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Royalty Disputes
Fort Worth Court Rejects 'Proceeds Plus' Theory in Barnett Shale Wellhead Royalty Dispute
Joel Reese | Jul 20, 2026
The City of Crowley challenged TotalEnergies' royalty calculations under a lease requiring payment based on "market value at the point of sale," arguing that lease provisions required including the third-party buyer's post-sale postproduction costs in the royalty base. The Fort Worth Court of Appeals affirmed summary judgment for TotalEnergies, holding that because the point of sale was the wellhead and no postproduction expenses were incurred prior to that point, the lease unambiguously fixed the wellhead as the valuation point and did not create a "proceeds plus" royalty.
District Court Partially Denies Dismissal in Marcellus Shale Royalty Dispute Alleging Affiliate Sales Manipulation and RICO Violations
Joel Reese | Jul 20, 2026
Bluebeck Holdings alleges SWN Production systematically underpaid royalties on Pennsylvania Marcellus Shale production through affiliate transactions with sister company SES and improper deductions, while SWN reported zero marketing deductions on monthly statements. The Southern District of Texas denied dismissal of breach of contract claims while dismissing all claims against individual defendants including SWN's CEO, CFO, and General Counsel.
Northern District of Texas Allows Revival of Time-Barred Revenue Claims Based on Operator's 2022 Acknowledgment of Debt from First Sales
Joel Reese | Jul 20, 2026
Five Oklahoma LLCs holding working interests and overriding royalties in Glasscock County wells survived Ovintiv's motion to dismiss claims for pre-September 2020 revenues, with the court finding plausible allegations that Ovintiv's 2022 communications—including division orders stating "Effective Date: Date of First Sales—07/31/2020" and alleged promises to pay revenues from first sales to present—constituted unequivocal acknowledgment reviving otherwise time-barred debts under Texas Natural Resources Code Chapter 91. The decision turns on whether the operator's written communications specifically referenced ascertainable obligations sufficient to toll the four-year statute of limitations, a question the court found survived the pleading stage.
Western District of Texas Applies Heritage Framework to Production Sharing Agreement's No-Deductions Clause in Reeves County Royalty Dispute
Joel Reese | Jul 20, 2026
Mineral owners in Reeves County challenged Permian Resources' deduction of post-production costs from royalties on wells subject to Production Sharing Agreements, arguing the PSAs' express "without deduction of any pre-production or post-production costs" language superseded the underlying lease's "at the mouth of the well" royalty clause. The magistrate judge applied Heritage Resources and Warren to recommend dismissal, finding the no-deductions clause "simply meant nothing" under Texas Supreme Court precedent establishing that "at the well" language creates both a valuation point and valuation method that subsequent clauses cannot alter without changing the computation point itself.
Eastland Court Holds JOA Non-Operator Not Liable to Mineral Owner for Royalties Absent Privity
Joel Reese | Jul 20, 2026
The Eastland Court of Appeals affirmed summary judgment for Petroplex Energy, holding that a mineral owner could not recover royalties from a JOA party that lacked privity of estate or contract with the lessor. The court rejected all theories of liability, including privity of estate, third-party beneficiary status, cotenancy, and money had and received.
San Antonio Court of Appeals Applies Double Fraction Presumption to 1956 Deed, Finds Floating Royalty Interest Rather Than Fixed 3/32 Interest
Joel Reese | Jul 20, 2026
In a declaratory judgment action originating in McMullen County, the Court of Appeals reversed the trial court's determination that a 1956 deed reserved a fixed 3/32 nonparticipating royalty interest, holding instead that the deed's double fraction language reserved a floating ¾ interest for the grantors. The court applied the presumption that references to ⅛ in deeds containing double fractions serve as shorthand for the lessor's entire mineral estate, rejecting arguments that this presumption was inapplicable to royalty interest reservations or to instruments executed after 1924.
Western District of Texas Grants Partial Summary Judgment on Post-Production Cost Deductions in Dimmit County Royalty Dispute
Joel Reese | Jul 20, 2026
Gringita, Ltd., a royalty owner holding 1,014.76 acres in Dimmit County, Texas, challenged INEOS and Chesapeake's deduction of post-production costs from its 25% royalty share under a mineral lease. The Western District of Texas granted partial summary judgment for the lessor, finding that lease provisions requiring deductions to be "added to the price received by Lessee" prohibited the defendants from charging post-production costs against the royalty.
District Court Grants Summary Judgment to Lender in Oklahoma Producer's Lien Priority Dispute Over Unpaid Hydrocarbon Sales
Joel Reese | Jul 20, 2026
White Operating Company sought $2.6 million from Bank of America for Oklahoma hydrocarbons sold to Murphy Energy Corporation in summer 2016, after Murphy failed to pay and subsequently entered bankruptcy. The Northern District of Texas granted summary judgment to the bank, resolving claims under Oklahoma's Oil and Gas Owners' Lien Act and common law theories arising from Murphy's credit relationship with the bank.
Corpus Christi Court Reverses $15.8 Million Royalty Judgment in DeWitt County Lease Interpretation Dispute Over Valuation Point and Post-Production Costs
Joel Reese | Jul 20, 2026
The Corpus Christi Court of Appeals reversed a $15.8 million royalty underpayment judgment against Devon Energy and BPX Operating involving 110 oil wells across 3,700 acres in DeWitt County, holding the trial court erred in its lease construction that royalties were not valued "at the well" and that lessors bore no post-production costs. The dispute centered on reconciling form lease language specifying valuation "at the wells as of the day it is run to the pipe line or storage tanks" with addendum provisions requiring a cost-free royalty where "Lessor's royalty on hydrocarbons shall never bear, either directly or indirectly, any portion of" post-production costs.
Tyler Court Affirms Jury Verdict on Natural Resources Code Disclosure Requirements in East Texas Royalty Dispute
Joel Reese | Jul 20, 2026
The Tyler Court of Appeals affirmed a take-nothing judgment against royalty owners Lud R. Davis III and Charlotte Davis, who alleged that Aethon Energy violated their lease terms by improperly accounting for post-production transportation fees charged by affiliate Scona LLC. The Davises challenged AUBR's practice of showing transportation charges as '$0.00' on 2020 check stubs while allegedly embedding the actual fees in reduced sales prices, but the court found sufficient evidence to support the judgment in AUBR's favor.
Texas Supreme Court Clarifies 'Free of Cost' Language Does Not Shield NPRI from Post-Production Costs When Royalty Valued at Wellhead
Joel Reese | Jul 20, 2026
The Texas Supreme Court reversed the Court of Appeals, holding that a deed reserving a non-participating royalty interest in minerals "produced from the above described acreage" permitted operators to deduct post-production costs from downstream sales prices to arrive at wellhead value, despite "free of cost forever" language in the deed. The Court reaffirmed that cost-free language restates the rule exempting royalty from exploration and production costs but does not shield NPRI owners from post-production costs absent explicit language setting a downstream valuation point.
El Paso Court of Appeals Affirms Take-Nothing Judgment in Bad-Faith Washout Case Involving Reeves County ORRI Termination
Joel Reese | Jul 20, 2026
Thomas Craddick and Sandra Staley challenged BPX Properties' 2017 release of a 1943 oil and gas lease covering 1,440 acres in Reeves County, alleging bad-faith washout of their overriding royalty interests when BPX released the lease as part of a transaction with Cimarex that eliminated their ORRI burdens. The El Paso Court of Appeals affirmed summary judgment for the operators, holding that the lease's surrender clause authorized the release and that Texas law does not recognize bad-faith washout as a cognizable tort.
Texas Supreme Court Overrules Mapco, Holds Surface Estate Owns Salt Cavern Voids and Clarifies In-Kind Royalty Obligations
Joel Reese | Jul 20, 2026
The Texas Supreme Court overruled its 1991 Mapco precedent, holding that surface estate owners—not mineral estate owners—own subsurface cavern space created by salt extraction, and that mineral owners lack the implied right to use such voids for hydrocarbon storage produced from other lands. The Court also held that a deed reserving "a royalty of 1/8 of all the gas or other minerals" created an in-kind royalty obligation rather than a cash royalty.
Texas Appellate Courts Apply Heritage Resources to Defeat 'Free of Cost' Addenda in Market-Value-at-the-Well Leases
Joel Reese | Jul 14, 2026
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.
Texas Supreme Court Carves Out Unjust Enrichment Exception to Division Order Estoppel Rule
Joel Reese | Jul 06, 2026
The Texas Supreme Court held that division orders are not binding until revoked where the operator both prepared erroneous orders understating royalty interests and retained the underpaid proceeds, carving out an exception to the general estoppel rule based on unjust enrichment. The Court reversed summary judgment for Strata Energy after it underpaid the Gavenda family by 7/16th royalty—paying only 1/16th instead of the reserved 1/2 non-participating royalty interest—and retained at least part of the underpayment for itself.
Third Circuit Vacates Summary Judgment on Royalty Withholding Claim, Holds Factual Issues Preclude Judgment on Division Order and Payment History
Joel Reese | Jul 06, 2026
The Third Circuit partially vacated summary judgment in favor of Centennial Resources, holding that genuine issues of material fact existed as to whether the operator knew the majority interest holder had not signed the joint operating agreement when making royalty payments from March 2019 through February 2020, and whether a division order created a binding payor-payee relationship under Texas law. The court affirmed dismissal of the trespass-to-try-title claim, finding that even after the majority interest holder abandoned the lease, the minority interest holder remained a cotenant with the right to permit the operator to enter and drill.
Texas Supreme Court Holds "Free of Cost Forever" Language Subject to Postproduction Cost Deductions Under Market Value at the Well Framework
Joel Reese | Jul 06, 2026
The Texas Supreme Court reversed the San Antonio Court of Appeals in Fasken Oil and Ranch Ltd. v. Puig, holding that a 1960 nonparticipating royalty reservation containing "free of cost forever" language does not create an exception to postproduction cost deductions under Texas's market value at the well framework. The Court distinguished Chesapeake v. Hyder by ruling that "free of cost forever" merely restates the default rule that royalty owners bear postproduction costs when royalties are valued at the wellhead, with "forever" operating as a temporal rather than geographic modifier.
Oklahoma Supreme Court Bars Post-Production Deductions on Affiliate Wellhead Sales Under Gross Proceeds Act
Joel Reese | Jul 06, 2026
Oklahoma Supreme Court ruled 6-3 that Devon Energy's deduction of gathering and compression costs from royalty payments across 14,000 STACK play wells violated the state's 2015 Gross Proceeds Act, exposing Devon to $890 million in underpayment claims. The decision turns on whether gas sold to Devon's midstream affiliate constitutes a sale at the wellhead under Oklahoma's statutory market value at the well framework, precluding post-production cost deductions under the netback calculation method.
Texas Supreme Court Clarifies Third-Party Beneficiary Status and Privity of Estate in Joint Operating Agreements
Joel Reese | Jul 06, 2026
The Texas Supreme Court held that an oil and gas lessor could not enforce a Joint Operating Agreement (JOA) to recover unpaid royalties from a non-operating working interest owner who consented to drilling operations, finding the lessor was neither a third-party beneficiary of the JOA's royalty provisions nor in privity of estate with the consenting party. The decision clarifies the strict requirements for third-party beneficiary status under Texas law and confirms that JOA royalty allocation provisions among working interest owners do not create enforceable rights for lessors outside the parties to those agreements.
Eastland Court of Appeals Holds Mineral Owner Cannot Recover Royalties from Non-Operator Party to Joint Operating Agreement Absent Privity
Joel Reese | Jul 06, 2026
The Eastland Court of Appeals affirmed summary judgment for Petroplex Energy, holding that Evans Resources, a mineral estate owner, could not recover royalties from a company that was party to a joint operating agreement with Evans's lessee, because Evans lacked both privity of estate and privity of contract with Petroplex. The court rejected Evans's arguments that the JOA's royalty provisions created third-party beneficiary rights or that Petroplex became liable as a co-tenant, emphasizing that JOAs are not used to transfer ownership interests in pooled leases.
Fifth Circuit Holds Interior's Cash-for-Kind Royalty Switch Requires Notice-and-Comment Rulemaking
Joel Reese | Jul 06, 2026
W & T Offshore challenged Interior's demand for cash payment to resolve shortfalls in prior in-kind natural gas royalty deliveries on federal OCS leases, arguing the agency's policy shift constituted an unenforceable substantive rule promulgated without APA notice-and-comment procedures. The Fifth Circuit affirmed the district court's holding that Interior's requirement was not a substantive rule subject to notice-and-comment rulemaking, but reversed on equitable recoupment, holding that the doctrine applied to overcome OCSLA's limitations period and required Interior to credit W & T's over-deliveries against cumulative shortfalls.
Eastland Court of Appeals Construes Double-Fraction Royalty Reservation as Floating Interest, Rejects Multiple Estoppel Defenses
Joel Reese | Jul 06, 2026
The Eastland Court of Appeals held that a deed provision reserving "an undivided one-fourth (1/4th) of the usual one-eighth (1/8th) royalty" created a perpetual floating 1/4 royalty interest rather than a fixed 1/32 interest, applying the presumption that 1/8 reflects the entire mineral estate in double-fraction provisions. The court rejected Fasken's affirmative defenses of quasi-estoppel, contractual estoppel, division order estoppel, and judicial estoppel, though it reversed the trial court's determination that the royalty owners could bring a breach of contract claim.
Texas Supreme Court Holds Market Value Royalty Clause Controls Even When Lessee Realizes Above-Market Price Under Long-Term Contract
Joel Reese | Jul 06, 2026
The Texas Supreme Court held that royalty owners with market-value royalty clauses are entitled only to prevailing market price royalties, not the higher price KCS Resources actually realized under a long-term gas purchase agreement with automatic price escalations. The Court refused to imply a covenant to reasonably market into leases with explicit market-value language, finding the objective royalty calculation provided sufficient protection without entitling lessors to share in particularly lucrative contract negotiations.
Texas Supreme Court Limits Working Interest Profit Sharing to Oil Only, Rejecting Extrinsic Evidence of Course of Dealing
Joel Reese | Jul 06, 2026
The Texas Supreme Court reversed summary judgment for lessors who claimed entitlement to working interest gas proceeds under a 1932 oil and gas lease, holding that the unambiguous lease language reserved to lessors only one-half of working interest oil profits, not gas. Despite Sun Oil's decades-long practice of voluntarily paying lessors a share of working interest gas proceeds, the Court rejected the use of extrinsic evidence and estoppel theories to create contractual obligations not expressed in the integrated writing.
Texas Supreme Court Rejects Fraudulent Concealment Defense Where Publicly Available Information Could Have Revealed Royalty Underpayments
Joel Reese | Jul 06, 2026
The Texas Supreme Court held that fraudulent concealment did not toll limitations on royalty underpayment claims where the El Paso Permian Basin Index and other publicly available information would have revealed Shell's use of an arbitrary pricing method rather than third-party sales prices required under the lease. The Court reversed a $72,532.09 jury verdict, holding that royalty owners cannot avoid diligent investigation merely because there might be legitimate explanations for suspicious payments.
Acknowledgment of Debt Tolls Statute of Limitations in Gas Royalty Nonpayment Case
Joel Reese | Jul 06, 2026
The San Antonio Court of Appeals held that a lessee's letter and production charts acknowledging $22,268.20 in unpaid gas royalties from 1987-1995 created an implied promise to pay that tolled the four-year statute of limitations under Texas Civil Practice & Remedies Code § 16.065. The court rejected Bright & Company's counterclaim for offset based on alleged overpayments during a different time period, finding it was an untimely counterclaim rather than an affirmative defense that would negate the lessor's right to recover.
Texas Business Court Clarifies Amount-in-Controversy Standard for Saltwater Disposal Royalty Disputes
Joel Reese | Jul 06, 2026
Black Mountain SWD sought remand of its breach of contract action against NGL Water Solutions Permian, arguing that unpaid royalties of $0.03 per barrel on 147,426,305 barrels of transported saltwater totaled only $4.5 million—below the Business Court's $10 million jurisdictional threshold. The Business Court granted remand, holding that the amount in controversy equals past damages for unpaid royalties actually sought, not the speculative lifetime value of the royalty agreement or any purported right to receive future payments.
Fifth Circuit Applies Equitable Recoupment to Bar Successor Royalty Owner's Claims for Overpayments Made to Predecessor
Joel Reese | Jul 06, 2026
The Fifth Circuit affirmed summary judgment for Ovintiv USA in a dispute over more than $608,000 in royalty withholdings, holding that DDR Weinert and DDR Williams—entities owned and controlled by the Richters—acquired their Karnes County mineral interests subject to all valid leases and other indebtedness, including Ovintiv's right to recoup prior overpayments made to the Richters before the transfer. The court rejected the plaintiffs' breach of contract, Texas Natural Resources Code, and conversion claims arising from Ovintiv's Prior Period Adjustment to correct a gas flow error that resulted in overpayments to the Richters between September 2016 and January 2018.
Fort Worth Court of Appeals Affirms Wellhead Valuation Point in Barnett Shale Gas Royalty Dispute, Rejecting City's 'Market-Value-Plus' Theory
Joel Reese | Jul 06, 2026
The City of Crowley challenged TotalEnergies' royalty calculations under a Barnett Shale lease, arguing that because the wellhead sales price reflected the buyer's downstream postproduction costs, the lease required royalties on wellhead market value plus those costs. The Fort Worth Court of Appeals affirmed summary judgment for TotalEnergies, holding that the lease unambiguously fixed the wellhead as the valuation point and that the operator did not 'realize proceeds of production after deduction' merely because the third-party buyer's pricing formula accounted for its own postproduction expenses.
Texas Supreme Court Reverses on 'Free of Cost Forever' NPRI Clause, Permits Post-Production Cost Deductions in Webb County Dispute
Joel Reese | Jul 06, 2026
The Texas Supreme Court reversed lower courts in a Webb County royalty dispute, holding that a 1960 deed reserving a non-participating royalty interest in minerals "produced from the above described acreage" permitted operators to deduct postproduction costs from downstream sales prices to arrive at wellhead value, despite "free of cost forever" language. The Court rejected the royalty owners' argument that the cost-free language transformed their interest from a royalty on raw minerals at the wellhead into a royalty on processed gas sold downstream, reaffirming that absent explicit language setting a downstream valuation point, NPRIs bear postproduction costs.
Federal Claims Court Holds Stigler Act Imposes No Duty on Interior Attorneys to Object to State Court Lease Approvals for Restricted Indian Allotments
Joel Reese | Jul 06, 2026
Federal Claims Court dismissed breach of trust and takings claims by 58 heirs to restricted Indian allotment minerals in Eastern Oklahoma, holding the Stigler Act imposes no duty on Interior Department trial attorneys to object to state court oil and gas lease approvals or collect bonus payments for non-consenting mineral owners. The ruling clarifies that a Pittsburg County court's 2022 approval of Reagan Smith's lease—without requiring bonus payments to 13 non-leasing heirs who retained their mineral interests—does not constitute a Fifth Amendment taking.
Tenth Circuit: Operator Payment Records Satisfy Administrative Feasibility for Royalty Class Certification Without Title Searches
Joel Reese | Jul 06, 2026
The Tenth Circuit reversed denial of class certification in a Hugoton Gas Field royalty dispute, holding that Merit Energy's business records identifying 1,900+ royalty payees satisfied administrative feasibility without requiring individualized title searches for each claimant. The court rejected OXY's argument that proof of record title ownership was necessary at the certification stage when the operator maintains payment records tied to a 2008 settlement agreement capping gathering charges at $0.15/mmbtu.
Texas Supreme Court Lets Stand Ruling That Affiliate Wellhead Sales Render Anti-Deduction Lease Language Surplusage
Joel Reese | Jul 06, 2026
Texas Supreme Court denied review in City of Crowley v. TotalEnergies E&P USA, Inc., leaving intact the Fort Worth Court of Appeals' holding that anti-deduction lease language becomes surplusage when the lessee sells gas to its affiliate at the wellhead, triggering market value at the well valuation under Heritage v. NationsBank. The decision reinforces that affiliate wellhead transactions eliminate post-production costs as a matter of law, rendering royalty owner protections against cost-bearing inapplicable when no deductible costs exist between the valuation point and sale.
Tenth Circuit: Settlement Agreement Trumps ONRR Regulations in $2.8 Million Federal Lease Gas Treatment Deduction Dispute
Joel Reese | Jul 06, 2026
The Tenth Circuit reversed ONRR's $2.8 million disallowance of gas treatment deductions claimed by Devon Energy Production, holding the agency acted arbitrarily and capriciously by applying 30 C.F.R. § 206.150(b) in contravention of a controlling prior settlement agreement. The panel determined the settlement governed over 80% of disputed federal lease royalties and remanded for remedy determination under a two-factor vacatur test.
Texas Supreme Court Limits Lessee Duties in Royalty Calculations, Holds Market Price Determined by Arm's-Length Sales
Joel Reese | Jul 06, 2026
Texas Supreme Court affirmed that Fasken entities properly calculated royalties on net revenue after deductions under lease agreements requiring payment on market price at the well, rejecting Mabee Ranch's argument that lessees owe fiduciary duties to maximize sales prices in arm's-length transactions. The ruling establishes that market value at the well for royalty purposes must be determined by actual third-party sales prices rather than internal valuations, foreclosing claims that operators breach duties by failing to obtain hypothetically higher prices.
Fifth Court Creates Pre-1960 Carve-Out from Netback Methodology for 'Market Value at the Well' Conveyances
Joel Reese | Jul 06, 2026
The Fifth Court of Appeals reversed summary judgment for Ovintiv in a dispute over a 1938 Sabine Royalty Trust conveyance, holding that 'market value at the well' language prohibits post-production cost deductions for transportation and processing between the wellhead and gas plant even when no market exists at the wellhead. The decision distinguishes pre-1960 conveyances containing 'market value' clauses from modern royalty instruments using 'proceeds' or 'amount realized' language, creating a potential carve-out from Texas Supreme Court netback methodology based on historical clause formulations.
Texas Supreme Court Clarifies That NPRI Fixed Fractional Interests Are Not Reduced by Lease Ratification but May Be Modified by Cross-Conveyance
Joel Reese | Jun 25, 2026
Texas Supreme Court holds that a non-participating royalty interest holder's fixed 1/8 fractional interest in production was not reduced when the working interest owner ratified a subsequent lease containing a 1/4 landowner royalty, reaffirming Hysaw v. Dawkins that NPRIs convey a fixed share of gross production rather than a floating fraction of the lease royalty. The Court reversed the court of appeals on separate grounds, however, holding that the NPRI was later reduced through stipulation and cross-conveyance under Concho Resources v. Ellison, distinguishing between automatic ratification effects and voluntary conveyances that modify royalty interests.
Corpus Christi Court Reverses $15.8M Royalty Judgment, Holds 'At the Wells' Language Trumps Post-Production Cost Addenda Under Heritage Resources
Joel Reese | Jun 25, 2026
Corpus Christi Court of Appeals reversed a $15.8 million royalty judgment against Devon Energy and BPX, holding that lease language valuing royalties 'at the wells as of the day it is run to the pipe line or storage tanks' established an at-the-well valuation point under Heritage Resources and rendered post-production cost addenda mere surplusage. The trial court committed reversible error by allowing the jury to value royalties at the downstream Houston Ship Channel point rather than applying market value at the well.
Tenth Circuit Preserves District Court Discretion to Exceed 30% Fee Guideline in Oklahoma Royalty Class Actions
Joel Reese | Jun 25, 2026
The Tenth Circuit affirmed a $17.3 million attorneys' fee award—33.33% of a $52 million settlement fund—in an Oklahoma royalty underpayment class action, holding that district courts may exceed the 30% guideline established in Strack v. Classen where case complexity and near-complete class certification success warrant departure. The decision rejects objectors' argument that Strack imposed a hard ceiling on percentage-of-fund awards in common-fund fee applications, preserving district court discretion under Oklahoma's statutory fee factors.
Texas Supreme Court Clarifies Appellate Jurisdiction Over Presumed-Grant Doctrine in Double-Fraction Royalty Disputes
Joel Reese | Jun 05, 2026
The Texas Supreme Court reversed the Eastland Court of Appeals' jurisdictional holding that it could not consider the presumed-grant doctrine on permissive interlocutory appeal, where Fasken claimed a floating 1/4 royalty interest under a 1933 deed after treating it as a fixed 1/32 interest for 85 years. The Court held that the presumed-grant doctrine was a "fairly included subsidiary issue" within the certified controlling question of whether Fasken was barred from claiming anything other than a fixed 1/32 interest through affirmative defenses.