On Friday, a deeply divided Texas Supreme Court—in a surprising turn of events—disturbed long-standing rules for interpreting mineral conveyances in its 5-4 decision in Wenske v. Ealy. There, when the Wenskes bought property in Lavaca County in 1998, the sellers kept for themselves a 1/4th non-participating royalty interest (the “NPRI”). Five years later, the Wenske […]
Texas Supreme Court Upends Traditional Rules of Construction for Mineral Deeds
Federal Class Action Serves as Warning to Oil and Gas Industry
On March 2, 2016, Aubrey McClendon, the former head of Chesapeake Energy, was indicted on federal antitrust charges. One day later this pioneer and leader in the shale revolution tragically died in a car accident in Oklahoma. Although the criminal proceeding against him will be dismissed, the indictment has already given rise to federal class […]
Supreme Court Reverses El Paso Court, Concludes that Production Payments Cannot Outlive Leases
On Friday, the Texas Supreme Court ruled that production payments, like overriding royalty payments, cannot survive the termination of their respective oil and gas leases. In doing so, the Supreme Court stamped out a potentially “backwards” line of authority that we discussed in our post from September. It’s important to quickly review the lifespan of […]
Overriding Royalties: They are free of production costs, but are they free of post-production costs?
In Chesapeake v. Hyder, the Texas Supreme Court addressed the proper calculation of a “cost-free” overriding royalty interest (“ORRI”). The court has now asked the Hyders to respond to Chesapeake’s motion for rehearing of the decision in the Hyders’ favor. The lawsuit arises out of a disputed, nonstandard ORRI clause that gives the Hyders a […]
Post-Production Deductions and Affiliate Sales: A Potential Minefield for Unwary Operators
Chesapeake has not had a good run in the courts lately. It has been hammered over the last year with lawsuits brought by mineral lessors alleging that the natural gas giant has swindled them out of millions of dollars in royalty payments. And the plaintiffs in these cases are winning–or settling out of court for what […]