Oil & Gas Litigation Analysis

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Oil & Gas Litigation · Case Analysis
Joel Reese, Attorney

Home › Cases › SM Energy Company v. Buzzard Roost Farms, Inc. and C&L Solutions, Inc.
Lease Litigation

SM Energy Company v. Buzzard Roost Farms, Inc. and C&L Solutions, Inc.

Court of Appeals of Texas, Eastland 11-23-00222-CV resolved

The Eastland Court of Appeals affirmed in part a $1,449,179 jury award to surface owners after SM Energy breached a right of first refusal provision in a surface use agreement by failing to offer placement of saltwater disposal wells on their property before drilling such wells within five miles of the surface lands. The court held that while the agreement unambiguously obligated SM Energy to offer well placement, the operator's purchase of third-party land for the disposal wells was not part of the required offer, and surface owners could recover skim oil revenue damages based on SM Energy's own calculations.

Analysis

Eastland Court Enforces Right of First Refusal for Saltwater Disposal Well Placement in Surface Use Agreement

The Eastland Court of Appeals affirmed in part a $1,449,179 jury award to surface owners after SM Energy breached a right of first refusal provision in a surface use agreement by failing to offer placement of saltwater disposal wells on their property before drilling such wells within five miles of the surface lands. The court held that while the agreement unambiguously obligated SM Energy to offer well placement, the operator's purchase of third-party land for the disposal wells was not part of the required offer, and surface owners could recover skim oil revenue damages based on SM Energy's own calculations.

Joel Reese  |  Jul 20, 2026
Right of First Refusal Surface Damage Texas Court of Appeals Saltwater Disposal Benefit-of-the-Bargain Damages