Texas Appellate Courts Apply Heritage Resources to Defeat 'Free of Cost' Addenda in Market-Value-at-the-Well Leases

Texas appellate courts are reversing jury awards favoring royalty owners where lease addenda contain 'free of cost' language but the underlying lease establishes market value at the well as the valuation point. Applying Heritage Resources v. NationsBank, courts hold that such addenda constitute surplusage because no post-production costs are incurred at the wellhead under Texas's 'at the well' framework, rendering the addenda legally inoperative.