Oil + Gas Update | Royalties, PPCs, Cross-Unit Wells and other Issues Headline a Busy Fall 2024 for Courts.
Since our last report, natural gas prices underwhelmed steadily alongside a relatively flat rig count and stable oil prices. In pipeline news, MVP plans to increase capacity and asked FERC for more time to construct the Southgate Extension while Transco fights for its Regional Access Expansion Project. In national news, energy policy, particularly as it may impact Appalachia, seemed to play an important role in the lead-up to Trump's victory over Kamala Harris. In Appalachia, courts addressed antitrust claims; surface use; cross-unit wells; marketing obligations; post-production costs; arbitration agreements; pipelines; NPRIs; and royalty valuation methods/net-back calculations for royalties. In other regions, courts grappled with pooling orders; the “marketable product” rule; mineral servitudes; labor/employment issues in the oil patch; BLM’s flaring rule; federal lease expiration issues; gas gathering dedications and the statute of frauds; arbitration; life estates and royalties; strict liability for flowback procedures; the implied marketing covenant; competing surface uses; depth limitations in assignments; “net proceeds” royalty clauses; NPRIs and PPCs; JOAs; and blended royalty rates in pooling statutes.
Rig Counts, Spot Prices + Oil Prices
Rigs: National (585); Marcellus (24); Utica/Point Pleasant (10)
Brent Crude: $73.87/bbl
West Texas Intermediate: $70.38/bbl
NYMEX: December 2024 @ $2.747/MMBtu; 12-Month Strip @ $2.965/MMBtu
Spot Prices: Henry Hub @ $1.80/MMBtu; Eastern Gas @ $1.47/MMBtu
Headlines & Holdings - Appalachia
Fed. Ct. in PA Tosses Antitrust, Royalty Suit. A federal court in Pennsylvania dismissed a lawsuit filed by landowners seeking $5 billion in damages against Chesapeake and Anadarko and others for alleged antitrust and racketeering violations, holding that the landowners lacked standing or otherwise failed to allege the companies participated in an anticompetitive agreement. A&B Campbell Family LLC v. Chesapeake Energy Corp., --- F. Supp. 3d ----, No. 3:15-cv-00340, 2024 WL 4009633 (M.D. Pa. August 30, 2024).
WV Fed. Ct. Tosses Tort Claims under Gist-of-the-Action Doctrine. A federal court in West Virginia dismissed claims for fraudulent misrepresentation and constructive fraud in connection with other claims for breach of an oil and gas lease, holding that the gist-of-the-action doctrine bars those claims. Greenbriar Royalty Fund II, LLC v. Antero Resources Corp., --- F. Supp. ----, No. 1:21-CV-134, 2024 WL 4009665 (N.D. W. Va. August 30, 2024).
Ohio Fed. Ct. Says O+G Co. Complied with SUA. A federal court in Ohio rejected claims for breach of a surface use agreement for failing to follow with precision certain depictions and descriptions of activities and operations attached to the SUA, holding that the depictions and descriptions attached to the SUA “for informational purposes only” meant the parties did not expect the company to follow those depictions or descriptions with precision as the landowners claims. Pir, v. Equinor USA Onshore Properties, Inc., --- F. Supp. 3d ----, No. 2:22-CV-3854, 2024 WL 3992365 (S.D. Ohio Aug. 27, 2024).
Fed. Ct. in PA Says Cross-Unit Well Claims Survive Dismissal. A federal court in Pennsylvania denied a bid to dismiss landowner claims that their lessee can’t drill cross-unit wells without written consent, noting that Act 85 supports cross-unit drilling unless expressly prohibited by the parties’ leases but holding that the leases and their addenda are ambiguous about whether the lessee must obtain consent for cross-unit drilling. Gerfin v. SWN Production Company LLC, --- F. Supp. 3d ----, No. 3:23-CV-01037, 2024 WL 4026173 (M.D. Pa. Sept. 3, 2024).
PA Superior Ct. Transfers O+G Row to Allegheny County. The Superior Court of Pennsylvania overturned an order sustaining a lessee’s preliminary objections to a complaint alleging royalty and other claims, holding that the court below improperly transferred the case to Greene County, PA even though Allegheny County, PA was the plaintiffs’ choice and venue in that county is otherwise proper. Rice Drilling B, LLC v. Scott, --- A.3d ----, No. 854 WDA 2023, 2024 WL 4034540 (Sept. 4, 2024).
Fed. Ct. in PA Says Royalty Clause for Gas “Marketed and Used off Premises” is Ambiguous. In a case involving a dispute over royalties for gas sold to an affiliate at the well, a federal court in Pennsylvania denied summary judgment bids by both parties, holding that a royalty clause calling for payments on gas “marketed and used off the premises” is ambiguous and its interpretation should be supported by expert testimony that neither party provided. Chambers v. Equinor, --- F. Supp. 3d ----, No. 3:18-CV-00437, 2024 WL 4109340 (M.D. Pa. Sept. 6, 2024).
Ohio App. Ct. Rejects Injection Well Operator’s Taking Claim. In a case involving suspension of injection well permits following activities that allegedly caused seismic events, a court of appeals in Ohio on remand from the state’s high court concluded that the injection well operator failed to establish by clear and convincing evidence a partial taking under the Supreme Court’s test in Penn Central. AWMS Water Solutions vs. Mertz, --- N.E.2d ----, No.2016-T-0085, 2024 WL 4119199 (Ohio Ct. App. September 9, 2024).
Ohio App. Ct. Remands Dispute over Deductions from O+G Royalties. An appellate court in Ohio remanded a case involving a dispute over deductions from royalty payments, holding that (a) a royalty clause calling for payments to lessors “less any charges for transportation, compression and/or dehydration to deliver the gas for sale” is ambiguous; and (b) the trial court erred by evaluating definitions from statutes and other industry sources to render the royalty clause unambiguous. EAP Ohio, LLC v. Sunnydale Farms, LLC, --- N.E.3d ----, 2024 WL 4195165 (Ohio Ct. App. September 11, 2024).
PA App. Ct. Declines Injunction to Prevent Arbitration of O+G Contract Dispute. An appellate court in Pennsylvania reversed an order granting injunctive relief to preclude arbitration of claims between joint venturers under a development agreement, holding that the successor to the original contracting party could invoke the arbitration clause in the JDA. PennEnergy Resources, LLC v. MDS Energy Development, LLC, --- A.3d ----, No. 132 WDA 2023, 2024 WL 4246134 (Pa. Super. September 20, 2024).
NY App. Ct. Says Dispute over LNG Project is Barred by Prior Arbitration. A court of appeals in New York held that a previous arbitration between contracting parties regarding an abandoned LNG project foreclosed a more recent breach of contract claim brought by one of the parties’ parent company. Gulf LNG Energy, LLC v. Eni S.p.A., --- N.Y.S.3d ----, No. 2101-02, 2024 WL 4268683 (N.Y. App. Div. Sept. 24, 2024).
Fed. Ct. in PA Denies SWN’s Request for Discovery in Trespass-by-Frac Case. A federal court in Pennsylvania denied a bid by SWN to discover information from plaintiffs about gas extracted and sold from the property by another well operator, holding that none of the discovery SWN seeks is relevant because the only question in the case is whether SWN trespassed and how much gas SWN extracted from the property by injecting proppants into the subsurface. Briggs v. SWN Production Company, LLC, --- F. Supp. 3d ----, No. 3:21-CV-520, 2024 WL 4311490 (M.D. Pa. Sept. 26, 2024).
Fed. Ct. in PA Certifies O+G Royalty Owner Class in PPC Row. A federal court in Pennsylvania certified a class of royalties owners consisting of three groups of people who had natural gas leases with the lessee that prohibited the lessee from deducting post-production costs exceeding 80 cents, 75 cents or 72 cents per MMBTU. Rupert vs. Range Resources – Appalachia, LLC, --- F. Supp. 3d ----, No. 2:21-CV-1281, 2024 WL 4349222 (W.D. Pa. Sept. 30, 2024).
Ohio Ct. App. Rejects State’s Claims against Interstate Pipeline. A court of appeals in Ohio held that the Natural Gas Act preempts the state’s claims that an interstate pipeline violated state law for having inadvertent returns during drilling, allowing storm water runoff, and affecting wetlands without first obtaining state permits, holding that Section 401 of the Clean Water Act gives states a certification process during which they can push for permits for interstate pipeline projects but Ohio did not do so. Ohio vs. Rover Pipeline, LLC, --- N.E.3d ----, No. 2023CA00151, 2024 WL 4357504 (Ohio Ct. App. October 1, 2024).
Fed. Ct. in WV Remands O+G Title Dispute to State Court. In a dispute over title to oil and gas interests, a federal court concluded that, under West Virginia law, all persons with an interest in real property must be made defendants to an action to quiet title, and the joinder of such parties destroyed diversity here such that the federal court lacks jurisdiction. Curd Minerals, LLC vs. Diversified Production, LLC, --- F. Supp. 3d ----, No. CV 1:22-00113, 2024 WL 4363254 (S.D.W. Va. Sept. 30, 2024).
Ohio Supremes Uphold Approval of NatGas Pipeline. The Ohio Supreme Court upheld a state agency’s approval of a 3.7-mile natural gas pipeline over the objections of a property owner who alleged that the agency failed to consider and resolve environmental concerns. In re Columbia Gas of Ohio, Inc., --- N.E.3d ----, No. 2023-0649, 2024 WL 4375867 (Ohio October 3, 2024).
CA3 Says Fraud Claims against O+G Co. and Law Firm are Time Barred. The Third Circuit upheld an order dismissing fraud claims in connection with the sale of an oil and gas lease and related wells and assets, holding that the company claiming fraud knew or should have known about its claims more than two years before it filed suit. Prime Energy and Chemical LLC v. Tucker Arensberg, --- F.4th ----, No. 23-2169, 2024 WL 4441492 (3d Cir. Oct. 8, 2024).
WV App. Ct. Says NPRI is a Real Property Interest. In a dispute over ad valorem taxation, a court of appeals in West Virginia analyzed competing views over how courts treat non-participating royalty interests – with a majority of states treating them as real property and a minority treating them as personal property – and adopted the majority view for West Virginia that NPRIs are real property interests because they vest upon conveyance and thereby avoid a violation of the rule against perpetuities; give transferors of NPRIs the ability to pass clear title upon conveyance; treating NPRIs as real property interests promotes certainty in the law governing these transactions; and royalty interests only become personal property upon production. Venable Royalty, Ltd. vs. EQT Production Co., --- S.E.2d ----, No. 23-ICA-351, 2024 WL 4441155 (W. Va. Ct. App. Oct. 8, 2024).
Sixth Circuit Stays Pipeline Construction Pending Permit Challenges. The Sixth Circuit issued an order staying CWA and Army Corps permits authorizing the construction of a pipeline to serve Tennessee Valley Authority’s natural gas-fired power plant, citing “permanent impacts” to wetlands and streams if construction proceeded before the courts sort out the challenges. Sierra Club v. Tennessee Dep’t of Environmental Protection, --- F.4th ----, No. 23-3682, 2024 WL 4472048 (6th Cir. Oct. 11, 2024).
Ohio App. Ct. Says Statute Extinguished Royalty Interest. In a dispute over a prior royalty interest reservation, a court of appeals in Ohio concluded that a general reference to a “royalty interest” in a deed, without more, is insufficient to preserve that interest under the Marketable Title Act unless the deed also specifically identifies a prior recorded title transaction. Clark v. Hammond, --- N.E.3d ----, No.23 BE 0047, 2024 WL 4534583 (Ohio Ct. App. October 18, 2024).
PA Federal Court Transfers SWN Royalty Dispute to Texas. A federal court in Pennsylvania granted a motion to transfer a dispute over royalty payments and related allegations to the Southern District of Texas, holding that Texas federal court is a better venue than Pennsylvania federal courts to resolve the claims against the company. Bluebeck Holdings, Ltd. v. SWN Production Company, LLC, --- F. Supp. 3d ----, No. 3:23-CV-2095, 2024 WL 4536952 (M.D. Pa. Oct. 21, 2024).
WV Fed. Ct. Says O+G Leases may be Designated “Confidential” for Discovery Purposes. A federal court in West Virginia ordered a defendant in a royalty class action to produce oil and gas leases to the plaintiff, rejecting attempts by the company to produce the documents with redactions and concluding that the redacted information is publicly available in memoranda of leases but further holding that the underlying oil and gas leases may be designated confidential pursuant to a protective order because they contain non-public information. Braxton Minerals, III, LLC v. Antero Resources Corp., --- F. Supp. ----, No. 1:21-CV-119, 2024 WL 4575293 (N.D.W. Va. Oct. 24, 2024).
Third Circuit Upholds Dismissal of O+G Royalty Row. In a lease dispute over royalties and post-production costs, the Third Circuit upheld a district court’s decision to enter summary judgment against the class plaintiffs, rejecting claims that their lessees used the wrong valuation method to calculate royalties and improperly deducted from the royalty calculation post-production costs incurred by the downstream marketers and traders, holding instead that the lessees engaged in arms-length transactions with unaffiliated third parties and therefore properly used the net-back method to calculate royalties. Slamon v. Carrizo (Marcellus) L.L.C., --- F.4th ----, No. 23-1394, 2024 WL 4602673 (3d Cir. Oct. 29, 2024).
Ohio Ct. App. Upholds Big Verdict in Subsurface Gas vs. Salt Dispute. A court of appeals in Ohio upheld an 8-figure verdict in favor of a gas company forced to abandon wells damaged by the defendant’s negligent solution-mining operations underlying the gas company’s property. Triad Hunter, LLC vs. Eagle Natrium, LLC, --- N.E.3d ----, No. 23 MO 0019, 2024 WL 4614638 (Ohio Ct. App. October 29, 2024).
CA3 Confirms EHB Jurisdiction over State Permit Required by NGA. Following its previous decision, the Third Circuit upheld the Pennsylvania Environmental Hearing Board’s authority to review state water quality and other state permits required for a certificate of public convenience under the Natural Gas Act. Transco v. Beckman, --- F.4th ----, No. 24-1099, 2024 WL 4661593 (3d Cir. Nov. 4, 2024).
Ohio Ct. App. Gives Landowner Second Crack at Claims against Pipeline Co. A court of appeals in Ohio remanded a dispute over a pipeline ROW location and related damages, holding that the trial court on remand erred by ruling in the company’s favor and should consider on remand whether the parties reached a final agreement as to location of the easement to decide whether trespass occurred and awarding 76,000 in damages for breach of an oral agreement to build a protective electric fence on the plaintiff’s cattle farm. Cameron v. Mark West Liberty Midstream & Resources, LLC, --- N.E.3d ----, No. 23 JE 0020 (Ohio Ct. App. November 1, 2024).
Ohio Fed. Ct. Tosses Second Attempt at Royalty Class Action. A federal court in Ohio tossed a second attempt by class plaintiffs to pursue royalty claims against their lessee, applying claim preclusion principles; holding that the Sixth Circuit upheld a dismissal of an identical class action for lack of pre-suit notice; and concluding that the state’s “savings statute” did not apply to preserve expired claims. Kirkbride v. Antero Resources Corp., --- F. Supp. 3d ----, No. 2:23-CV-3212, 2024 WL 4710244 (S.D. Ohio Nov. 7, 2024).
WV Ct. App. Upholds Oil + Gas Interest Despite Limiting Language. In a dispute over oil and gas ownership, a court of appeals in West Virginia interpreted a 1905 deed as conveying a permanent one-half interest, holding that a 25-year term limitation did not apply to the conveyance of the oil and gas rights but to another provision. West v. Armstrong, --- S.E.3d ----, No. 24-ICA-34, 2024 WL 4709943 (W. Va. Ct. App. Nov. 7, 2024).
Headlines & Holdings - Beyond Appalachia
Okla. Fed. Ct. Says Pooling Order Supersedes Unit Size Restriction. A federal court in Oklahoma dismissed a complaint alleging breach of an oil and gas lease for violating a 160-acre unit restriction, holding that an order from the state’s conservation commission superseded the lease restriction pursuant to statutory powers to prevent waste and protect correlative rights. Cory v. Ovintiv USA, Inc., --- F. Supp. 3d ----, No. CIV-21-568-G, 2024 WL 3933916 (W.D. Okla. Aug. 22, 2024).
Kansas Supremes Poised to Mull Marketable Condition Rule. A federal court in Kansas certified the following question about royalties and post-production costs for review by the Kansas Supreme Court: “[U]nder the Marketable Condition Rule, does an operator’s duty to solely bear the expense in making the product marketable continue until the gas is in a condition to be sold to (a) any potential purchaser of the gas or (b) the intended purchaser of the gas from the royalty owner's well?” Cooper-Clark Foundation v. Scout Energy Management, LLC, ---- F. Supp. 3d ----, No. CV 22-4048-KHV, 2024 WL 3967204 (D. Kan. Aug. 28, 2024).
Louisiana App. Ct. Says Mineral Servitude Expired. A court of appeals in Louisiana held that a mineral servitude expired for more than 10 years of nonuse, holding that a spud well after the expiration wasn’t enough to save it from expiration. Ganey v. Cupstid, --- So.3d ----, No. 55,798-CA, No. 55,799-CA, 2024 WL 3959267 (La. Ct. App. August 28, 2024).
CA5 Says Welder Inspector is IC for FLSA Purposes. The Fifth Circuit refused to revive a welding inspector’s FLSA claim for refusing to pay him wages and overtime, holding instead that the inspector's claim failed because he isn’t an employee but an independent contractor. Guillermo Gray v. Killick Group, --- F.4th ----, No. 23-20295, 2024 WL 3963875 (5th Cir. August 28, 2024).
ND Federal Court Enjoins BLM’s Flaring Rule. In a case in which states challenged the BLM’s rule mandating flaring of excess gas from wells on federal lands rather than venting for the purpose of preventing waste and conserving resources, a federal court in North Dakota enjoined the rule, reasoning among other things that BLM did not reasonably explain the rule or offer a proper rationale why flaring is more economically productive than venting. State of North Dakota vs. DOI, --- F. Supp. 3d ----, No. 1:24-CV-00066, 2024 WL 4164939 (D.N.D. Sept. 12, 2024).
Fed. Claims Ct. SOL does not Bar Claim for Wrongful Termination of O+G Lease. In a case involving BLM’s termination of an oil and gas lease for regulatory violations, the Federal Circuit Court of Appeals held that the well operator’s breach of contract claim for wrongful termination of the lease, holding that the company’s claim accrued when BLM terminated the lease, not before. Petro Mex LLC v. United States, --- F.4th ----, No. 2023-1848, 2024 WL 4157003 (Fed. Cir. Sept. 12, 2024).
Tex. App. Ct. Says Dedicated Acreage Map Satisfies Statute of Frauds. In a dispute between a gatherer and well operator over an exclusive commitment to supply gas from dedicated acreage, a court of appeals in Texas concluded that a dedicated acreage map satisfied the statute of frauds, holding that the receipt points identified in the map together with other writings of the parties are specific enough to satisfy the statute. ETC Texas Pipeline, Ltd. v. XTO Energy, Inc., --- S.W.3d ----, No. 11-22-00350-CV, 2024 WL 4151904 (Tex. App. Sept. 12, 2024).
Tex. App. Ct. Denies Arbitration of Claims in O+G Contract Dispute. In a dispute over arbitrability of claims stemming from various oil and gas agreements, including a purchase and sale agreement, a court of appeals in Texas upheld an order denying a motion to compel arbitration, holding that the parties’ arbitration clause is unambiguous and narrowly tailored to apply only to carefully circumscribed disputes over which an arbitrator will act as an expert to determine the matter for arbitration. BP America Production Co. v. Simcoe LLC, --- S.W.3d ----, No. 14-23-00586-CV, 2024 WL 4153096 (Tex. App. Sept. 12, 2024).
ND Supremes Uphold O+G Well Unitization Plan. In a case involving a dispute between an operator and a non-operator over a unitization order issued by the state’s industrial commission, the Supreme Court of North Dakota concluded that the agency did not exceed its authority or misapply the law when approving the unitization plan and related risk penalty provisions, nor did the agency authorize an unconstitutional taking when issuing the unitization order. Liberty Petroleum Corp., N. Dakota Indus. Comm’n, --- N.W.3d ----, No. 20240022, 2024 WL 4296189 (N.D. September 26, 2024).
Kansas Fed. Ct. Asks State Supremes to Weigh in on Marketable Condition Rule. A federal court in Kansas certified the following question for review by the Kansas Supreme Court regarding oil and gas royalties and post-production costs under the so-called “marketable condition” rule: “[U]nder the Marketable Condition Rule, does a lessee’s duty to make the gas marketable at its own expense end when the gas is in such a condition that it can be sold in some market to some potential purchaser or does a lessee’s duty continue until the gas is in such a condition that it can be sold in the market in which the lessee intends to sell and actually does sell the gas?” The Cooper-Clark Foundation vs. Scout Energy Management, LLC, --- F. Supp. 3d ----, No. CV 22-4048-KHV, 2024 WL 4298635 (D. Kan. Sept. 26, 2024).
Wyo. Supremes Says Holder of Life Estate Can’t Get O+G Royalties. In a dispute over royalties on production from oil and gas held as a life estate, the Wyoming Supreme Court (a) concluded that the doctrine of waste precludes a life estate owner from receiving royalties without an agreement with the remainderman or express language in a deed allowing for payment of royalties to the life estate owner and (b) rejected a request to reform the deed to reserve a right in the life estate owner to receive royalties based on the statute of limitations. Phoenix Capital Group Holdings, LLC vs. Woods, --- P.3d ----, No. S-24-0011, 2024 WL 4403756 (Wyo. Oct. 4, 2024).
Fed. Ct. in Tenn. Scraps Sierra Club Challenge to Power Generation Project. A federal court in Tennessee denied Sierra Club’s challenges to the environmental assessments and impact statement of the Tennessee Valley Authority for a power expansion project, holding that TVA adequately studied the potential climate impacts of its project and otherwise did not violate NEPA. Sierra Club vs. Tennessee Valley Authority, --- F. Supp. 3d ----, No. 3:22-CV-01054, 2024 WL 4363144 (M.D. Tenn. Sept. 30, 2024).
NM App. Ct. Says the Flowback Process during Production is not Inherently Dangerous for Strict Liability Purposes. A court of appeals in New Mexico concluded that the flowback process – which calls for specialized independent contractors to pump sand into a wellhead to push oil, natural gas, and water out of the well – is not is not inherently dangerous for strict liability purposes if carried out in an ordinary manner, holding instead that the lack of a pop-off valve on a sand separator created the danger that caused a fatal explosion. Grano v. RKI Exploration & Production, LLC, --- P.3d ----, No. A-1-CA-40598, 2024 WL 4381233 (N.M. Ct. App. Oct. 3, 2024).
NM Federal Court Addresses Implied Marketing Covenant. A federal court in New Mexico concluded that the sales price for gas sold from the plaintiff’s property before including transportation costs represents the highest reasonably obtainable price for purposes of the lessee’s implied marketing covenant. Anderson Living Trust vs. ConocoPhillips Company, LLC, --- F. Supp. 3d ----, No. CIV 12-0039 JB/SCY, 2024 WL 4348998 (D.N.M. Sept. 30, 2024).
Fed. Ct. in Tex. Upholds Bankruptcy Ct.’s Decision on Lease Expiration Claims. A federal court in Texas concluded that a bankruptcy court properly interpreted oil and gas leases to reject trespass claims after leases allegedly expired, holding that the debtor maintained seven leases by complying with drilling obligations in the continuous development clause of the lease and maintained nine leases by restoring production within 120 days under the lease’s temporary-cessation clause. In re: EP Energy E&P Company, LP, --- F. Supp. 3d ----, No. 4:21-CV-04148, 2024 WL 4356581 (S.D. Tex. Sept. 30, 2024).
Oklahoma Supreme Court Disbars Lawyer Engaged in Fraudulent O+G Work. The State of Oklahoma disbarred an attorney-landman who conspired with others to steal a production company’s drilling plans and other confidential data in order to acquire leases the company planned to lease and then surreptitiously sold the leases to the company via entities created to avoid detection while reserving overrides. State of Oklahoma vs. Dyer, --- P.3d ----, No. SCBD-7680, 2024 WL 4439509 (Okla. October 8, 2024).
ND Supremes Resolve Competing Surface Uses. In a dispute over whether a lessee may run layflat hoses over leased property to conduct frac’ing operations despite another company having a similar temporary easement from the surface owner, the Supreme Court of North Dakota held that (a) the lease provisions giving the lessee the right to install pipelines gave the lessee authority to use layflat hoses on the property at issue as part of exploration and development activities; (b) the competing surface user had notice of the oil and gas lease and corresponding surface rights; and (c) the lessee did not tortiously interfere with the competing surface user’s “exclusive” right to transfer water using layflat hoses. N.D. Energy Servs. LLC v. Lime Rock Resources II-A, L.P., --- P.3d ----, No. 20240096, 2024 WL 4446591 (N.D. October 9, 2024).
Tex. App. Ct. Says Royalty Assignment did not Include Depth Limitation. In a case involving an assignment of royalty interests, a court of appeals in Texas held that the conveyance in question did not include a depth limitation, rejecting arguments that a unit agreement attached to the assignment identifying geographic boundaries of the unit limited royalty interests to production from a specific formation, holding instead that the assignment conveyed all interests in the entire unit without any depth limitations. Rock River Minerals, LP v. Pioneer Natural Resources USA, Inc., --- S.W.3d ----, No. 08-23-00216-CV, 2024 WL 4528917 (Tex. App. Oct. 18, 2024).
Fed. Ct. in Ark. Declines to Reconsider Decision Interpreting “Net Proceeds” Royalty Clause. A federal court in Arkansas declined to reconsider a prior decision rendered with input from the Arkansas Supreme Court on the meaning of a “net proceeds” royalty clause in an oil and gas lease, holding that an intermediate state appellate court decision limiting post-production costs deductions to certain taxes and transportation costs conflicted did not serve as a sufficient predictor of Arkansas law supporting reconsideration. Hurd v. Flywheel Energy Production, --- F. Supp. ----, No. 4:21-CV-01207-LPR, 2024 WL 4571445 (E.D. Ark. Oct. 24, 2024).
Tex. Ct. App. Says NPRI is Free of Post-Production Costs. In a case involving whether an NPRI reserved in a deed is subject to post-production costs, a court of appeals interpreted the phrase “free of cost forever” as exempting the NPRI owner from both production and post-production costs. Fasken Oil & Ranch. v. Puig, --- S.W.3d ----, No. 04-23-00106-CV, 2024 WL 4608591 (Tex. App. Oct. 30, 2024).
ND Fed. Ct. Says ORRI Owner is not a Third-Party Beneficiary of JOA. In a dispute over payment of overrides reserved by the plaintiff’s predecessor in interest, a federal court in North Dakota held that one of the parties to a JOA that includes leases burdened by the ORRI in question is not responsible for payment because there is no contract between the ORRI holder and the operator, the ORRI owner is not a third party beneficiary of the JOA, and the statute compelling royalty payments does not apply to ORRIs. MG Exploration, LLC v. XTO Energy, Inc., --- F. Supp. 3d ----, No. 1:22-CV-200, 2024 WL 4635221 (D.N.D. Oct. 30, 2024).
Ark. Fed. Ct. Says “Gross Proceeds” Lease Doesn’t Prohibit PPC Deductions under Pooling Statute. In a case involving a dispute over royalty payments and deductions for post-production costs, a federal court rejected claims that lessees contractually relinquished their rights to deduct post-production expenses under Arkansas’ blended royalty statute by entering into leases with “gross proceeds” royalty clauses, holding instead that the blended royalty provision applies to forced pooling orders. Pennington v. BHP Billiton Petroleum (Fayetteville), LLC, --- F. Supp. 3d ----, No. 4:20-CV-00178-LPR, 2024 WL 4652196 (E.D. Ark. Nov. 1, 2024).
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