agreements you sometimes pay less attention than you should to the details of those “standard” releases, writes Charles Sartain in Gray Reed’s Energy & the Law blog.

He explains that Acme Energy Services, d/b/a Big Dog Drilling v. Staley et al. provide the lesson: Beware the boilerplate; before signing, consider what you actually are trying to accomplish.

“Lake Hills contracted to provide materials and services on oil and gas leases owned by Heritage. Big Dog and other subcontractors provided work and materials and invoiced Lake Hills,” Sartain explains. “Heritage stopped paying Lake Hills and Lake Hills stopped paying the subs, who then recorded statutory mineral property liens against Heritage, its leases, and the well. Each subcontractor sued Heritage to foreclose and for personal liability.”

He lists the five rules the court considered in the case and discusses the ruling.

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Landowners, Energy Companies Seek to Capture Court’s Ruling in Historic Hydraulic Fracking Case

Below-ground look at frackingThe Supreme Court of Pennsylvania has agreed to hear a case to consider whether the rule of capture applies to hydraulic fracking, reports The Hydraulic Fracking Blog of Norton Rose Fulbright.

The case involves landowners’ trespass and conversion claims against an energy company based on hydraulic fracking activities. The plaintiffs  compared the energy company’s fracking activity to slant drilling, claiming that the proppants of hydraulic fracturing “serve the same purpose as a drill bit invading the land.”

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Mineral Interests: Executive Right Holder Liable for Refusing to Lease

A Texas Supreme Court ruling in Texas Outfitters Limited v. Nicholson explains why there is no bright-line rule delineating the duty of the executive right holder in resolving disputes among the mineral interest family, according to Gray Reed & McGraw.

The article in the firm’s Energy & the Law blog explains that the case presented an opportunity for the court to apply the guidelines outlined in an earlier ruling to a different scenario: whether the executive breached the duty by refusing to lease.

The ruling in “Outfitters reinforces the message that surface protection is not the only goal an executive is allowed to pursue – especially if a co-owner has leased.”

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The Law of Hydraulic Fracturing

Below-ground look at frackingA new article by two Gray Reed & McGraw lawyers in Houston covers the benefits and risks of hydraulic fracturing, including reduction of foreign imports, jobs, reduced prices for consumers, water quality and usage, air quality, earthquakes, and social impacts, writes John McFarland in the Oil and Gas Lawyer Blog of Graves, Dougherty, Hearon & Moody.

“A Brief Look at the Law of Hydraulic Fracturing in Texas and Beyond” gives a balanced view of the ongoing debate over whether increased use of natural gas for generation of electricity reduces greenhouse gas emissions, whether there is a connection between hydraulic fracturing and earthquakes, and adverse impacts on roads and other infrastructure, according to McFarland.

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Mineral Interests: Net Royalty Acres Defined

The term “net royalty acre” is used by mineral and royalty buyers to price a mineral or royalty interest that is subject to an oil and gas lease. It is related to, but different from, a “net mineral acre,” explains John McFarland of Graves, Dougherty, Hearon & Moody in the firm’s Oil and Gas Lawyer Blog.

“Mineral buyers often make offers in terms of dollars per net royalty acre. If the recipient of the offer does not know for sure what she owns, it can be difficult to evaluate the offer,” he writes.

In the article, McFarland explains the difference between the two terms and provides formulas that can be used to calculate each one.

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Haynes and Boone Issues Energy Roundup for Spring 2019

Haynes and Boone’s Spring 2019 Energy Roundup highlights an evolving United States oil and gas industry responding to recent commodity price volatility, the firm said on its website.

It also examines new international investment opportunities arising from legal changes in the United Kingdom and Brazil.

And the Spring 2019 Borrowing Base Redeterminations Survey predicts a conservative, but not knee-jerk, response by banks to the late 2018 drop in oil prices.

“Investor activism is on the rise in the public E&P space – our capital markets group tracks the various players and the demands they are marking. In the midst of this changing market, our guest contributor from Opportune LLP gives an outlook on upstream trends in 2019 and we also look at the related impact in the midstream space,” the firm said in the introduction to the report.

Read the report.



Do Indemnity Obligations Cover First-Party Claims, Or Only Third-Party Claims?

The Supreme Court of Texas is considering whether to grant a petition for review to establish whether an indemnity provision covers only third-party claims, not first-party claims, unless the provision unequiv­oc­al­ly states otherwise, writes D.C. Toedt III in the On Contracts blog.

He describes the case of Claybar v. Samson Exploration LLC, in which a property owner sued Samson for alleged damage to the property during oil and gas drilling. Claybar settled with Samson’s contractor but still claimed Samson was con­tract­ually required to indemnify Claybar for the attorney’s fees and costs that Claybar had incurred in pursuing his negligence claim.

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Top 4 Indicators Shaping Upstream Oil and Gas in 2019

Oil wellsOpportune takes a look at a few key indicators shaping the upstream oil and gas sector so far in 2019.

The first indicator is the continued climb of U.S. shale output, which is estimated to set records this year and next.

On the subject of supply and demand, the United States is expected to continue leading growth in oil supply worldwide, as global consumption of petroleum and liquid fuels show relative growth.

Liquid natural gas production reached a record high at the end of 2018, and export capacity will grow significantly.

The bad news for producers, however, is that increased production will limit price increases.

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Appeals Court Allows Quick-Take of Land for Mountain Valley Pipeline

The 4th U.S. Circuit Court of Appeals has upheld the “take first, pay later” approach to building the Mountain Valley Pipeline, in which the company condemned private property in the project’s path before paying opposing landowners for their losses, reports The Roanoke Times.

Reporter Laurence Hammack writes that the ruling was a blow to pipeline foes, who have long decried the use of eminent domain to take parts of family farms and rural homeplaces to make way for a 303-mile natural gas pipeline through West Virginia and Virginia.

Landowners did not contest the laws that allowed the pipeline company to obtain forced easements through nearly 300 parcels in Southwest Virginia, but they objected to a lower-court ruling granting immediate possession of the disputed land before deciding how much each property owner should be compensated, Hammack explains.

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Texas Court Addresses Bad Acts in an Oil-Patch Lease Play

Writing in Gray Reed’s Energy & the Law blog, Charles Sartain points out that parties to a transaction need to be mindful that if a business deal is a partnership, there will be rights and duties not present in arms-length commercial transactions.

He discusses a recent appellate court opinion and considers the main question: Was a partnership formed by a letter agreement, a participation agreement and the actions of the parties?

Stephens et al v. Three Finger Black Shale Partnership et al. is a complicated petroleum development deal that included all those elements. The jury trial ended with a multimillion dollar judgment for actual and exemplary damages in favor of two separate groups of plaintiffs and intervenors against several groups of defendants.

The appellate court determined that there was no evidence of a partnership, which meant that no fiduciary duty was owed by the defendants.

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San Antonio Oil Exec ‘Thumbed His Nose’ at Legal Process, Judge Says

San Antonio oil and gas entrepreneur Brian Alfaro avoided getting hauled off to jail Friday, a day after a bankruptcy judge issued a warrant for his arrest, reports the San Antonio Express-News.

Alfaro had failed to provide various records to a court-appointed receiver, prompting the judge to issue an arrest warrant. But in a hearing in which Alfaro, attending via phone from his lawyer’s office as four federal marshals stood ready to take him to jail, the judge granted him an additional 10 days to comply.

The judge “presided over a trial in 2017 on 28 investors’ claims that they had been defrauded by Alfaro. The judge awarded nine of them $8 million. Alfaro is appealing. Rose’s duties include ensuring that investors collect on the judgment,” writes Patrick Danner of the Express-News.

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Environmental Defense Fund Satellites to Monitor Methane Emissions From Oil and Gas Operations

The Environmental Defense Fund has signed contracts with two aerospace companies that will compete for the opportunity to construct the organization’s planned satellite project to quantify and map heat-trapping methane emissions from oil and gas facilities and other man-made sources around the globe.

A post on the Mitchell, Williams, Selig, Gates & Woodyard website quotes Mark Brownstein, Senior Vice President of the EDF energy program:

“Significant reductions in oil and gas methane emissions now can materially lower the rate of global temperature rise in our lifetime. MethaneSAT will give us the data we need to seize this moment.”

Walter G. Wright of Mitchell, Williams describes MethaneSAT “as using the latest scientific and technological innovations in sensor design, spectroscopy, data retrieval algorithms and flux inversions, a state-of-the-art modeling technique to distinguish emissions from ambient methane and trace them back to their source.”

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Texas Case Offers Three Lessons for Contract Drafters

The Texas Supreme Court recently heard oral argument in Barrow-Shaver Res. Co v. Carrizo Oil & Gas, Inc., on the interpretation of a farmout agreement providing that an assignment could not be made “without the express written consent,” according to a post on the website of Porter Hedges.

“The issue—whether the provision means consent can be withheld arbitrarily or only reasonably,” the post states. “Regardless how the Texas Supreme Court rules, there are three lessons in Barrow-Shaver for contract drafters: (1) be precise in contractual language; (2) address the use of non-final drafts in interpretation disputes; and (3) consider other provisions that may be impacted by the implied reasonableness issue.”

The post offers some pointers on each of those three points.

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2018’s Bad Guys in Energy

Charles Sartain of Gray Reed & McGraw has posted a list of what he calls “2018’s parade of reprobates, rapscallions and others generally lacking in moral hygiene” in the world of energy law.

He reports on a “mendacious filing” in an SEC civil enforcement action against Chris Faulkner; seven defendants, nine co-conspirators and three unnamed “government officials” allegedly involved in the embezzlement of funds from Venezuela’s government-owned oil company; a former Chevron employee charged with conspiracy to commit many felonies; a former Texas state senator; the culprit in a garden variety wire fraud and money laundering case; and more.

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Local Taxation of Oil and Gas Activities Fails Again

The Texas Supreme Court issued four opinions addressing the taxation of compressors used to deliver natural gas into pipelines, according to a post on Gray Reed & McGraw’s Energy & the Law blog.

Charles Sartain and Isreal Miller introduce a discussion of the rulings:

“Local taxing authorities frequently look to out-of-towners to bear what the locals consider the outsiders’ fair share of the burdens of increased oil and gas activity. The counties are often small and rural. (See the Dimmit County road tax).You can’t blame them, but  Reeves County (county seat: Pecos, 2010 pop. 13,783), Loving (county seat: Mentone, 2010 pop. 1,340), and Ward (county seat: Monahans, 2010 pop. 10,658) have been reminded by the big guys and gals in Austin that these efforts are not likely to succeed. It didn’t work for Huey Long and it isn’t working well now.”

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Texas High Court Invokes the Discovery Rule

The Texas Supreme Court has held that the discovery rule delayed the running of the statute of limitations on behalf of the holder of a recorded right of first refusal to purchase mineral interests, reports the Energy & the Law blog of Gray Reed & McGraw.

Gray Reed partner Charles Sartain explains: “The trustees sued the Tregellases for buying the minerals without allowing the Trust to exercise its ROFR, contending that a contract was formed when they sued more than four years after the Tregellases’ purchase; the suit was their acceptance of the right to purchase the minerals, they said.”

The appellate court held that the trust suffered an injury when the minerals were sold, but the discovery rule delayed limitations.

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What Colorado’s and Washington’s Pro-Energy Votes Could Mean for the Rest of the Industry

Check mark box on ballot.Just because voters in two states rejected measures that energy companies opposed, but that doesn’t mean the fight is over for oil and gas companies, warns Buchanan Ingersoll & Rooney in a website post.

Colorado voters turned down an initiative that would have dramatically limited the use of hydraulic fracturing. And Washington voters rejected a proposed carbon fee on fossil-fuel emissions.

“Though it’s early, East Coast lawmakers in states like Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island and Vermont may introduce their own carbon-pricing legislation in the near future. And of course, Washington isn’t quite ready to give up yet either,” according to the post.

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Expropriation Ruling Explains Landowner’s Burden to Prove Severance Damages to a ‘Legal Certainty’

Oil and gas pipelineA Louisiana appellate court has added to the relatively sparse body of appellate rulings in pipeline expropriation matters with an unpublished opinion affirming that landowners whose property is expropriated must prove their entitlement to severance damages to a “legal certainty.”

Writing in the Liskow & Lewis Energy Law Blog, Laura Springer Brown discusses the case of  Enterprise Products Operating, LLC, v. Southwood Terminal, L.L.C.

In its ruling, the court affirmed a two-part test for severance damages: The landowner must prove a diminution in value, “and only then could the jury continue on to the issue of the amount of damages.”

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