Background and Business Context

NGL Water Solutions Permian, LLC operates wastewater disposal wells in the Permian Basin, including the Colt McCoy SWD No. 3 well in Loving County, Texas. Defendant LRR Pecos Valley, LLC holds leasehold mineral rights and operates oil and gas wells in the vicinity of NGL's disposal well. In October 2024, Pecos Valley sent a demand letter alleging that NGL's injected wastewater had escaped confinement and migrated to "the upper portion of the Bone Spring formation," resulting in a "complete loss of hydrocarbons that would otherwise have been produced." After standstill negotiations failed, NGL preemptively filed a declaratory judgment action seeking a declaration that a damages waiver provision in a "Shut In Agreement" between the parties shielded it from liability.

The Venue Dispute

The central issue was whether NGL could invoke a venue-selection clause in the Shut In Agreement designating Harris County as the exclusive forum, or whether Texas Civil Practice and Remedies Code Section 15.011's mandatory venue provision required the case to be heard in Loving County where the real property at issue is located. The Shut In Agreement, effective from May 10, 2023 until December 31, 2023, contained language stating that "Operator [NGL] shall have no responsibility or liability for damages to a Well" and defined "Well" as "certain oil and gas wells ... within a one-half mile of the Colt McCoy No. 3 SWD well" in Loving County. NGL argued the dispute was fundamentally contractual, while Defendants contended it was an action to recover damages to real property.

The Court's Analysis

Judge Grant Dorfman applied the "essence" test, looking beyond how parties characterized their claims to examine "the facts alleged in the petition, the rights asserted, and the relief sought." The court found that NGL's petition expressly sought a declaration absolving it from liability for "damages to [Defendants'] wells and/or the surrounding formation," which constituted an action for damages to real property under Section 15.011. Citing In re M3P Directional Services, Ltd., the court noted that disputes "for alleged damage to the allegedly failed wellbores" trigger the mandatory venue provision. The court emphasized:

NGL's declaratory judgment action can only "terminate the controversy or remove an uncertainty" ... if it impinges upon Pecos Valley's right to develop its Loving County leasehold interest without unlawful interference by NGL. The immunity from liability that NGL espies in the Shut In Agreement plainly affects Pecos Valley's interest in real property in Loving County.

The court rejected NGL's argument that the venue-selection clause controlled, finding it unenforceable because the Shut In Agreement did not constitute a "major transaction" under Section 15.020(a), which requires "consideration with an aggregate stated value equal to or greater than $1 million." The agreement stated no value and imposed no monetary obligation on either party, with any potential consideration conditioned on events that never occurred. The court held that "[w]hen both a mandatory and a permissive venue statute apply to a suit, the permissive statute must yield to the mandatory statute," and that Section 15.011 mandated venue in Loving County for all claims arising from the same transaction.

Implications for Practitioners

This decision reinforces that contractual forum selection clauses in oil and gas agreements cannot override Texas's mandatory venue statutes when the dispute's essence involves real property interests. Practitioners drafting venue-selection clauses in saltwater disposal agreements, surface use agreements, or other contracts affecting real property should recognize that such provisions may prove unenforceable unless the agreement qualifies as a "major transaction" with stated consideration exceeding $1 million. The ruling also demonstrates that declaratory judgment actions cannot be used as procedural vehicles to circumvent mandatory venue rules—courts will look to the underlying substance of the dispute rather than its procedural posture. For operators of disposal wells in Texas, this case highlights the risk that liability disputes will be litigated in the rural counties where the affected property is located, regardless of contractual provisions attempting to designate more convenient forums. The decision may also impact litigation strategy in cases involving alleged subsurface trespass or formation damage, as it confirms that such disputes fall squarely within Section 15.011's mandatory venue framework.