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A case that has gained attention in the Texas oil and gas industry is the case of Samson Exploration v. T.S. Reed Properties which is currently awaiting a decision by the Texas Supreme Court. The case involves three gas wells and two mistakenly overlapping pooling units in Hardin County, Texas.  The boundaries of the first unit were amended by the well operator, but the boundaries of the second unit were not. The two main issues, as stated by the Texas Ninth Court of Appeals, are : “First, whether the stakeholders participating in (the first unit) can recover damages from the operator of the unit when the operator amended the boundaries of the unit to exclude a well that was within the boundaries of the original unit, and where the stakeholders accepted royalties attributable to the amended unit without challenging the operator’s authority to amend the original unit’s boundaries. Second, whether the stakeholders in (the second unit), based on their claims for breach of contract, can recover damages from the operator due to the operator’s failure to pay royalties on oil and gas produced from a well that the operator contends was (originally)  included in that unit by mistake”.

In October 2015, the Texas Ninth Court of Appeals opinion ruled that the stakeholders in the first unit had ratified the amendment to the unit by accepting royalties attributable to the amended first unit. Therefore, those stakeholders should recover nothing. The Ninth Circuit further determined that the stakeholders in the second unit could recover damages from the well operator for the operator’s failure to file an amendment to the description defining the pooling unit’s boundaries, but that the award of damages in the trial court was excessive because it awarded royalties for prior to the time the unit existed.

Many in the Texas oil and gas industry, like Texas Alliance of Energy Producers, support Samson’s claim that the royalty owners in the first gas unit ratified the unit amendment by accepting royalties after the unit was amended, and that they should not be required to pay royalties from one well to lessors in both gas units.

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The Texas Court of Appeals in Houston recently decided a case, UNION PACIFIC RAILROAD COMPANY v. AMERITON PROPERTIES INCORPORATED, that contains an important caveat for anyone preparing or interpreting a deed.

Background

Galveston, Harrisburg & San Antonio Railway Company (GHSR), the predecessor to Union Pacific Railroad Company, acquired title to certain Texas land in 1879 after commencing a condemnation proceeding against the owner, Mary Lawrence. GHSR and Mrs. Lawrence agreed to settle the condemnation proceeding, and Mrs. Lawrence gave GHSR a deed in return for GHSR’s payment of $437 for a portionthe land.

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On March 28, 2017, President Trump signed an executive order entitled “Presidential Executive Order on Promoting Energy Independence and Economic Growth”, rolling back regulations governing emissions. The order is aimed at changing the Obama Administration’s climate policies and regulations.  The order comes as a fulfillment of repeated campaign promises for the overhaul of emission standards for the oil and gas industry and the Clean Power Plan. The exact wording of the executive order states that it is in the best interest of the United States to continue to perpetuate the growth of energy development “while at the same time avoiding regulatory burdens that universally encumber energy production, constrain economic growth, and prevent job creation.” Detractors take this as a direct blow against environmental protection and climate change. However, many in the industry who saw the Clean Power Plan as putting too much power in the hands of federal bureaucrats (who are not elected and not accountable to anyone), and taking it away from state regulatory agencies, applaud the order.

Among other things, the order requires the review of the Environmental Protection Agency’s (EPA) carbon emission restrictions for power plants in the United States and the standards that new power plants must meet. Additionally, the order rescinds a memorandum by President Obama to the EPA which directed carbon pollution standards for power plants and that were aimed at cutting carbon emissions in the United States and curbing the impacts of climate change.

The order directs U.S. Attorney General, Jeff Sessions, to ensure that the EPA cooperates with these requests. The EPA responded by stating they will review the Clean Power Plan and will hold any environmental litigation in abeyance while they conduct their review of the order.

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In Caffe Ribs, Inc. v. State of Texas, the State of Texas filed an eminent domain suit to obtain property from Caffe Ribs to use for a storm water detention pond as part of an expansion of Interstate 10. The property is near the intersection of Beltway 8 and Interstate 10.

Prior to ownership by Caffe Ribs, the property was used to store and manufacture oil field equipment, which resulted in environmental contamination on the property. Weatherford owned the property from 1977 to 1988, until the property was foreclosed on by Paul Revere Variable Annuity Insurance Company. Weatherford continued operations on the property as a lessee into the 1990s.

In February 1995, Paul Revere sold the property “as is” to Caffe Ribs for $487,000.  Ribs expressly agreed “to accept the conveyance of the Property subject to any presently known or subsequently discovered Hazardous Materials or Hazardous Materials Contamination.” Paul Revere retained the exclusive right to evaluate and analyze the environmental condition of the property and take any actions that Paul Revere determined to be necessary regarding environmental conditions. Subsequently, Weatherford and Paul Revere  began remediation of the property. They were well into that process when their efforts were interrupted by the condemnation lawsuit.

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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.

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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.

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With so many new oil and gas pipelines being constructed presently in Texas, the Texas Supreme Court’s timing for additional guidance on when a pipeline company is a common carrier in the case of Denbury Green Pipeline-Texas L.L.C. v. Texas Rice Land Partners Ltd, et al. could not be more appropriate. A second opinion in that case focuses on when a pipeline company can be considered a “common carrier”, a status that grants the company the right to exercise eminent domain powers.

The Denbury Pipeline case has been making its way through the Texas court system for a number of years and this is not the first time that some aspect of the case has been heard by the Texas Supreme Court. In 2012, in Texas Rice Land Partners Ltd, et al v. Denbury Green Pipeline-Texas L.L.C.,  the Texas Supreme Court articulated a standard based on the Texas Natural Resources Code to determine when a pipeline company can have common carrier status. The standard or test is referred to as the Texas Rice I test. At the time, the Texas Supreme Court did not apply the test to the facts of the case, but instead reversed and remanded the case to the trial court for proceedings consistent with the common-carrier test it established, thus “affording Denbury Green the opportunity to produce reasonable proof of a future customer, thus demonstrating that [the pipeline] will indeed transport to or for the public for hire and is not limited in [its] use to the wells, stations, plants, and refineries of the owner.”

Test Under Texas Rice I

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The  Texas Court of Appeals in Texarkana published an interesting decision in the case of  In re Estate of Hardesty, in which they discussed who had standing in Texas to challenge a foreclosure sale of real estate.

Background

Carolyn Hardesty obtained a home equity loan for $500,000.00 from PrimeLending in 2004. The loan was secured by a lien classified as an extension of credit under Article XVI, Section 50(a)(6)(A) of the Texas Constitution. Carolyn signed a sworn fair market value agreement at closing stating that the value of the property was $625,000.00. Kenneth Hardesty, Carolyn’s son, assisted Carolyn in the loan process but was not a party to the transaction with PrimeLending. In October 2005, CitiMortgage began servicing the loan. The lien was assigned to CitiMortgage in April 2010.

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The Texas A&M School of Law, in Fort Worth, Texas will be hosting the Eighth Energy Law Symposium on March 23 and 24, 2017.

The energy industry in the United States and globally is facing multiple transitions and fluctuation. The downturn in the oil market ha​s caused numerous bankruptcies; OPEC recently agreed to reduce production; the US is now a net exporter of gas and refined petroleum products; energy from renewable sources in the US now surpasses ​16 percent of total generation; and the Trump presidency promises to create new opportunities and challenges for the industry.

In assessing these factors and projecting where the global energy regime might go, Texas A&M University will host the 2017 Energy Law Symposium on “The Future of Energy”. The symposium, scheduled for March 23–24, 2017, will convene industry experts, academic commentators and public officials to discuss a wide range of issues bearing on anticipated needs, policy challenges and proposed reforms in the U.S. and global energy markets. Panel, debate and keynote sessions will address legislative and regulatory priorities, power generation, allocation wells, transboundary resource management, environmental considerations, bankruptcy and much more. Please join us as we explore “The Future of Energy”. Registration is $50 or $150  if you want CLE credit (12.75 CLE credit hours pending approval).

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The Texas 14th Court of Appeals recently decided the case an interesting case,  Clay Exploration, Inc. v. Santa Rosa Operating, LLC, concerning who has the right to execute oil and gas leases for unknown owners. In 1889 Frederick Kastan and Gustav Heye purchased 102 acres in Grimes County, Texas. Subsequently, Kastan left Texas and moved to Germany. In 1999, after conducting an unsuccessful effort to locate Kastan or his heirs, Marathon Oil petitioned a local court for a receiver to sign oil and gas leases for the 102 acres purchased by Kastan and Heye. Marathon’s petition requested that the receiver “take charge of and execute an oil, gas, and mineral lease, or leases” on behalf of unknown owners of the mineral rights, which included Kastan and his unknown heirs. This is pretty standard practice in Texas when an oil company can’t locate all the owners. The trial court appointed a receiver, Charles Ketchum, and ordered Ketchum to execute mineral leases with Marathon. The Marathon leases required Marathon to drill and produce within three to five years or the lease would expire.

Apparently the Marathon leases expired, and in 2011 two new oil companies, Clay Exploration, Inc. and Santa Rosa Operating, LLC decided they wanted to lease the 102 acres.  Santa Rosa petitioned a local court to appoint another receiver to lease the Kastan mineral rights. While the Santa Rosa petition was pending, Clay Exploration contacted the original receiver, Ketchum, who signed a lease with Clay in January 2012.

In April 2012 Santa Rosa intervened in the original Marathon receivership action, alleging that Ketchum had only been authorized to sign a lease with Marathon and no one else. Meanwhile, Santa Rosa located the unknown Kastan heirs and obtained leases directly from them. Santa Rosa filed a motion to set aside and invalidate the Clay leases on the grounds that Clay was aware that the Kastan heirs were no longer unknown and that Ketchum was authorized to sign a lease only with Marathon.” Santa Rosa also alleged that Marathon never drilled or operated on the tracts, although there was apparently no evidence on this. In response, Clay filed a motion to confirm the lease they signed with Ketchum.

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