Background: Saltwater Disposal Infrastructure and Royalty Agreements

Black Mountain SWD, LP operates saltwater pipelines serving the oil and gas industry. On January 11, 2019, Black Mountain and NGL Water Solutions Permian, LLC executed a royalty agreement ("RA") granting Black Mountain a $0.03-per-barrel royalty for saltwater transported through specified pipelines. Critically, the royalty was payable only on volumes for which NGL Permian received a transportation fee from unaffiliated third parties—not on saltwater transported for capacity balancing across NGL Permian's disposal assets. The RA required quarterly accounting and reimbursement for any underpayment of royalties.

The Jurisdictional Dispute

Black Mountain filed suit in the 342nd Judicial District Court of Tarrant County on February 10, 2025, alleging breach of contract and seeking unpaid royalties. NGL Permian removed the case to the Texas Business Court on March 11, 2025, without Black Mountain's consent, asserting the amount in controversy exceeded the Business Court's $10 million jurisdictional threshold under Section 25A.004(d)(1) of the Texas Government Code. Black Mountain moved for remand, arguing the amount in controversy was limited to approximately $4.5 million in past unpaid royalties—the product of $0.03 multiplied by 147,426,305 barrels of saltwater transported from the RA's execution date through the filing date.

The Court's Analysis: Backward-Looking Damages vs. Speculative Future Rights

Judge Jerry D. Bullard applied a burden-shifting framework for determining amount in controversy. The Court held that

the proper inquiry when determining amount in controversy for purposes of Business Court jurisdiction is to ask what the parties seek to recover, not what they will recover or are likely to recover, when the pleadings are filed.

The Court emphasized that Black Mountain was "the only party seeking to recover anything" and "did not seek any prospective relief." Instead, Black Mountain sought only "reimbursement for royalties already accrued and owed," requiring "a backwards-looking calculation of flow through pipelines."

NGL Permian's chief financial officer declared that unpaid royalties totaled no more than $4.5 million, calculated by multiplying the $0.03 royalty by 147,426,305 barrels. NGL Permian presented no controverting evidence to raise a fact issue that the amount exceeded $10 million. The Court rejected NGL Permian's argument that the amount in controversy should include the lifetime value of the royalty agreement, holding that

the amount in controversy did not include the value of a purported right at stake to receive disputed lifetime royalties on discarded saltwater.

The Court distinguished cases where "other privileges or rights at stake" might be valued separately, noting that Black Mountain "alleged breach of contract and sought a discrete amount of money," NGL Permian "did not repudiate [Black Mountain's] right to receive royalties under contract," and Black Mountain "did not put in controversy the amount of all payments that could ever come due under royalty agreement."

Implications for Oil and Gas Practitioners

This decision provides critical guidance on Business Court jurisdiction in midstream royalty disputes. Practitioners representing plaintiffs seeking remand should focus pleadings and evidence on discrete, backward-looking damages calculations rather than speculative future payment streams. The Court's rejection of lifetime royalty valuations as part of the amount in controversy is particularly significant for saltwater disposal, gathering, and transportation agreements where per-unit royalties may appear modest but could theoretically generate substantial cumulative payments over decades. The decision also clarifies that parties seeking remand need not stipulate to damages below the jurisdictional threshold—the Court held that "refusal to stipulate to an amount below the jurisdictional minimum was merely one factor in determining whether amount in controversy requirement was met." For defendants considering removal to the Business Court, this case underscores the importance of developing concrete evidence that the amount actually sought—not hypothetically at stake—exceeds $10 million, particularly in breach of contract actions seeking past-due payments rather than declaratory or injunctive relief affecting ongoing contractual relationships.