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Lease Litigation
Texas Supreme Court Reverses Hughes v. Cantwell, Holds Habendum Clause Does Not Require Personal Production by Lessee
Joel Reese | Jul 20, 2026
The Texas Supreme Court reversed decades of precedent, holding that habendum clauses using passive voice—providing leases continue "so long as minerals are produced"—do not require the lessee to personally produce minerals to maintain the lease. The Court disapproved Hughes v. Cantwell and Cimarex Energy Co. v. Anadarko Petroleum Corp., applying the default rule against forfeiture of mineral interests where production in commercial paying quantities had continuously occurred on the land.
Dallas Court Affirms Special Judge Verdict Dismissing Investor's Fraud Claims Against Oil and Gas Joint Venture Operator
Joel Reese | Jul 20, 2026
A petrophysicist who invested $53,000 in a dry hole joint venture and $109,850 in a forfeited Tuscaloosa prospect brought fraud and fiduciary duty claims against Aresco, LP and its president, challenging the operator's conduct as managing venturer. The Dallas Court of Appeals affirmed a special judge's verdict rejecting all claims after finding no fraudulent inducement, misrepresentation, or nondisclosure relating to the Tannehill #1 Joint Venture and determining the investor lacked standing for Tuscaloosa claims because his LLC, not he individually, was the purchaser.
Texas Supreme Court Resolves Produced Water Ownership: Mineral Lessee Prevails Over Surface Estate in First-Impression Case
Joel Reese | Jul 20, 2026
The Texas Supreme Court held that mineral rights lessees, not surface estate lessees holding produced water lease agreements, possess the right to custody, control, and disposition of constituent water in produced water from hydrocarbon operations. The court ruled that while water is not part of the mineral estate, the mineral lessee's rights to possess and dispose of produced water as an incident of hydrocarbon production cannot be reserved by the surface owner absent express language.
Eastland Court Reverses Surface Damage Claim Dismissal and Usury Award in Jones County Oil and Gas Lease Dispute
Joel Reese | Jul 20, 2026
The Eastland Court of Appeals reversed a trial court's refusal to try a surface owner's breach of lease claim for cattle deaths and land damage caused by a saltwater leak, holding that the petition's allegations of breach and property damage provided fair notice despite a prayer for relief requesting only declaratory judgment. The court also addressed whether demand letters seeking 18% monthly interest on unpaid surface damage claims constituted actionable usury under the Texas Finance Code.
Eastland Court Bars Lessor's Self-Help Burial of Lessee's Flow Lines, Reverses $30,000 Damage Award
Joel Reese | Jul 20, 2026
The Eastland Court of Appeals reversed a $30,000 award to a successor lessor who hired a third party to bury Byrne Oil Company's flow lines after the lessee allegedly breached a lease provision requiring burial below plow depth upon request. The court held that self-help abatement was unavailable to the successor lessor, even though the flow lines remained property of the lessee as owner of the dominant mineral estate.
Fourth Court Holds TCPA Does Not Apply to Implied Covenant Drainage Claim Despite Railroad Commission Permit Application
Joel Reese | Jul 20, 2026
EOG Resources sought dismissal under the Texas Citizens Participation Act of CNH's failure-to-protect-from-drainage claim, arguing the claim was based on its Railroad Commission permit application for a Gary 2H Well drilled 148 feet from the Hundley Lease boundary—closer than the 330-foot lease-line requirement under Eagleville Field Rules. The San Antonio Court of Appeals affirmed denial of the TCPA motion in a memorandum opinion, concluding the TCPA does not apply to CNH's claim.
Fourteenth Court Holds Non-Signatory Bound by Forum-Selection Clause Through Incorporation in Alaska JOA Dispute
Joel Reese | Jul 20, 2026
The Fourteenth Court of Appeals affirmed denial of a special appearance by Cornucopia Oil and Gas, holding that an operator who executed an Amended Joint Operating Agreement governing Alaska's Kitchen Lights Unit was bound by a Texas forum-selection clause in an Assignment it did not sign, where the Amended JOA expressly stated it was "subject to the Assignment" and that "in the event of any conflict between this Agreement and the Assignment, the Assignment Agreement shall control." The dispute arose from allegations that Cornucopia breached carried interest provisions by charging Prohibited Expenses to working interest owners.
Eastland Court Denies Mandamus Enforcing Alberta Forum-Selection Clause in Composite Pipe Dispute
Joel Reese | Jul 20, 2026
A Canadian composite pipe supplier sought mandamus relief to enforce an Alberta forum-selection clause against a Texas oil and gas exploration and production company, but the Eastland Court of Appeals held that no valid agreement arose where order acknowledgements expressly required acceptance by signature and the company never signed. The court further rejected equitable estoppel arguments based on the company's receipt of credits under a returns provision, finding that provision was not contained in the general terms and conditions requiring signature for acceptance.
Fifth Circuit Holds 40-Day Production Cessation During Bankruptcy Does Not Terminate Texas Oil and Gas Leases
Joel Reese | Jul 20, 2026
The Fifth Circuit affirmed that EP Energy's temporary 40-day cessation of production from south Texas wells during its Chapter 11 bankruptcy and the COVID-19 pandemic did not automatically terminate mineral leases under Texas law, rejecting lessors' administrative expense claims premised on trespass damages. The court held that the Bankruptcy Court had subject-matter jurisdiction over the underlying state-law lease-termination claims when adjudicating the lessors' request for payment of administrative expenses under 11 U.S.C. § 503(b)(1)(A).
Ninth Court of Appeals Reverses on Habendum Clause Construction: Whether 90-Day Cessation Provision Replaces Clifton Prudent Operator Standard
Joel Reese | Jul 20, 2026
Zarvona Energy secured reversal of summary judgment denial in dispute over whether identical oil and gas leases covering Tyler and Polk County acreage terminated under a 90-day cessation provision or required application of the Clifton v. Koontz reasonably-prudent-operator standard for measuring production in paying quantities. The appellate court addressed three controlling questions: whether the lease's 90-day cessation language replaces the traditional Clifton standard, whether cessation provisions apply on a pooled-unit basis or to all retained acreage collectively, and whether the retained acreage clause operates as a one-time snapshot provision or permits rolling partial terminations.
Fourth Court Affirms $14.9 Million Breach Award Against Surface Owner in Water Purchase Agreement Dispute Over Access Rights
Joel Reese | Jul 20, 2026
The San Antonio Court of Appeals affirmed a $14.9 million breach of contract judgment against surface owners Dean Davenport and related entities in a dispute with EOG Resources over a 2022 water purchase agreement. The Davenports had sought to restrict all of EOG's access to a single gate under the agreement, while EOG contended the restriction applied only to water-related operations, with the trial court granting summary judgment in EOG's favor before proceeding to a jury trial on damages.
Choice-of-Law Dispute Over Oilfield Indemnity Obligations: Texas MSA Prevails Over Louisiana Oilfield Indemnity Act
Joel Reese | Jul 20, 2026
SWN Production and Independence Contract Drilling sought summary judgment to enforce Texas-law indemnity and additional-insured obligations under a Master Service Agreement after St. Paul Fire and Marine denied coverage based on Louisiana Oilfield Indemnity Act (LOIA) voidability arguments following a 2021 Louisiana wellsite injury. The Southern District of Texas granted summary judgment to the plaintiffs, though the court's full reasoning on key issues including judicial estoppel was not available in the published excerpt.
Austin Court of Appeals Affirms TCPA Dismissal of Tortious Interference Claims Over Top-Leasing Activities
Joel Reese | Jul 20, 2026
The Austin Court of Appeals affirmed dismissal under the Texas Citizens Participation Act of Trivista Oil Company's tortious interference, trespass to try title, and declaratory judgment claims against Fort Apache Energy, which had contacted Trivista's lessors to solicit top leases or lease terminations. The court held that Fort Apache's communications with landowners constituted protected speech on matters of public concern under the TCPA, and the commercial-speech exemption did not apply to preclude dismissal.
Business Court Dismisses Leaseholder's Third-Party Beneficiary Claim in Directional Drilling Dispute
Joel Reese | Jul 20, 2026
The Business Court of Texas granted Octane Energy's plea to the jurisdiction, dismissing leaseholder Slant WTX Holdings II, LLC for lack of standing to enforce a letter agreement containing reciprocal waivers of drilling objections between operator Slant Operating LLC and adjacent operator Octane Energy. The court held that Slant WTX Holdings failed to establish third-party beneficiary status because the contracting parties did not enter into the agreement with the intention to directly benefit the leaseholder.
District Court Rules for Pioneer in Winter Storm Uri Force Majeure Dispute Over Firm Gas Delivery Obligations
Joel Reese | Jul 20, 2026
Following remand from the Fifth Circuit, the Northern District of Texas conducted a bench trial on whether Pioneer Natural Resources properly invoked force majeure to excuse non-delivery of 20,000 MMBtu/day of Permian Basin gas during Winter Storm Uri's February 2021 freeze-offs. The court found Pioneer did not breach its NAESB Base Contract Firm delivery obligations to gas trader MIECO, resolving disputed material facts regarding whether performance was actually prevented and whether Pioneer exercised due diligence under Section 11 of the parties' contract.
Eastern District of Texas Denies TRO Seeking to Block Gulf of Mexico Well Abandonment in Joint Operating Agreement Dispute
Joel Reese | Jul 20, 2026
W&T Energy sought emergency injunctive relief to prevent Murphy Exploration from plugging and abandoning the Medusa SS06 well in the Gulf of Mexico, arguing the well could be reworked to extract significant reserves despite a 2016 sand control system failure. The court denied the motion, holding that economic harms from lost future production and prior investments are calculable as monetary damages and do not constitute irreparable injury warranting preliminary injunctive relief.
Ninth Court Reverses Default Judgment in $1.3M Operating Agreement Dispute Over E-Filing Deadline Calculation Under Rule 21(f)(5)
Joel Reese | Jul 20, 2026
The Beaumont Court of Appeals reversed a $1,379,281.69 default judgment against Proline Energy Resources in an oil and gas operating agreement dispute, holding that the trial court erred in refusing to consider a motion for new trial based on lack of plenary power. The court determined the motion was timely under Texas Rule of Civil Procedure 21(f)(5) where it was transmitted to the electronic filing service provider before midnight on the due date, despite subsequent technical failures and clerk's office rejections.
Eastland Court Affirms Summary Judgment on Fraud Claim Where Oral Drilling Promises Contradicted Paid-Up Lease Terms
Joel Reese | Jul 20, 2026
The Eastland Court of Appeals affirmed summary judgment for Diamondback E&P in a multi-claim dispute brought by Evans Resources alleging fraud, breach of contract, bad faith pooling, and rule against perpetuities violations concerning horizontal well pad development rights in Midland County. The court held that landowners' reliance on oral representations about timely horizontal drilling was unjustifiable where the lease granted only a discretionary right to drill additional wells beyond initial obligations during a three-year primary term.
Fourteenth Court Holds 'Mutually Agreed' Seismic Permit Provision Creates Enforceable Condition Precedent with No Duty to Negotiate
Joel Reese | Jul 20, 2026
The Fourteenth Court of Appeals affirmed summary judgment for a south Texas landowner, holding that a surface use agreement provision requiring Endeavor Natural Gas to obtain a "mutually agreed-upon seismic surface use permit" before conducting geophysical operations was an enforceable condition precedent. The court rejected Endeavor's arguments that the provision was an unenforceable agreement to agree or that Comanche's refusal to negotiate excused performance.
El Paso Court Construes Retained-Acreage Clause as Covenant, Not Special Limitation, in Permian Lease Termination Dispute
Joel Reese | Jul 20, 2026
MRC Permian Company missed a drilling deadline under its lease and sought to invoke force majeure, while Point Energy Partners claimed successor rights and the lessors argued termination, spawning disputes over quasi-estoppel, retained-acreage clause construction, and horizontal wellbore measurement methodology. On remand from the Texas Supreme Court, the El Paso Court of Appeals held that the lease's retained-acreage clause was a covenant rather than a special limitation, meaning breach could not result in automatic lease termination or limit production unit size.
Eastland Court Enforces Right of First Refusal for Saltwater Disposal Well Placement in Surface Use Agreement
Joel Reese | Jul 20, 2026
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.
Business Court Strikes Down Third-Party Beneficiary Claims in Off-Lease Penetration Point Waiver Dispute
Joel Reese | Jul 20, 2026
The Business Court of Texas granted Octane Energy's motion to strike untimely summary judgment evidence and granted in part its motion for summary judgment in a dispute over a letter agreement between oil and gas operators exchanging waivers for off-lease penetration point permit applications. The case involves whether non-signatory leasehold owner Slant WTX Holdings II, LLC can recover damages as a third-party beneficiary when operator Slant Operating, LLC claims breach for failure to waive objections to drilling the Gardendale Wells.
Western District of Texas Dismisses Fraudulent Inducement Claim Against Generator Manufacturer Based on Lack of Privity
Joel Reese | Jul 20, 2026
Alkane Midstream's $5.6 million purchase of nineteen generator units for remote oilfield operations spawned fraudulent inducement claims against manufacturer Mesa Natural Gas Solutions, despite Mesa not being a party to the purchase agreement executed through distributor Alterra Systems. The Western District of Texas magistrate judge recommended dismissal, holding that under Texas law fraudulent inducement requires the existence of a contract between the parties and arises only in the context of such a contract.
Business Court Enforces Letter Agreement Requiring Reciprocal Off-Lease Penetration Point Waivers Between Adjacent Operators
Joel Reese | Jul 20, 2026
Slant Operating obtained partial summary judgment against Octane Energy for breach of a letter agreement requiring reciprocal waivers for drilling from off-lease penetration points on adjacent leaseholds, after Slant had already provided its waiver to Octane. The Business Court rejected Octane's defenses that the future waiver provision was too indefinite to enforce and that Slant was required to exhaust Railroad Commission administrative remedies before pursuing breach of contract claims.
Standing and Damages in Oil Purchaser Payment Dispute: District Court Rejects Dismissal Despite Third-Party Judgment Satisfaction
Joel Reese | Jul 20, 2026
Stroud Production, operator of the Kelly Bayou Jeter Field Wide Unit in Miller County, Arkansas, sued oil purchaser DK Trading & Supply for breach of contract and violation of Arkansas Code § 15-74-601(a) after DKTS redirected working interest revenue to a third-party judgment holder without garnishment proceedings. Judge Andrew S. Hanen of the Southern District of Texas denied DKTS's motion to dismiss, though the full reasoning is not yet available in the published portion of the opinion.
Texas Supreme Court Bars Fraud Claims When Paid-Up Lease Terms Contradict Oral Development Promises
Joel Reese | Jul 20, 2026
The Texas Supreme Court held that a mineral lessor could not justifiably rely on a lessee's alleged oral representations about development intent and bonus payments when the parties executed a paid-up lease giving the lessee an unqualified right to transfer the lease without drilling. The Court reinforced that reliance on extra-contractual representations is unjustifiable as a matter of law when a written agreement's express terms directly contradict those oral promises.
First Court Reverses Severance of Interwoven Midstream Cost Inflation Claims in Williston Basin JOA Dispute
Joel Reese | Jul 20, 2026
A minority working interest owner in Williston Basin wells operated under a 1999 Joint Operating Agreement alleged that Chord Energy and affiliated midstream entities collusively inflated gas processing costs through 2017 Midstream Agreements, asserting ten claims including breach of contract, fraud, civil conspiracy, and alter ego theories against upstream operators, midstream service providers, and individual executives. The First Court of Appeals reversed the trial court's severance of dismissed tort claims from surviving contract claims, holding the claims were interwoven because each incorporated allegations that the parties "collusively agreed to artificially inflate gas processing costs" and risked inconsistent rulings on whether an express contract bars quasi-contract restitution theories.
Texas Business Court Distinguishes Conditional Assignment from Agreement to Transfer in Eagle Ford Farmout Dispute
Joel Reese | Jul 20, 2026
In a McMullen County Eagle Ford farmout dispute, the Business Court of Texas addressed whether a 2009 farmout agreement constituted a conditional assignment vesting immediate interest in the farmees subject to divestment, or merely an agreement to transfer requiring prerequisite performance. The court's partial summary judgment ruling turned on whether defendants' alleged failure to properly designate earned acreage within contractual deadlines would trigger automatic reversion of the leases to the farmors.
Fourteenth Court Reverses Want-of-Prosecution Dismissal Where Contractor Awaited Whitney Certificate for Service on Secretary of State
Joel Reese | Jul 20, 2026
The Fourteenth Court of Appeals reversed dismissal of an oilfield contractor's breach of contract and mineral lien foreclosure suit against Rise Petroleum Investments LLC, holding that Gulf Coast Lease Service's failure to timely move for default judgment was not intentional or the result of conscious indifference where the Secretary of State's delay in issuing the required Whitney certificate made filing impossible. The court applied Rule 165a(3)'s standard for reinstatement, finding that counsel's inability to obtain jurisdictional proof before the deadline negated intent or conscious indifference.
Midland Court Addresses Fraudulent Inducement and Agency Theory in $5.58 Million Generator Equipment Dispute
Joel Reese | Jul 20, 2026
Alkane Midstream LLC alleges Mesa Natural Gas Solutions fraudulently induced its purchase of 19 generator units by misrepresenting field testing and reliability of a newly released engine model, with all units allegedly suffering systemic mechanical failures within weeks of deployment. The Western District of Texas must determine whether Alkane adequately pleaded fraudulent inducement under Rule 9(b)'s heightened particularity standard when the purchase contract was executed with Mesa's alleged agent Alterra rather than Mesa directly.
Eastland Court Denies Disqualification in $534 Million Permian Basin Top Lease Dispute After Defense Counsel Contacted Former In-House Counsel
Joel Reese | Jul 20, 2026
Pioneer Natural Resources sought mandamus relief after the trial court denied its motion to disqualify defense counsel who contacted Pioneer's former in-house counsel outside formal discovery channels in a $534 million tortious interference case involving top leases in the Permian Basin. The Eastland Court of Appeals denied the petition, affording great deference to the trial court's credibility determinations and factual findings regarding whether defense counsel's communications exceeded a narrow attorney-client privilege waiver.
Fourteenth Court Enforces 'Mutually Agreed' Seismic Permit Requirement as Condition Precedent, Rejecting Implied Duty to Negotiate
Joel Reese | Jul 06, 2026
The Fourteenth Court of Appeals held that a surface use agreement's requirement that Endeavor Natural Gas conduct seismic operations "only after" entering into a "mutually agreed-upon seismic surface use permit" with landowner Comanche Maverick Ranch constituted an enforceable condition precedent that had not been satisfied. The court rejected Endeavor's arguments that the provision was an unenforceable agreement to agree and that Comanche's refusal to negotiate excused compliance with the condition precedent.
Business Court Enforces Letter Agreement Requiring Competitor to Waive Objections to Off-Lease Drilling Applications
Joel Reese | Jul 06, 2026
The Business Court of Texas granted partial summary judgment to Slant Operating on its breach of contract claim against Octane Energy, holding that a letter agreement requiring reciprocal waivers of objections to off-lease penetration point drilling applications was a valid, enforceable contract with sufficiently definite terms. The court rejected Octane's arguments that the future waiver provision was unenforceable for indefiniteness and that Slant was required to exhaust administrative remedies before the Texas Railroad Commission before pursuing breach of contract claims.
Fifth Circuit Affirms Dismissal of Fraud Claims Against Oil and Gas Joint Venture Operator After Dry Hole
Joel Reese | Jul 06, 2026
The Dallas Court of Appeals reversed a summary judgment that would have rejected fraud and fiduciary duty claims brought by a petrophysicist investor against Aresco, LP and its president following the plugging and abandonment of the Tannehill #1 Joint Venture as a dry hole and forfeiture of the Tuscaloosa #1 Joint Venture interest for nonpayment of operations assessments. The court held that Aresco and Laxton failed to meet their summary judgment burden on the investor's individual claims, remanding those claims for further proceedings while affirming the judgment as to claims brought on behalf of the investor's LLC.
Eastland Court Bars Lessor Self-Help on Pipeline Burial Disputes, Reverses $30,000 Damage Award
Joel Reese | Jul 06, 2026
The Eastland Court of Appeals reversed a $30,000 award to a successor lessor who hired a third party to bury over 10,000 feet of above-ground flow lines after the lessee delayed compliance with the lease's "bury below plow depth" provision, holding that self-help abatement was unavailable where suit had been pending for over two years and legal remedies remained available. The court rejected the lessor's argument that the lease's sixty-day notice provision established an exclusive remedy precluding judicial enforcement of the burial obligation.
Fourteenth Court Enforces 'Mutually Agreed' Seismic Permit Requirement as Condition Precedent, Rejecting Operator's Duty-to-Negotiate Theory
Joel Reese | Jul 06, 2026
The Fourteenth Court of Appeals affirmed summary judgment for a south Texas landowner, holding that surface use agreement language requiring seismic operations "only after" the parties entered into a "mutually agreed-upon seismic surface use permit" created an enforceable condition precedent with no implied duty to negotiate. Endeavor Natural Gas III, LLC argued the provision was an unenforceable agreement to agree and alternatively that Comanche Maverick Ranch Investments, L.P.'s refusal to negotiate excused performance, but the court held "mutually agree" gave each party an independent right to withhold consent.
Texas Business Court Holds Force Majeure Clause Excused Spot Market Purchases and Buybacks After Winter Storm Uri
Joel Reese | Jul 06, 2026
The Business Court of Texas ruled that modified NAESB contract language expressly relieving a party claiming force majeure of any obligation to seek alternative gas supplies excused Marathon Oil from purchasing spot-market gas or buying back delivery obligations after a winter storm disrupted its natural gas production. The decision clarifies that parties to oil and gas contracts can contractually limit the scope of "reasonable efforts" required under force majeure provisions, even when such efforts might otherwise be commercially feasible.
El Paso Court Rejects Common-Law Bad-Faith Washout Claims and Narrows Lease Surrender 'Good Faith' Obligations
Joel Reese | Jul 06, 2026
The El Paso Court of Appeals affirmed a take-nothing judgment against override owners in Reeves County whose overriding royalty interests were extinguished when Cimarex surrendered a producing lease to the mineral owner, holding that Texas common law does not recognize a bad-faith washout claim. The court construed the lease's surrender clause requiring 'good faith' as imposing only a ministerial duty to deliver a recordable release instrument, not a duty governing the lessee's business decision whether to surrender.
Ohio Supreme Court Holds Oil-and-Gas Landmen Must Be Licensed Real Estate Brokers to Recover Compensation for Lease Negotiation
Joel Reese | Jul 06, 2026
The Supreme Court of Ohio held that oil-and-gas land professionals who negotiate oil-and-gas leases for compensation must hold real-estate-broker licenses under Ohio Rev. Code §§ 4735.01(A) and 4735.02(A), affirming dismissal of Thomas Dundics's claims against Eric Petroleum Corporation. The court applied the statute's unambiguous definition of "real estate" to include "leaseholds" and "any and every interest or estate in land," rejecting arguments that the unique nature of oil-and-gas leases creates an exception to the licensing requirement.
Co-Tenant Drilling Does Not Satisfy Lessee's Unless Clause Obligations: Hughes v. Cantwell
Joel Reese | Jul 06, 2026
The El Paso Court of Civil Appeals held that a lessee holding an undivided 1/128th mineral interest could not rely on a co-tenant's drilling operations to satisfy the lease's unless clause requiring commencement of operations or payment of delay rentals, resulting in automatic termination when Hughes failed to pay the $1.00 per acre rental due November 8, 1973. The court rejected arguments that absence of the phrase "by the lessee" in the drilling commencement language allowed third-party operations to maintain the lease, finding the instrument's entirety demonstrated obligations were exclusively assigned to the named lessee.
Co-Tenant Production Cannot Extend Bottom Lease Under Habendum Clause: Cimarex v. Anadarko
Joel Reese | Jul 06, 2026
The El Paso Court of Appeals held that a mineral lessee's habendum clause did not permit the lessee to rely on its co-tenant's production to extend the lease into the secondary term, and that the lessee's payment of royalties on its share of the co-tenant's production did not prevent lease termination. The court rejected estoppel arguments based on lessors' acceptance of royalty payments and found that a settlement agreement between the parties was not a joint operating agreement.
Fifth Circuit Holds Co-Tenant Drilling Does Not Satisfy Unless Clause for Separate Undivided Interest Lease
Joel Reese | Jul 06, 2026
The Fifth Circuit affirmed termination of an oil and gas lease covering an undivided interest where the lessees failed to pay delay rentals or commence drilling operations, holding that drilling by another company holding a lease on different undivided interests in the same tract could not satisfy the unless clause. The court rejected appellants' argument that production language in the habendum clause permitted them to hold the lease without providing consideration through their own drilling operations.
Fifth Circuit Clarifies Force Majeure Standards in Natural Gas Sales Contracts After Winter Storm Uri
Joel Reese | Jul 06, 2026
The Fifth Circuit held that a force majeure clause in a natural gas sales agreement does not require literal impossibility of performance, and that 'seller's gas supply' refers only to gas the seller produces from its own operations—not replacement gas available on the spot market. The court reversed summary judgment on whether Pioneer exercised contractually-required due diligence to overcome Winter Storm Uri's impacts on its Permian Basin gas deliveries to MIECO.
Legal Malpractice and Collateral Estoppel: When Arbitration Awards Don't Bind Subsequent Litigation Over Contract Interpretation
Joel Reese | Jul 06, 2026
Continental Holdings sued its former counsel for malpractice after arbitrators denied benefit-of-the-bargain damages in a breach of contract action involving a geophysical services vessel charter, arguing the lawyers failed to meet the burden of proof on lost profits. The Eastland Court of Appeals affirmed summary judgment for the defense lawyers, holding that a limitation-of-liability provision in the underlying contract precluded recovery of direct profits damages regardless of counsel's performance, and that Continental waived any collateral estoppel argument by raising it for the first time in a motion for rehearing.
Texas Supreme Court Clarifies Notice Requirements and Non-Consent Penalties Under AAPL Form 610 Operating Agreement
Joel Reese | Jul 06, 2026
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.
Western District of Texas Applies JOA Non-Consent Penalties to Multi-Section Horizontal Wells Traversing Contract Area
Joel Reese | Jul 06, 2026
McCully-Chapman challenged Ovintiv's application of non-consent penalties under a 1982 AAPL form JOA to horizontal wells drilled from surface locations outside the Contract Area but producing through Section 46, arguing the JOA only governed operations "solely within" the Contract Area. The Western District of Texas rejected McCully's position, holding that the JOA's broad language—covering "any well on the Contract Area" and operations to "explore and develop" the parties' interests—applied to allocation wells that traverse and produce from the Contract Area even when drilled from neighboring sections.
Fourth Court Addresses Subject Matter Jurisdiction Over Hypothetical JOA Declarations and Cross-Netting of Multi-Agreement Obligations
Joel Reese | Jul 06, 2026
The San Antonio Court of Appeals held that a trial court lacked subject matter jurisdiction under the UDJA to render a declaratory judgment resolving hypothetical obligations under a joint operating agreement where the actual controversy—whether Marathon owed 1776 unpaid costs, interest, and revenues under three separate JOAs—turned on undisputed facts that Marathon never paid required cash calls. The court affirmed summary judgment for 1776 on its breach of contract claim seeking unpaid JOA obligations, rejecting Marathon's challenges to damage calculations that cross-netted amounts owed across multiple agreements and affirming exclusion of Marathon's fraud counterclaim for failure to establish a duty to disclose.
Tyler Court of Appeals Addresses Subsurface Trespass, Expert Damages Testimony, and Bad Faith Pooling Claims
Joel Reese | Jul 06, 2026
The Tyler Court of Appeals held that lessor Elton Goodwin possessed a legally protected ownership interest in the subsurface at the depth of XTO Energy's cased wellbore intrusion sufficient to support a trespass cause of action, but reversed the damages award as unsupported by reliable expert testimony. The court further ruled that XTO had no implied duty to prevent drainage from wells drilled on adjoining non-owned leased properties, and applied the voluntary payment rule to bar XTO's unjust enrichment counterclaim.
Texas Supreme Court Clarifies Recoupment Defense and Statute of Limitations in Lease Breach Claims
Joel Reese | Jul 06, 2026
The Texas Supreme Court held that a lessee's claim for liquidated damages arising from a lessor's breach of the obligation to deliver possession on a specified date constitutes an independent cause of action subject to the statute of limitations, and cannot be asserted as recoupment against a later rent claim. The Court distinguished between defenses that merely negate a plaintiff's right to recover (not subject to limitations) and independent causes of action that do not go to the foundation of the plaintiff's demand (subject to limitations even when pleaded defensively).
Business Court Remands Produced Water Disposal Dispute Over Amount-in-Controversy Threshold
Joel Reese | Jul 06, 2026
The Business Court of Texas remanded OWL AssetCo's breach-of-contract claim against EOG Resources arising from three produced water spills, finding that EOG failed to establish the $10 million jurisdictional threshold required under Section 25A.004(d)(1). EOG had removed the case asserting the amount in controversy exceeded $10 million based on OWL's indeterminate millions in compensatory damages and EOG's own counterclaim seeking approximately $929,192 in liquidated damages.
Thirteenth Court Reverses Summary Judgment on JOA Operator's Duty to Commence Drilling Operations After All Parties Consent
Joel Reese | Jul 06, 2026
The Corpus Christi-Edinburg Court of Appeals reversed a trial court's ruling that an operator's failure to timely commence proposed drilling operations in the Sugarloaf Prospect Area was not a breach of a 1982 AAPL-form JOA where all parties had elected to participate. The dispute centered on whether Article VI.B.1's resubmittal provision provided the exclusive remedy when Burlington Resources refused to drill wells, despite having elected to participate and the absence of force majeure conditions.
Business Court Bars Third-Party Beneficiary Damages in Off-Lease Penetration Point Waiver Dispute
Joel Reese | Jul 06, 2026
The Business Court of Texas granted in part Octane Energy's summary judgment motion in a dispute over a letter agreement that reciprocally waived objections to off-lease penetration point drilling permits, while also granting Octane's motion to strike untimely summary judgment evidence filed by Slant Operating and Slant WTX Holdings II. The plaintiffs had sought three categories of damages—lost revenue for six Gardendale Wells, lost revenue for 35 future unidentified wells, and drilling redesign costs—after Octane allegedly failed to provide a promised waiver for the Gardendale Wells.
Texas Business Court Denies Third-Party Beneficiary Standing to Leaseholder in Horizontal Drilling Waiver Dispute
Joel Reese | Jul 06, 2026
Slant WTX Holdings II, LLC, a leaseholder for Slant Operating LLC's proposed horizontal well with a penetration point off its leasehold, sought to enforce a reciprocal waiver agreement between Slant Operating and adjacent operator Octane Energy Operating, LLC. The Business Court sustained Octane's plea to the jurisdiction, holding that the leaseholder lacked standing as a third-party beneficiary because there was no evidence that Octane entered the letter agreement with the intention to benefit the leaseholder, and any benefit conferred was merely incidental.
Business Court Jurisdiction Upheld Over $10 Million Directional Drilling Waiver Agreement
Joel Reese | Jul 06, 2026
The Business Court of Texas denied Octane Energy's plea to the jurisdiction in a breach of contract action brought by Slant Operating, holding that Slant adequately pleaded that a letter agreement containing reciprocal waivers of objections to directional drilling applications constituted a qualified transaction with aggregate value exceeding the $10 million jurisdictional threshold. The court rejected Octane's arguments that the agreement's silence on consideration and alleged status as an unenforceable agreement to agree defeated jurisdiction, finding that the value of each waiver at the time of contracting—based on expected production of additional resources—was properly alleged to exceed $10 million.
Thirteenth Court Affirms Summary Judgment on Communitization Agreement Dispute Over Net Revenue Interest Calculations in Karnes County Unit
Joel Reese | Jul 06, 2026
Roane-Williams Texas Minerals, LLC, holding an unleased 1/36 mineral interest in 125 acres in Karnes County, challenged EOG Resources' net revenue interest calculations after EOG reduced the drilling unit from 823.15 acres to 702.24 acres by removing a tract that lacked pooling authority under the Ranch Lease. The Corpus Christi court affirmed summary judgment for EOG and Reagan Smith Energy Solutions, rejecting Roane's breach of contract claims based on the 2017 communitization agreement and joint operating agreement after Roane had executed WPAs, AFEs, and a horizontal unit designation all depicting the reduced 702.24-acre unit.
Indiana Court Applies Rule of Capture to Dismiss Coal Mine Methane Conversion Claims
Joel Reese | Jul 06, 2026
Pioneer Oil Company, holding an exclusive lease to produce methane from abandoned coal mine voids in Gibson County, sued adjacent lessee GCC and its partner ECC for trespass, conversion, and civil conspiracy after defendants unsealed a 1,500-foot tunnel originating on their parcel to draw methane from the underground voids. The Indiana Court of Appeals affirmed dismissal under Rule 12(B)(6), holding that the rule of capture precluded Pioneer's conversion claim because defendants captured the methane through operations entirely on their own leased property without physically entering Pioneer's leasehold.
Fifth Circuit Limits Post-Confirmation Bankruptcy Jurisdiction Over Midstream Restructuring Disputes
Joel Reese | Jul 06, 2026
The Fifth Circuit reversed lower courts, holding that a Chapter 11 debtor's post-confirmation settlement and restructuring agreements executed 18 months after plan confirmation were not "executory contracts" under the reorganization plan, stripping the bankruptcy court of "related-to" jurisdiction over a nondebtor midstream provider's state-law claims. The decision clarifies that executory contracts subject to assumption or rejection under 11 U.S.C. § 365 must have existed prepetition, limiting bankruptcy court jurisdiction over disputes involving agreements created after confirmation.
Thirteenth Court Grants Mandamus on Venue Selection Clause in Eagle Ford Assignment Dispute
Joel Reese | Jul 06, 2026
The Thirteenth Court of Appeals conditionally granted mandamus relief to INEOS, CNOOC, Jamestown, and Chesapeake entities, holding that a venue selection clause designating Nueces County was unenforceable because the assignment of fourteen oil and gas leases covering 633.22 acres in La Salle County did not constitute a "major transaction" under Texas Civil Practice and Remedies Code § 15.020. The dispute arose from Texas Lone Star Petroleum's claim that reversionary rights were triggered when wells drilled by assignees failed to satisfy production levels required in a Partial Assignment with an $850-per-acre purchase price totaling $538,237.
Bankruptcy Court Holds Texas Chapter 56 Mineral Lien Claimants Not Entitled to Chapter 67 Withholding Protections
Joel Reese | Jul 06, 2026
A Texas bankruptcy court denied a motion to stay pending appeal in a dispute over whether oilfield service providers holding Chapter 56 mineral liens can invoke Chapter 67's statutory withholding mechanism to intercept over $2.5 million in crude oil proceeds. The ruling affects Force Pressure Control and Axis Energy Services, which had demanded Plains Marketing withhold payments from debtor Barrow Shaver Resources' oil sales based on unpaid service claims totaling approximately $2.5 million.
Fourth Court Narrows TCPA Application in Oil and Gas Drainage Dispute: Implied Covenant Claims Survive Anti-SLAPP Motion
Joel Reese | Jul 06, 2026
EOG Resources sought dismissal under the Texas Citizens Participation Act of CNH's failure-to-protect-from-drainage claim, arguing the claim was based on its Railroad Commission permit application for a Gary 2H Well drilled 148 feet from the lease line in the Eagleville Field. The San Antonio Court of Appeals affirmed denial of the TCPA motion, holding that CNH's implied covenant claim was based on EOG's failure to drill an offset well to prevent drainage from the 276,420-barrel producer, not on EOG's communications with the Railroad Commission.
Fifth Circuit Enforces Mutual Waiver of Consequential Damages in Offshore Drilling Contract Despite Gross Negligence Claims
Joel Reese | Jul 06, 2026
The Fifth Circuit affirmed summary judgment dismissing Cantium's $27.3 million counterclaim for consequential damages arising from a lost offshore well near Louisiana, holding that the parties' mutual waiver in Section 15.21 of their Master Offshore Drilling Services Contract barred recovery for spread costs and well loss even where gross negligence or willful misconduct was alleged. The panel declined to reach the unsettled maritime law question of whether contractual indemnification for gross negligence violates public policy, finding the contract's plain language—designating redrilling as Cantium's "sole and exclusive remedy"—unambiguously foreclosed additional damages.
Choice-of-Law Analysis Voids Oilfield Indemnity Clause: Texas Federal Court Applies New Mexico's Absolute Anti-Indemnity Rule Despite Texas Choice-of-Law Provision
Joel Reese | Jul 06, 2026
ConocoPhillips sought to enforce a Master Service Agreement indemnity clause requiring Totem Well Service to defend and indemnify against claims arising from a Totem employee's personal injury in Carlsbad, New Mexico, but the Southern District of Texas granted summary judgment for Totem after finding a conflict between Texas and New Mexico oilfield anti-indemnity laws. The court's decision turned on three key questions: whether the MSA's § 21.3 validly disclaimed the Texas Oilfield Anti-Indemnity Statute, which state's law governed the indemnity obligation's scope, and whether the parties' choice-of-law provision was enforceable.
Fifth Circuit Clarifies Insurance Floor and Ceiling in Oilfield Mutual Indemnity Agreements Under TOAIA
Joel Reese | Jul 06, 2026
Century Surety, as subrogee of Triangle Engineering after paying $5 million on a personal injury settlement, sought reimbursement from Colgate Operating under a master service agreement requiring indemnity insurance "not less than $5 million" or the maximum amount permitted without violating TOAIA. The Fifth Circuit affirmed summary judgment for Colgate, holding that the MSA's insurance language established both a floor and ceiling of $5 million, rendering Colgate's $75 million excess policy irrelevant to Triangle's indemnity rights.
Fifth Circuit Reverses Dismissal of Duty-to-Defend Claim, Holds Contractual Settlement Negotiations Constitute 'Alternative Dispute Resolution Proceeding' Under CGL Policy
Joel Reese | Jul 06, 2026
The Fifth Circuit reversed dismissal of BPX Production Company's duty-to-defend claim against Lloyd's underwriters arising from a 7,000-foot cement plug that destroyed a Reeves County well, holding that contractually mandated settlement negotiations under a Master Services Agreement constitute an 'alternative dispute resolution proceeding' triggering coverage. The court resolved policy ambiguity in favor of the insured under Texas law, rejecting the insurer's argument that only formal ADR proceedings with consent invoke the duty to defend.
Eastland Court Enforces Right of First Refusal for Saltwater Disposal Wells in Surface Use Agreement
Joel Reese | Jul 06, 2026
SM Energy breached a surface use and compensation agreement's right of first refusal provision requiring it to offer surface owners the opportunity to place any saltwater disposal well drilled within five miles on their property, resulting in damages including $1,449,179 in skim oil revenue. The Eastland Court of Appeals held that the ROFR was triggered by SM Energy's choice to drill disposal wells within the specified radius, not by its separate decision to purchase third-party land for those wells.
Eastland Court Reverses Trial Court's Refusal to Try Surface Damage Claim Despite Fair Notice Pleading Standard
Joel Reese | Jul 06, 2026
In this Jones County oil and gas lease dispute, the Eastland Court of Appeals reversed a trial court's refusal to try a surface owner's breach of lease claim for cattle deaths and land damage from saltwater leaks, holding that allegations of breach and property damage satisfied Texas's fair notice pleading standard even without specific damages in the prayer for relief. The court also addressed whether demand letters seeking 18% monthly interest triggered usury counterclaims under the Texas Finance Code.
Eastland Court Affirms Summary Judgment on Fraud Claim Where Lease Terms Contradicted Alleged Oral Drilling Commitments
Joel Reese | Jul 06, 2026
The Eastland Court of Appeals affirmed summary judgment for Diamondback E&P in a multi-claim dispute involving alleged oral representations to drill horizontal wells, holding that landowners' reliance was unjustifiable where the paid-up lease granted only discretionary drilling rights beyond initial obligations. The court also excluded expert testimony on surface agreement damages, including a $6,670,000 diminution-in-value calculation, finding the opinions regarding city variance approvals were unreliable and based on assumed facts contradicted by the record.
District Court Dismisses State Land Conveyance Claims Against Diamondback, Holds Texas Relinquishment Act Inapplicable to 1948 Land Sales Act Conveyance
Joel Reese | Jul 06, 2026
Williams O&G Resources challenged Diamondback Energy's mineral development under the Texas Relinquishment Act of 1919, but the Western District of Texas held the Act inapplicable where land was conveyed from the State in 1948 under the Texas Land Sales Act of 1931. The court rejected Williams O&G's novel interpretation of the 1937 Wintermann decision, holding that land sold under the Land Sales Act is governed by its own terms, not by the Relinquishment Act.
El Paso Court Clarifies Retained-Acreage Clause as Covenant, Not Special Limitation, in Permian Lease Dispute
Joel Reese | Jul 06, 2026
MRC Permian Company missed a drilling deadline under its lease and sought declaratory relief that a force majeure clause prevented termination, while Point Energy Partners claimed successor rights and counterclaimed for breach. The El Paso Court of Appeals, on remand from the Texas Supreme Court, held that the lease's retained-acreage clause was a covenant rather than a special limitation, meaning breach could not result in automatic lease termination or limit production unit size, and further clarified that horizontal wellbore length must be measured from the kickoff point into the producing formation.
Texas Supreme Court Reinforces Parol Evidence Bar in Mineral Lease Fraud Claims
Joel Reese | Jul 06, 2026
The Texas Supreme Court held that a mineral lessor's fraud claims failed where alleged oral representations about development intent and bonus payments directly contradicted the unambiguous terms of a paid-up lease granting the lessee an unqualified right to transfer. The Court found reliance unjustifiable as a matter of law when a written agreement's substance conflicts with extra-contractual representations, even absent explicit contradictory language.
Fifth Circuit Clarifies Force Majeure Obligations and Allocation Practices in Natural Gas Marketing Contracts After Winter Storm
Joel Reese | Jul 06, 2026
The Fifth Circuit reversed partial summary judgment for Targa Gas Marketing on its force majeure defense during a severe winter storm, holding that genuine fact issues existed as to whether the marketer made reasonable efforts to procure gas from usual suppliers and the spot market before declaring force majeure. The court also affirmed a jury verdict on allocation practices, finding that usage of trade evidence supported a presumption that parties contracted with reference to industry practice requiring allocation of available gas to cheaper First-of-Month transactions before more expensive Gas Daily transactions.
Texas Supreme Court Rejects Personal Production Requirement in Passive-Voice Habendum Clauses
Joel Reese | Jul 06, 2026
The Texas Supreme Court reversed the El Paso Court of Appeals, holding that passive-voice habendum clauses in oil-and-gas leases providing that leases would continue "so long as minerals are produced from the land" did not require lessee Cromwell to personally produce minerals to maintain his working interest. The Court disapproved Hughes v. Cantwell and Cimarex Energy Co. v. Anadarko Petroleum Corp., applying the default rule against forfeiture of mineral interests where the habendum clauses did not clearly, precisely, and unequivocally require personal production by the lessee.
Texas Supreme Court Holds Produced Water Belongs to Mineral Estate Absent Express Reservation
Joel Reese | Jul 06, 2026
The Texas Supreme Court held in a matter of first impression that mineral rights lessees, rather than surface estate lessees holding produced-water lease agreements, possess the right to custody, control, and disposition of produced water from hydrocarbon production. The Court reasoned that water is not part of the mineral estate but remains with the surface estate unless expressly severed, yet the mineral lessee's rights necessarily include disposition of this inherent and inescapable byproduct of oil-and-gas operations.
Texas Business Court Holds Farmout Agreement Conveyed Fee Simple Determinable Interest Immediately, Rules Retained-Acreage Provisions Are Special Limitations
Joel Reese | Jul 06, 2026
Texas Business Court holds farmout agreement conveyed fee simple determinable interest in Eagle Ford Shale leases immediately upon execution, rejecting farmor's argument that title passed only after drilling performance, and rules retained-acreage provisions operate as special limitations causing automatic partial termination upon cessation of continuous drilling operations. Court further holds payout calculation for 30% reversionary back-in interest must be computed earning-well-by-earning-well, foreclosing farmor's theory that non-earning wells could independently trigger payout obligations.
Fifth Circuit Upholds Lease Grace Periods During COVID-19 Production Curtailments and Affirms Bankruptcy Court Jurisdiction Over Lease-Termination Disputes
Joel Reese | Jul 06, 2026
Fifth Circuit affirms that a 40-day cessation of production during the March 2020 COVID-19 oil price collapse did not terminate South Texas mineral leases under their express 120-day grace period, rejecting landowners' trespass and administrative expense claims in EP Energy's Chapter 11 bankruptcy. The panel held the bankruptcy court possessed core jurisdiction under 28 U.S.C. § 157(b)(2)(B) to resolve underlying state-law lease-termination issues as part of the administrative expense determination.
Texas Business Court Rules Farmout Agreements Convey Immediate Fee Simple Determinable Interest, Limits Payout to Earning Wells
Joel Reese | Jul 06, 2026
The Texas Business Court held that farmees in a farmout agreement acquire a vested fee simple determinable interest immediately upon execution, not upon completion of drilling obligations, rejecting the farmors' argument that the instruments were mere conditional assignments. Judge Sharp ruled that earned-acreage requirements function as special limitations and that payout calculations under the farmout must be tied exclusively to earning wells rather than subsequent non-earning wells drilled on already-earned acreage.
Texas Supreme Court Vests Produced Water Ownership in Operators Under Silent Leases
Joel Reese | Jul 06, 2026
The Texas Supreme Court held that operators own produced water generated from oil and gas production under leases silent on waste stream ownership, rejecting surface owners' attempt to convey those rights to a third-party water services company. COG Operating's $21 million disposal of 52 million barrels of produced water from 72 horizontal Delaware Basin wells became the subject of competing ownership claims when surface owners purported to grant produced water rights to Cactus Water Services through separate surface agreements.
Texas Supreme Court Finds Express Anti-Drainage Covenant Ambiguous on Non-Adjoining Tract Offset Well Obligations
Joel Reese | Jul 06, 2026
The Texas Supreme Court reversed summary judgment in favor of Rosetta Resources, holding that an express covenant to protect against drainage in a lease addendum was ambiguous as to whether the lessee's offset well drilling obligation applied only to drainage from specifically enumerated triggering wells or extended to all drainage affecting undrilled acreage. The Court remanded for trial on whether Rosetta breached its drainage protection duty when the Simmons Well—located on non-adjoining property—drained the Martin Lease, requiring interpretation of an express anti-drainage covenant that potentially extends beyond traditional common law limitations.
Louisiana Supreme Court Extends Subsequent Purchaser Rule to Mineral Leases But Preserves End-of-Lease Restoration Claims Under Prudent Operator Standard
Joel Reese | Jul 06, 2026
Louisiana Supreme Court extended the subsequent purchaser rule to mineral leases, barring Vinton Harbor & Terminal District from pursuing pre-acquisition property damage claims against lessee Honeywell but preserving claims against Texas Pacific for an 87-day overlap period in 1968 when Vinton Harbor held title. The ruling establishes that subsequent surface owners may enforce implied end-of-lease restoration duties under La. R.S. 31:122's prudent operator standard when those obligations mature at lease termination.
Business Court Resolves Transaction Confirmation Dispute in Post-Winter Storm Uri Force Majeure Case
Joel Reese | Jul 06, 2026
Marathon Oil invoked force majeure under a NAESB-form natural gas purchase agreement, with Mercuria challenging whether transaction confirmations specifying pipeline delivery terms were binding contract components. The Business Court held that both parties' transaction confirmations—despite only Marathon's containing the critical pipeline delivery specification—did not materially differ and thus combined with the base contract to form an integrated agreement supporting Marathon's force majeure declaration.
Federal Claims Court Dismisses Indian Heirs' Challenge to BIA Lease Approval for Failure to Establish Tucker Act Jurisdiction
Joel Reese | Jun 25, 2026
Fifty-eight American Indian heirs challenged BIA's approval of an Oklahoma state court-ordered oil and gas lease under the Stigler Act, asserting breach of trust, takings, and illegal exaction claims in the Court of Federal Claims. The court dismissed for lack of jurisdiction, holding the collective 'Litigation Group' failed to qualify as an 'identifiable group' under the Indian Tucker Act and individual plaintiffs did not establish specific trust duties or property deprivation required for their claims.
Texas Business Court Bars $10M+ Recovery in Off-Lease Drilling Case on Privity Grounds Despite Waiver Breach
Joel Reese | Jun 25, 2026
Texas Business Court dismissed over $10 million in lost revenue claims in Permian Basin off-lease drilling waiver dispute, holding that operator Slant Operating had contractual standing but suffered no damages while affiliated mineral owner Slant Holdings sustained all economic losses but lacked contract privity. The ruling leaves only drilling redesign costs recoverable, illustrating how corporate separation between operating entities and mineral owners can preclude recovery when counterparties breach protective agreements.
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.