Supreme Court of Texas Holds Strip-And-Gore Doctrine Does Not Make Adjacent Landowners Mandatory Parties

On Feb. 3, 2017, the Supreme Court of Texas held that adjacent landowners were not mandatory parties to a lessor’s suit against the lessee for failure to make royalty payments if the adjacent landowners had not claimed any interest relating to the lawsuit. In short, “Rule 39 does not require joinder of persons who potentially could claim an interest in the subject of the action [pursuant to the strip-and-gore doctrine]; it requires joinder, in certain circumstances, of persons who actually claim such an interest.” Crawford v. XTO Energy, Inc., No. 15–0142, 2017 WL 461361, *5 (Tex. Feb. 3, 2017) (emphasis added).

The lessor, Crawford, owned approximately 146 acres of land in Tarrant County, Texas. In 1964, she conveyed the surface estate of about eight acres in fee simple, expressly reserving the oil and gas under the tract (Crawford Tract). In 1984, Crawford conveyed the property immediately north and south of the Crawford Tract without reserving the oil and gas, and most of that property was subdivided into residential lots. Continue Reading

85th Texas Legislature: Oil and Gas Roundup

On Jan. 10, 2017, the 85th regular session of the Texas Legislature convened in Austin, and already several bills are on the table that, if adopted, could impact the oil and gas industry in Texas.

State Sen. Van Taylor, R-Plano, has introduced the Oil and Gas Majority Rights Protection Act for Secondary and Tertiary Recovery Operations (SB 177). If enacted, the bill would make it easier for Texas oil and gas companies to conduct secondary recovery operations with the consent of a supermajority (70 percent) of working and royalty interest owners in a field. Texas law currently requires the unanimous approval and agreement of all working and royalty interest owners in order for secondary recovery operations to commence in a field.

Senator Taylor argues that the bill will be a boon to energy production in the state, claiming that geologists estimate that an additional “10 to 20 billion barrels of oil worth over $1 trillion will come out of the ground” if the bill is passed. Critics argue that the bill will give oil and gas companies power to compel dissenting, and generally smaller, interest owners to allow secondary recovery operations on their private property. Continue Reading

Times Definitely Are a-Changin’

On Dec. 10, Bob Dylan, in absentia, received the 2016 Nobel Prize in literature. The title track of Dylan’s 1964 album The Times They Are a-Changin’ is one of the most celebrated protest songs. Undoubtedly, times are a-changin’ in Washington.

President-elect Donald Trump recently announced his selection of Rex Tillerson, chairman and CEO of Exxon Mobil Corporation, as secretary of state and of Rick Perry, former governor of Texas, as secretary of energy. Previously, Trump announced his selection of Oklahoma Attorney General Scott Pruitt as administrator of the Environmental Protection Agency. Immediately, my Twitter feed exploded with a barrage of anti-Pruitt statements from politicians, environmentalists and celebrities. These verbal Pruitt protests follow the Obama administration’s last stand in North Dakota. Continue Reading

Wind Energy in Texas: Powerful or Not?

On Oct. 26, the U.S. Energy Information Administration released a report challenging the view that Texas is a leader in wind power production. According to the report, Texas lagged far behind Midwest and Plains states in 2015 in utilizing wind energy as a percentage of total net electricity generation. Iowa, South Dakota and Kansas led the survey, with a 31 percent, 25 percent and 24 percent share of wind energy as a percentage of total net generation, respectively. Texas came in 12th nationally, with a share of 9.9 percent. Such a ranking, however, is misleading.

First, notwithstanding its ranking, Texas is still the highest wind electricity-producing state in the nation, making up 24 percent of the national total wind generation. Texas’s total wind electricity production – and share as a percentage of total net generation – is also expected to continue to rise in the coming years. Indeed, on Nov. 29, Spanish wind energy giant Gamesa announced that it was awarded a contract to supply 75 additional 2.1 megawatt (MW) turbines to Terna Energy, a Greek renewable energy company, for the development of another wind farm in Texas (for a total of 155 MW additional capacity). Delivery and commissioning are anticipated to be completed by the end of 2017. Continue Reading

What’s in a Name?

On Thursday, November 10, 2016, the Sunset Advisory Commission was called to order to announce decisions concerning the Texas Railroad Commission. The Sunset Commission is composed of five senators, five representatives and two public members appointed by the lieutenant governor and the speaker of the House. The Sunset Commission addressed seven issues outlined in the Sunset Commission report and adopted new issues.

Most notably, the Sunset Commission rejected part of the first of seven recommendations by the Sunset Commission staff – to change the Railroad Commission’s name to the Texas Energy Resources Commission to reflect the agency’s current functions. The Sunset Commission did adopt the Sunset staff’s recommendation to reauthorize the Railroad Commission for 12 years. Continue Reading

Texas Senate Holds Public Hearing on EPA Regulations

On Sept. 28, 2016, the Senate Committee on Natural Resources and Economic Development held a public hearing on one of the committee’s interim charges for the 84th Legislative Session. The topic for discussion at the hearing centered on the impact and challenges Texas faces in implementing proposed federal Environmental Protection Agency regulations, including, but not limited to, the Clean Power Plan, reduction of methane and Volatile Organic Compounds (VOCs) from oil and gas facilities, ozone standards, and rules for regional haze, and waters of the U.S. A number of witnesses presented written and oral testimony regarding these issues, including representatives from the Texas Commission of Environmental Quality, the Office of the Attorney General, the Texas Alliance of Energy Producers, the Texas Independent Producers and Royalty Owners Association, and the Texas Oil and Gas Association. Continue Reading

Struggling to Produce: Heirs to Claimed Royalty Interest Acquired in Late 1800s in 9,200-acre Tract in Texas Fail to Pass Procedural Hurdles to Asserting Their Claims for Superior Title and Unpaid Royalties Against Multiple Oil and Gas Companies

On Monday, Oct. 10, 2016, dozens of claimed heirs to a one-half mineral interest allegedly obtained in the late 1800s in a 9,200-acre tract of land in Brooks County, Texas, filed a Petition for Review with the Texas Supreme Court, claiming that the Fourth Court of Appeals in San Antonio erred in upholding the Brooks County District Court’s ruling dismissing their claims for superior title and unpaid royalties from various oil companies with prejudice because the plaintiffs had not joined all necessary parties with an interest in the property.

The appeal is the latest in an almost 15-year saga by the plaintiffs to overcome procedural hurdles to their claims to superior title and for unpaid royalties.

The plaintiffs claimed that their ancestor, Jose M. Longoria, acquired an undivided one-half mineral interest in 9,200 acres of land in Brooks County, Texas, by adverse possession in the late 1800s by fencing the property, surveying it, and growing crops and grazing livestock on it for decades before the mineral estate was severed from the surface estate. The plaintiffs contend that a partition suit and judgment in 1924, which divided the entire tract, and succeeding partition judgments are void and are clouds on their title, since none of Mr. Longoria’s heirs were made parties to the partition suits. The plaintiffs then sued 11 energy companies in March 2002, seeking a declaratory judgment and damages, and subsequently added the current record-title owners as defendants. Continue Reading

Eighth Circuit Holds Nonoperating Working Interest Owner and Engineering Contractor Not Liable For Negligence of On-Site ‘Company Hand’

On Aug. 5, 2016, the United States Court of Appeals for the Eighth Circuit affirmed summary judgment in favor of a nonoperating working interest owner, Oasis, and its engineering subcontractor, RPM Consulting, holding that neither owed a duty of care to an employee of a drilling rig operator. North Dakota, like Texas and other states, follows Section 414 of the Restatement of Torts for determining liability for acts of independent contractors.

Oasis is an oil and gas exploration company that contracts with other entities to manage the day-to-day operations at its wells. It does not conduct drilling operations at its well sites; instead, it has a Master Service Contract with RPM Consulting to provide engineering support and subcontractors to oversee the drilling process and coordinate services needed to keep the sites operating efficiently. Continue Reading

Recent Supreme Court of Ohio Rulings May Alter the Status of Dormant Mineral Rights Throughout the State

The Supreme Court of Ohio recently brought clarity to issues plaguing the holders of both mineral and surface rights for years by addressing two questions: When does the owner of dormant mineral rights abandon those rights? And when do those rights merge with the surface holders’ rights?

Surface owners, mineral rights owners, and the courts in Ohio have, for decades, disagreed about when mineral rights are deemed abandoned and are merged with the surface owner’s estate. The Ohio legislature attempted to clear up this issue by passing the Dormant Mineral Act in 1989. The law provided that “any mineral interest held by any person, other than the owner of the surface of the lands subject to the interest, shall be deemed abandoned and vested in the owner of the surface” unless one of a number of “saving events” had occurred within the preceding 20 years. Former R.C. 5301.56(B)(1), 142 Ohio Laws, Part I, at 985, 986–87.

The law was later amended in 2006. The only true substantive change was that surface rights holders were required to (1) provide advance notice to the mineral rights holder; and (2) give the mineral rights holder an opportunity to preserve its rights before those rights could be deemed abandoned and merged with the surface estate. R.C. 5301.56 (E)–(G). Continue Reading

Federal Reserve Proposes Rules Aimed at Banks Owning, Trading and Moving Commodities

On Sept. 23, 2016, the Federal Reserve issued proposed rules[1] that could put pressure on investment banks, such as Morgan Stanley and Goldman Sachs, to divest certain energy assets and energy trading activities.

Over the past decade, environmental catastrophes involving physical commodities, such as Deepwater Horizon and Fukushima, have led to monetary damages ranging from hundreds of millions to tens of billions of dollars. For example, BP p.l.c. guaranteed the payment of approximately $19 billion as part of a consent decree resolving claims against its subsidiaries resulting from the Deepwater Horizon oil spill.[2]

The Federal Reserve noted, in its proposed regulations, that monetary damages of this magnitude, directed at a bank-owned facility, could trigger a domino effect of fines, cleanup costs and loss of investor confidence that, when taken together, could render a financial institution unstable. Continue Reading

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