Justia Energy, Oil & Gas Law Opinion Summaries

In this quiet title action involving the mineral interests in two tracts of real estate, the Supreme Court affirmed the judgment of the district court finding that the grantees' successors in interest obtained ownership of minerals when twenty years expired without production on the property, holding that the common-law rule against perpetuities (the rule) should not be applicable to the circumstances of this case.The tracts at issue were conveyed by deeds in which the grantor excepted the mineral interests for a "period of 20 years or as long thereafter" as minerals may be produced. The grantor's successors in interest claimed full ownership of the mineral interest in both tracts, arguing that the future ownership of the minerals when the grantor's excepted term interest ended violated the rule, thereby voiding those conveyances ab initial and preventing them from devolving to the grantees' successors in interest. The district court concluded that the grantees' heirs obtained ownership of the minerals when twenty years expired without production on the property. The Supreme Court affirmed on different grounds, holding that the rule did not apply under these circumstances. View "Jason Oil Co. v. Littler" on Justia Law

The State of North Dakota, ex rel. the North Dakota Board of University and School Lands, and the Office of the Commissioner of University and School Lands, a/k/a the North Dakota Department of Trust Lands (“the State”) appealed a district court’s interpretation of royalty provisions of natural gas leases with Newfield Exploration Company, Newfield Production Company, and Newfield RMI LLC (“Newfield”). The State argued the district court’s interpretation of the leases improperly allowed the reduction of the royalty payments to account for expenses incurred to make the natural gas marketable. The North Dakota Supreme Court concluded the gross proceeds from which the royalty payments under the leases were calculated could not be reduced by an amount that either directly or indirectly accounted for post-production costs incurred to make the gas marketable. Therefore, the Court reversed the district court’s judgment. View "Newfield Exploration Company, et al. v. North Dakota, et al." on Justia Law

The Supreme Court affirmed the order of the circuit court granting Plaintiffs' motion for class certification in this action alleging that Defendant, which leased with Plaintiffs to drill and sell hydrocarbons from the leased property, improperly suspended royalty payments, holding that the requirements of numerosity and superiority were met.The complaint alleged that the royalty payments were suspended in an effort by Defendant to recoup improper deductions. Plaintiffs moved for class certification, which the trial court granted. Defendant appealed, arguing that Plaintiffs failed to satisfy the numerosity and superiority requirements. The Supreme Court affirmed, holding that the trial court did not abuse its discretion in determining that the numerosity and superiority requirements were satisfied in this case. View "Stephens Production Co. v. Mainer" on Justia Law

Daniel and Debra Bearce (“the Bearces”) appealed a judgment entered in favor of Yellowstone Energy Development LLC (“Yellowstone”) after the parties’ cross motions for summary judgment. In June 2006, representatives of a business entity that would eventually become Yellowstone went to the Bearces' home seeking to purchase 170 acres of land they owned. Yellowstone successfully secured an exclusive option to purchase the land. In 2008, Yellowstone exercised its option to purchase the land and the parties entered into a contract for deed. In 2009, Yellowstone and the Bearces modified the contract for deed to alter some of the payment terms. Both the original contract for deed and the 2009 modified contract for deed included a term providing for the payment of a portion of the purchase price with “shares” of a contemplated ethanol plant. Yellowstone subsequently abandoned its plan to build an ethanol plant on the Bearces’ land. In July 2010, Yellowstone sent a letter to the Bearces advising them their $100,000 in “value” would be issued despite Yellowstone’s abandonment of the plan to build an ethanol plant. The letter stated ownership units had not yet been issued and explained the Bearces would receive their ownership interest “at the time shares are issued to all its members.” Shortly after receiving that letter, the Bearces executed and delivered a deed for the property to Yellowstone. In December 2011, and again in October 2012, the Yellowstone Board of Directors approved a multiplier of three units per $1 invested for individuals who had provided initial cash investment in Yellowstone. The Bearces’ interest in Yellowstone was not given the either 3:1 multiplier. The Bearces' objected, and Yellowstone continued to refuse to apply the multiplier to the Bearces' interest. When unsuccessful at the trial court, the Bearces appealed, challenging the district court’s exclusion of parol evidence to support their allegation of fraud in the inducement. The Bearces also challenged the district court’s conclusion the Bearces were not owed a fiduciary duty. After review, the North Dakota Supreme Court affirmed the district court’s judgment dismissing the Bearces’ claim for fraud and their claim for breach of contract. The Court reversed the district court’s dismissal of the Bearces’ claim for breach of a fiduciary duty and remanded for further proceedings. View "Bearce, et al. v. Yellowstone Energy Development, LLC" on Justia Law

In this ongoing Marcellus shale litigation arising that arose from claims asserted by Plaintiffs - surface owners of several tracts of land - the Supreme Court affirmed the order of the Mass Litigation Panel (MLP) granting summary judgment in favor of Defendants - the leaseholder of the gas and oil estates and the company who was conducting the drilling - holding that there were no genuine issues of material fact precluding summary judgment.Plaintiffs alleged that their use and enjoyment of their land was being improperly and substantially burdened by horizontal wells being used to develop the Marcellus shale underlying their properties even where the wells were not physically located on Plaintiffs' properties. In granting summary judgment for Defendants the MLP concluded that the effects on the surface owners resulting from the horizontal drilling were within the implied rights to use the surface granted by virtue of the relevant severance deeds and did not impose a substantial burden on the surface owners. The Supreme Court affirmed, holding that Plaintiffs failed to establish the existence of a genuine issue of material fact as to whether the effects on their surface estates were reasonably necessary to develop the mineral estate or whether they were being substantially burdened by Defendants' activities. View "Andrews v. Antero Resources Corp." on Justia Law

The Supreme Court affirmed the circuit court's order granting partial summary judgment, finding that Defendant trespassed on Plaintiffs' surface lands to the extent it was drilling for and removing minerals from neighboring properties and awarding Plaintiffs $190,000 in damages, holding that the partial summary judgment order and judgment order were supported by the record.The circuit court found that Defendant trespassed to the extent it used Plaintiffs' surface tracts to conduct operations under neighboring mineral estates. The Supreme Court affirmed, holding (1) a mineral owner or lessee does not have the right to use the surface to benefit mining or drilling operations on other lands in the absence of an express agreement with the surface owner permitting those operations; and (2) the circuit court correctly found that Defendant trespassed on Plaintiffs' surface lands to the extent it used those lands to extract minerals from neighboring properties. View "EQT Production Co. v. Crowder" on Justia Law

A public utility filed a condemnation action seeking the land use rights necessary to construct a natural gas storage facility in an underground formation of porous rock. The utility held some rights already by assignment from an oil and gas lessee. The superior court held that because of the oil and gas lease, the utility owned the rights to whatever producible gas remained in the underground formation and did not have to compensate the landowner for its use of the gas to help pressurize the storage facility. The court held a bench trial to determine the value of the storage space. The landowner appealed the resulting compensation award, arguing it retained ownership of the producible gas in place because the oil and gas lease authorized only production, not storage. It also argued it had the right to compensation for gas that was discovered after the date of taking. The landowner also challenged several findings related to the court’s valuation of the storage rights: that the proper basis of valuation was the storage facility’s maximum physical capacity rather than the capacity allowed by its permits; that the valuation should not have included buffer area at the same rate as area used for storage; and that an expert’s valuation methodology, which the superior court accepted, was flawed. The Alaska Supreme Court concluded the superior court did not err in ruling that the landowner’s only rights in the gas were reversionary rights that were unaffected by the utility’s non-consumptive use of the gas during the pendency of the lease. Furthermore, the Court concluded the trial court did not clearly err with regard to findings about valuation. View "Kenai Landing, Inc. v Cook Inlet Natural Gas Storage, et al." on Justia Law

The Supreme Court reversed the decision of the court of appeals reversing the judgment of the trial court awarding specific performance to Pathfinder Oil & Gas, Inc., which claimed a twenty-five percent working interest in certain mineral leases under a letter agreement that Great Western Drilling Ltd. claimed was unenforceable, holding that Pathfinder was entitled to specific performance.On the day before trial, the parties stipules that only certain issues would be submitted to the jury and that favorable jury findings would entitle Pathfinder to specific performance instead of money damages. The jury charge included only the specifically enumerated jury issues, and the jury answered those issues in favor of Pathfinder. The trial court awarded specific performance as provided by the parties' agreement. The court of appeals reversed and rendered a take-nothing judgment, holding that specific performance was unavailable without a jury finding that Pathfinder was "ready, willing, and able" to perform its obligations under the contract. The Supreme Court reversed, holding that, through the stipulation, Great Western waived the right to insist on any other fact findings that might otherwise have been required to entitle Pathfinder to specific performance. View "Pathfinder Oil & Gas, Inc. v. Great Western Drilling, Ltd." on Justia Law

The surface and mineral estates of “Tract 46” in Pike County, Kentucky have been severed for a century. Pike and Johnson own the surface estate as tenants in common. Pike also owns the entirety of the coal below and wants to mine. In 2013, Pike granted its affiliate a right to enter the land and commence surface mining. Despite Johnson’s protestations, Kentucky granted a surface mining permit. Mining commenced in April 2014. In 2014, as the result of a federal lawsuit, the Secretary of the Interior determined that the permit violated the Surface Mining Control and Reclamation Act of 1977 (SMCRA), 30 U.S.C. 1250. The deficiencies in the original permit were remedied; Kentucky issued an amended permit the same year. The Secretary then confirmed that the permit complied with federal law. Johnson sued again. An ALJ, the district court, and the Sixth Circuit affirmed, first finding that Johnson exhausted its administrative remedies to the extent required by SMCRA. The ALJ’s application of Kentucky co-tenancy law, instead of the state’s rules of construction for vague severance deeds, to uphold the issuance of Elkhorn’s permit and the Secretary’s termination of the cessation order was not arbitrary, capricious, or contrary to law. View "M.L. Johnson Family Properties, LLC v. Bernhardt" on Justia Law

The Supreme Court reversed the judgment of the court of appeals ruling that the Texas Commission on Environmental Quality does not have the discretion to deny an ad valorem tax exemption for heat recovery steam generators (HRSGs), devices the Legislature considers "pollution control property," holding that the Legislature did not exceed its constitutional authority in exempting pollution control property from taxation.Brazos Electric Power Cooperative, Inc. filed for an exemption seeking a positive use determination for the HRSG used in two of its facilities. The Commission's Executive Director issued negative use determinations for the applications on the grounds that HRSGs are not eligible for a positive use determination. The Commission eventually affirmed the determinations as to both facilities. The trial court affirmed. The court of appeals affirmed. The Supreme Court reversed, holding (1) under Texas Tax Code 11.31, property that qualifies as pollution control property, is entitled to a tax exemption, and HRSGs qualify, at least in part, as pollution control property; and (2) thus, assuming the applicant otherwise complies with the statute's requirements, the Executive Director may not issue a negative use determination for HRSGs. View "Brazos Electric Power Cooperative, Inc. v. Texas Commission on Environmental Quality" on Justia Law