Background and Business Context

This dispute arose from EOG Resources' development of the Blanc Unit in the Eagle Ford Shale in Karnes County, Texas. Roane-Williams Texas Minerals, LLC—a family business comprised of William A. Roane, Jr., Louis M. Williams, III, and James F. Roane II—owns an unleased, undivided 1/36 mineral interest in 125 acres within the unit. The federal government owns an undivided 1/4 mineral interest in the same tract managed by the Bureau of Land Management (BLM) and leased to EOG. Because of the federal interest, BLM was required to authorize co-development via a communitization agreement. EOG retained Reagan Smith Energy Solutions, Inc. to provide consulting services and prepare, circulate, and file the communitization agreement with BLM.

The Communitization Agreement Dispute

In February 2018, Reagan sent James Roane a BLM Communitization Agreement dated September 15, 2017 (the 2017 CA) covering 823.150 acres in Karnes County for the Blanc Unit #101 Well. This Contract Area included a 120.910-acre tract (Tract 120.910) subject to a January 28, 2009 lease known as the Ranch Lease. Roane signed and returned the 2017 CA as requested. However, according to Roane's own pleadings, the Ranch Lease restricted pooling based on acreage percentages, and because Tract 120.910 encompassed less than the required percentage, EOG lacked authority to include it in the 823.15-acre communitization area. In August 2018, Reagan removed Tract 120.910 from the proposal and updated the coverage area to only 702.24 acres in a new communitization agreement (the 2018 CA), which was filed with BLM on September 7, 2018, and approved on July 24, 2019. Roane did not sign the 2018 CA.

The Joint Operating Agreement and Supporting Documents

Between August and September 2018, EOG sent Roane a joint operating agreement (JOA), well proposals (WPAs), authorizations for expenses (AFEs), and a Blanc Horizontal Unit Designation (BHUD) for the Blanc Unit. The WPAs and AFEs, issued on September 4, 2018, identified Roane's non-operating working interest and included plats for each well showing that Tract 120.910 was "not pooled." Roane signed the WPAs and AFEs on September 13, 2018, electing to participate in drilling all three wells, and executed the JOA on September 14, 2018. In early 2019, the parties signed the BHUD with an effective date of December 1, 2018, agreeing to "unitize, consolidate, pool, and combine their interests in the minerals beneath the 702.24-acre tract" for drilling and production operations. The BHUD's Exhibit C depicted the same 702.24-acre area shown in the WPAs and AFEs, again showing Tract 120.910 was not pooled.

The Payment Dispute and Litigation

EOG discovered in early July 2019 that the net revenue interests reflected in the division orders did not properly charge Roane for its proportional share of production burdens as required by the JOA. EOG claimed the drilling unit consisted of the 702.24 acres described in the BHUD, not the entire 823.15-acre Contract Area, and therefore it had overpaid Roane on the first three wells. EOG informed James Roane in writing that Roane's corrected NRI for wells located entirely within the 702.24-acre drilling unit was 0.00331668, not 0.00484148. Roane disputed this calculation and sued EOG in 2020 for breach of the JOA and the 2017 CA, declaratory relief, violations of Texas Natural Resources Code § 91.402, fraud by non-disclosure, negligent misrepresentation, and an accounting. Roane also sued Reagan for fraud by non-disclosure and negligent misrepresentation. The trial court granted summary judgment for both EOG and Reagan, denied Roane's motion for reconsideration based on allegedly newly discovered evidence, and after a bench trial awarded attorney's fees to EOG.

Implications for Practitioners

The Thirteenth Court of Appeals affirmed the trial court's judgment in all respects, though the opinion as published is truncated and does not contain the full analysis. The case underscores the importance of carefully reviewing all unitization documents—particularly when federal interests require BLM approval and when subsequent modifications are made to communitization agreements. Practitioners should note that signing multiple consistent documents (WPAs, AFEs, BHUDs) that all reflect a modified unit configuration may preclude later claims based on earlier, superseded agreements. The case also highlights the risks for mineral interest owners of executing operational documents without fully understanding how changes to the drilling unit affect net revenue interest calculations and production burden allocations under joint operating agreements. For operators, the decision reinforces the need for clear written communications when correcting payment errors and the value of comprehensive documentation showing parties' agreement to modified unit boundaries.