Justia Energy, Oil & Gas Law Opinion Summaries

Four oil and gas leases were assigned in one instrument. At issue in this case was how to calculate a production payment reserved in the assignment of the four leaseholds. When two of the leases terminated, the payor asserted that the production payment should be reduced to reflect the loss of the underlying mineral-lease interests. The payee responded by asserting that the production payment burdened the four leases jointly and that the assignment included authorization to adjust the payment. The trial court construed the assignment as allowing for the production payment’s adjustment based on the expiration of an underlying lease. The court of appeals reversed, concluding that the production payment could not be reduced because the assignment failed to include “express language providing for a piecemeal reduction of the production payment.” The Supreme Court reversed, holding that the trial court rendered the correct judgment in this case. View "Apache Deepwater, LLC v. McDaniel Partners, Ltd." on Justia Law

In general, an overriding royalty on oil and gas production must bear its share of postproduction costs unless the parties agree otherwise. The Hyder family leased 948 mineral acres to Chespeake Exploration, LLC. The Hyders and Chesapeake agreed that the overriding royalty in the parties’ lease was free of production costs but disputed whether it was also free of postproduction costs. The trial court rendered judgment for the Hyders, awarding them postproduction costs that Chesapeake wrongfully deducted from their overriding royalty. The court of appeals affirmed. The Supreme Court affirmed, holding that the parties’ lease clearly freed the overriding royalty of postproduction costs. View "Chesapeake Exploration, LLC v. Hyder" on Justia Law

In 2008, the Railroad Commission of Texas issued orders to plug a number of inactive offshore wells operated in the Gulf of Mexico. Gulf Energy Exploration Corporation was the lessee of the offshore area that included one of wells subject to the plugging order. The Commission and Gulf Energy reached an agreement that the Commissioner would delay plugging this well. A few months later Gulf Energy discovered that the well was plugged. Gulf Energy sued the Commission with legislative permission. The jury returned a favorable verdict on Gulf Energy’s negligence and breach-of-contract claims. The court of appeals affirmed. The Supreme Court reversed, holding (1) the trial court erred in refusing to submit a jury question on a statutory good-faith defense; and (2) a question of fact existed as to whether the Commission and Gulf Energy entered into a binding contract before the well was plugged. Remanded for a new trial. View "R.R. Comm’n of Texas v. Gulf Energy Exploration Corp." on Justia Law