Reese Marketos Energy Law

Fifth Circuit Clarifies When Creditors May Pursue Direct Claims Against Secured Lenders in Oil & Gas Bankruptcies

The Fifth Circuit held that unsecured bondholders' fraud claims against Chesapeake Energy, a secured creditor of bankrupt Seven Seas Petroleum, were not property of the bankruptcy estate because they alleged direct injury to bondholders independent of harm to the debtor. The decision establishes that creditors may pursue their own state-law claims against secured lenders who allegedly participated in fraudulent conduct that directly induced bond purchases, even after a confirmed bankruptcy plan releases the secured creditor from liability.

Texas Supreme Court Authorizes Netback Method for "Market Value at the Well" Royalty Clauses in $340 Million Barnett Shale Dispute

Texas Supreme Court reversed the Fifth Court of Appeals in a $340 million Barnett Shale dispute, holding that post-production gathering and compression costs are deductible from royalty payments under "market value at the well" lease language even when gas is sold downstream. The decision expressly distinguishes Heritage Resources and confirms that "market value at the well" clauses permit operators to deduct reasonable post-production costs when calculating royalty payments.

Texas Supreme Court Overturns Decades of Precedent on Subject Matter Jurisdiction Over Foreign Mineral Rights

The Texas Supreme Court reversed the Fort Worth Court of Appeals and disapproved six prior decisions, holding that Texas courts have subject matter jurisdiction over in personam claims involving West Virginia mineral rights where the defendant is subject to personal jurisdiction in Texas. The Court rejected the 'gist of the action' test that had barred Texas courts from adjudicating disputes where title to foreign property was central to the claims.