Lease Litigation

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

Joel Reese | Jun 02, 2026

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.