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In two recent cases, the Texas Supreme Court reviewed what are called “retained acreage” clauses in gas and oil leases. Consistent with recent precedent, the Court instructs that these clauses are to be interpreted based on the language used and that the intent of the parties is to be the guiding principle.

In Endeavor Energy Resources, L.P. v. Discovery Operating Inc., the conflict involved the interpretation of so-called “retained acreage” clauses where the parties intended the retained-acreage definition to be based on the plats filed with the Texas Railroad Commission (“RRC”). The Court also decided a companion case,  XOG Operating LLC v. Chesapeake Exploration LP, that came to a different conclusion. The difference between the cases hinges on the language in the leases. We will discuss XOG separately.

Regulatory Background

In the case of ConocoPhillips Co. v. Koopmann the Texas Supreme Court held that the Rule Against Perpetuities (“the Rule”) did not void a 15-year non-participating royalty interest that was reserved in a deed. In doing so, the Court changed the way the Rule applies to oil and gas deeds.

The Rule is a complicated legal subject and this case makes significant changes in how the Rule applies in Texas. Note that the Supreme Court explicitly limited the holding of this case to “future interests in the oil and gas context.” The case is significant for these reasons:

• The Supreme Court rejected the long-held distinction of a future interest created via reservation versus one created via grant in the oil and gas context.

In the recent opinion of Knopf v Gray, the Texas Supreme Court instructs as to the essence of a life estate under Texas law. Whatever specific words are used to create a life estate, a testator must express three ideas:

• Any land granted is subject to the limitations that it not be sold;
• That the grantee take care of the land; and

A January 2018 case from the Texas Supreme Court, JP Morgan Chase Bank, N.A. v. Orca Assets GP, LLC, the Court dealt with justifiable reliance which is an element of a common law fraud and negligent misrepresentation claim. In this case, there were too many “red flags” for the plaintiff to show justifiable reliance with respect to certain oil and gas leases.

Background

This case involved mineral interests in various tracts throughout the Eagle Ford Shale adding up to about 40,000 acres owned by The Red Crest Trust. JP Morgan Chase Bank was the trustee. A  JP Morgan employee, Phillip Mettham, was responsible for leasing the trust’s Eagle Ford interests.

Texas residents are required by law to call 811 before digging any deeper than 16 inches. Once that call is made, all companies with any pipelines, water lines or utility lines in that area come out and mark their respective lines so that the excavation can avoid those lines. This is an obvious and common sense safety measure to protect the public as well as whoever is doing the digging.

House Bill 1818 recently extended the authority of the Texas Railroad Commission regarding pipelines. Previously, the RRC had jurisdiction only over intrastate pipelines (lines that begin and end within Texas). Now, the RRC has authority over interstate pipelines as well (lines that cross state boundaries).

Under the new RRC Rules (that you can review here), excavators must report any damage not later than one hour after the damage occurs. Next, a written report must be filed with the RRC within 30 days.

Interesting to realize that United States has overtaken Saudi Arabia and Russia to become the world’s largest oil and gas producer and continues to lead in production. On April 7, 2016, the U.S. Energy Information Administration released a report showing the United States remained the world’s largest producer in 2014 despite the decline in oil prices that occurred during the second half of 2014. In that year, the United States produced almost double the amount of oil and gas that was produced by Saudi Arabia. Saudi Arabia produces mostly oil and a small amount of gas while the production in the United States and Russia is balanced, with about half of the production coming from gas, and the other half from oil.

Why The Increase In The US?

The report credits the increase in production of both oil and gas directly to the United States’ ability to exploit tight oil and shale gas formations. Last year the United States produced over 3.1 billion barrels of crude oil, an 18% increase from the 2.7 billion barrels produced in 2013. The increase in hydrocarbon production over the last several years is credited to the increase in horizontal drilling and hydraulic fracturing which allows production from unconventional reserves which were previously uneconomical to produce.

No question about it: Hurricane Harvey and its aftermath have been horrible. It will be a very long time before things return to anything like “normal” for a lot of people. One of the few things that bring a smile these days is the amount of volunteer effort going on in response to the hurricane. Boaters across Texas hauled out their boats, headed to Houston and have been rescuing people. Churches, businesses and public institutions open their doors to serve as shelters. Nonprofit rural water and electric co-ops all over Texas are sending their crews and equipment to help the local crews in Southeast Texas restore water and power service.

One of the things I was intrigued to learn is that Anheuser-Busch has a history of producing water for disaster situations and Hurricane Harvey is no exception. When disaster strikes the company halts their production at its Cartersville, Georgia brewery and begins canning drinking water instead. So far, they’ve delivered over 410,000 cans of safe drinking water to the Gulf Coast. According to their website, they’ve been doing this since 1988. In 2016, Anheuser-Busch produced and shipped emergency drinking water to the California wildfire area, as well as areas impacted by the Louisiana floods and Hurricane Matthew.

Yes, I realize it’s good PR. But it’s also a really nice thing to do. Texans are tough and we will recover from this. However, it sure is nice to have the help!

In a case that could have a substantial impact on the rights of Texas mineral right and landowners, the Supreme Court of Texas recently heard the oral arguments in the case of Atmos Energy Corporation et al v. Town of DISH, et al. The case involves the residents of DISH, Texas– named after the cable television provider–who are seeking are damages for nuisance and injuries. The town claims that the oil pipeline company’s operation of gathering and compression facilities near the town has resulted in adverse health effects to its residents. This case is of particular importance because it calls into question whether a company operating legally and within government regulation can still be liable for damages for trespass and nuisance .

Background

The dispute between the Town of DISH and various pipeline companies began in 2005 when pipeline companies began constructing a compressor outside the town.  Initially, the residents of DISH complained of odors and excessive noise, and in 2008 the town issuedfiled a complaint with the Texas Commission On Environmental Quality (TCEQ). However, after investigations in 2009 and 2010, the TCEQ concluded that the facilities would not cause the effects the residents of DISH complained about.

When a crime occurs on someone else’s property, who is liable for the harm caused by that crime? Of course, the person who committed the act of crime should be held accountable, but does a property owner have any sort of obligation to a crime victim? Does a property owner have a duty to protect third parties from falling victim to crimes committed on their property?

Man Victimized By Crime In The Parking Lot of An Apartment Complex

The Texas Supreme Court recently weighed in on this issue in UDR Texas Properties LP et al. v. Alan Petrie. In this case, Petrie was waiting for a coworker at The Gallery apartment complex, which is owned by UDR Texas Properties. Petrie was attending a party at the apartment complex, but needed to be let into the gated facility and so was in the process of calling someone to give him access.  The visitor parking area was not gated. While he was on the phone, a vehicle pulled up behind Petrie’s vehicle and blocked him in. Two men exited the vehicle and pointed a rifle at Petrie, telling him to get out of the car and to give up his wallet and keys. When Petrie did not get to the ground fast enough for his assailants, the gunman shot Petrie.