Texas Supreme Court Clarifies Notice Requirements and Non-Consent Penalties Under AAPL Form 610 Operating Agreement

The Texas Supreme Court resolved a dispute over the 1977 AAPL Form 610 Model Form Operating Agreement, holding that operators may commence drilling before the thirty-day election period expires and that non-consent penalties are enforceable risk-allocation mechanisms rather than liquidated damages. The decision reversed the Court of Appeals and disapproved Hamilton v. Texas Oil & Gas Corp., clarifying that a working interest owner's election not to participate in proposed operations is not a breach of contract.