Fort Worth Court Rejects 'Proceeds Plus' Theory in Barnett Shale Wellhead Royalty Dispute

The City of Crowley challenged TotalEnergies' royalty calculations under a lease requiring payment based on "market value at the point of sale," arguing that lease provisions required including the third-party buyer's post-sale postproduction costs in the royalty base. The Fort Worth Court of Appeals affirmed summary judgment for TotalEnergies, holding that because the point of sale was the wellhead and no postproduction expenses were incurred prior to that point, the lease unambiguously fixed the wellhead as the valuation point and did not create a "proceeds plus" royalty.