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Recent NewsRRC Hears Testimony on Flaring at Open Meeting - June 2020 At the May RRC Open Meeting on prorationing, Chairman Wayne Christian instructed the Blue Ribbon Task Force to continue meeting and bring forth recommendations to reduce flaring in Texas. The Blue Ribbon Task Force (through the Texas Methane & Flaring Coalition) released their report containing recommendations on ways to reduce flaring in Texas. The Commission staff was instructed to review the report and make recommendations for items that can be implemented by this fall and present their findings at the next Commission meeting on August 4, 2020. The following link is the link to the press release and report by the Texas Methane & Flaring Coalition. Below are Chairman Christian’s thoughts on the hearing. https://www.rrc.texas.gov/about-us/commissioners/christian/news/061620a-christian-flaring-report/ TLMA looks forward to hearing what the RRC will propose at next months meeting. Court of Appeals Rules for Landowner in Brazoria County Condemnation Case - June 2020 Last week, the First Court of Appeals ruled in favor of the landowner in Hlavinka v. HSC, finding that HSC cannot use eminent domain to acquire the land for a pipeline easement. The Hlavinkas and HSC could not reach an agreement for the easement, which led to HSC filing condemnation proceedings. The Hlavinkas argued that HSC was not a common carrier, in addition to other things. HSC won at the trial court level, but were successful at the Court of Appeals. You can view the full opinion from the Court of Appeals here. TLMA will continue to monitor this case in the event it is appealed to the Texas Supreme Court. *UPDATED* RRC of Texas Denies Motion Prorationing Oil Production in Texas, Passes Other Motions – May 2020 The Railroad Commission of Texas denied the motion by Pioneer and Parsley Energy to proration oil production in Texas. To provide other measure to assist operators, the Commission passed the following motions:
There will be a more in-depth article of the impacts to land and mineral owners of the changes in our upcoming newsletter. We will continue to watch for rule changes over the coming months and then for legislative changes at the appropriate times. In addition to the article included in our current newsletter, Ryan Lammert put together this powerpoint on the temporary exceptions.
TLMA Asks Texas Supreme Court to Affirm 4th Court of Appeals Opinion in Strickhausen Case - March 2020 TLMA filed an amicus brief in the BPX v. Strickhausen case (No. 19-0567) relating to ratification of pooling mineral ownership interests. “The issue in this case is whether Respondent ratified Petitioner’s breach of the contractual no pooling clause by accepting royalty checks, after she explicitly objected to the unlawfully pooled unit in writing.” Strickhausen immediately objected to the pooling once she was made aware of the pooling. Both parties have filed briefs on the merits. The Court has not decided whether to hear oral arguments in the case. You can read the TLMA amicus here and see other court documents here. RRC Approves Rule Allowing for the Multiple Assignment of Acreage – February 2020 At the February 11 Open Hearing, RRC approved rule amendments to Section 3.40 – Assignment of Acreage to Pooled Development and Proration Units. This rule will allow surface acreage to be assigned to more than one horizontal well. While TLMA is supportive of this change, we filed formal comments asking for unleased mineral owners to receive notice in addition to the operators. The rule requires unleased mineral owners to be notified if the operator does not meet the requirements for multiple assignment of acreage but is seeking an exemption. TLMA asked for this across the board. The Commission declined to make the change because Section 3.40 “addresses acreage assignment and acreage can only be assigned by an operator”. TLMA also filed more detailed comments during the informal process. You can read the formal comments here and the informal comments here.
On December 3, 1999, TLMA was incorporated in the State of Texas. What began as 54 concerned land and mineral owners has flourished into an association of nearly 1,000 members. We are so proud of the past 20 years and look forward to the next 20! Our first 20 years include:
In addition to all of the above, we hosted town hall meetings, began hosting regional meetings, filed amicus briefs, and comments on Railroad Commission rule proposals. We hope that you will join us in our advocacy efforts in the next 20 years! If you haven’t joined, we encourage you to do so today!
In June, the Texas Supreme Court decided the Barrow-Shaver v. Carrizo farmout agreement case in favor of Carrizo, which TLMA supported with an amicus brief in November 2018. In August, Barrow-Shaver filed a motion for rehearing in the case. TLMA filed a letter of support of the Court’s decision and asked they not rehear the case. In the motion for rehearing, Barrow-Shaver relies on Dwyer v. City of Brenham, 7 S.Wl 598, 599 (Tex. 1888) and TLMA does not believe that case applies in Barrow-Shaver v. Carrizo.
You can read the letter here. TLMA Files Amicus Brief Defending the Original Intent of the "Division Order" Statute - September 2019 Earlier this year, TLMA joined with the South Texans’ Property Rights Association, Texas and Southwestern Cattle Raisers Association, Texas Cattle Feeders Association, Independent Cattlemen’s Association of Texas, Texas Forestry Association, Texas Wildlife Association, Texas Poultry Federation, Plains Cotton Growers, Inc., and Texas Corn Producers Association in filing a brief supporting the landowners in the overreach of using “blanket easements” in the SWEPCO v. Lynch et. Al case. The Texas Supreme Court has agreed to hear the case. Oral arguments have been set for December 5, 2019. You can watch them live on the Texas Bar Association website. You can read the brief TLMA filed for more information and find all case documents on the Texas Supreme Court website.
Texas Supreme Court rules in Barrow-Shaver v. Carrizo Farmout Agreement Case – June 2019
In November 2018, TLMA filed an amicus brief in the Barrow-Shaver v. Carrizo Supreme Court case on the consent to assign clause in a farmout agreement. TLMA agreed with Carrizo’s position because landowner’s use the consent to assign clause in their oil and gas leases to protect their land. The Supreme Court affirmed the Court of Appeals decision in favor of Carrizo. The Court stated that the language in the contract is “unambiguous” and “the contract imposed no consent obligation on Carrizo and that Carrizo’s right to withhold consent is unqualified.”
You can read TLMA’s letter to the Court here. Also available are the opinion and dissent.
On May 27, 2019, the 86th Legislature adjourned sine die – meaning until the 87th legislature begins in January 2021. However, just because session has ended, doesn’t mean the work will stop until next session. The regulatory agencies will begin rulemaking proceedings to implement the legislation that was passed, committees will begin to develop requests for interim charges, Sunset hearings will begin, and much more. Once the Lt. Governor and Speaker release their interim charges, the Committees will then begin to have hearings on those topics.
During this session, TLMA passed HB 3838 by Representative Ernest Bailes (Sponsored by Chairman Brian Birdwell) and prevented other harmful legislation from passing. For more details on the successes of our legislative efforts, see the latest newsletter.
On January 23 at the quarterly TLMA Board of Directors meeting, the Directors voted to approve the following slate of officers for the coming years.
Chairman Carolyn Frost Keenan, Houston Chairman-Elect Kimberley K. McTee, San Antonio Vice Chairman Thomas H. “Tom” Daniel, Austin Treasurer E.O. “Trey” Scott, III, San Antonio
Pursuant to the by-law changes adopted by members at the 2018 Statewide Member’s Meeting, the Chairman and Chairman-elect terms will end January 2020 and the Vice Chairman and Treasurer terms expire January 2021.
Southwest Electric Power Company v. Lynch et al impacts utilities rights to a “blanket easement” that SWEPCO had for electric transmission and distribution lines. SWEPCO notified the landowners 65 years after the signing of the easement that they would be rebuilding the line and would like a supplemental easement. After declining the supplemental easement, SWEPCO claimed a 100 foot easement that contained a house and pond that had been there for over forty years. The respondents were then sued for breach of easement and trespass.
It has not been determined if the Court will take this case.
TLMA, South Texan’s Property Rights Association, Texas and Southwestern Cattle Raisers Association, Texas Cattle Feeders Association, Independent Cattlemen’s Association of Texas, Texas Forestry Association, Texas Wildlife Association, Texas Poultry Federation, Plains Cotton Growers, Inc., and Texas Corn Producers Association all signed onto the brief.
RRC asks for comments on assignment of acreage; TLMA files comments – November 2018
Earlier this year, the RRC informally proposed a rulemaking to Rule 40 – Assignment of Acreage to Pooled Development and Proration Units. This informal rule would allow acreage at different depths to be leased separately. The rule would also require notice to be given to unleased mineral owners in addition to the operators. While the timelines don’t allow adequate time for mineral owners to request a hearing, TLMA is supportive of the notice provision.
You can read more about the rule and TLMA’s thoughts in the letter to the Commissioners.
TLMA filed a brief in support of Carrizo Oil & Gas in the Barrow-Shaver Resources v. Carrizo Oil & Gas Inc. farmout agreement case. The primary issue at hand for TLMA members is the consent requirement in the agreement because similar provisions can be found in many oil and gas leases. As stated in the brief “..not all oil and gas operators exercise the same level of diligence, many land and mineral owners view restrictions on assignability as a very important issue in their oil and gas lease negotiations, especially if the lessor is also the owner of the surface estate of the leased premises…It is therefore important for the landowner to know who will be operating on its property and to have some say in the assignment of those rights and liabilities to another operator.” The Tyler Court of Appeals ruled in favor of Carrizo and TLMA is asking for the Supreme Court to affirm that decision.
Oral arguments were held December 4. You can read TLMA’s letter here.
Earlier this year, the Supreme Court of Texas decided the Murphy v. Adams case in favor of Murphy. Because of the potential significant impact to longstanding practices with offset wells and drainage, TLMA joined NARO-TX and a number of oil and gas attorneys in requesting a motion for rehearing.
The Supreme Court rejected the motion for rehearing, but did correct their opinion.
You can read the amicus letter and the corrected opinion and dissent for more details.
Railroad Commission of Texas Chairman Christi Craddick proposed the next rule changes as part of the Texas Oilfield Relief Initiative earlier this month. The proposed rule would still require the initial well potential test, but would eliminate the annual well tests for oil wells that are reported on the Form W-10 except in the following circumstances:
TLMA submitted comments and also encouraged our members to do the same. After the comment deadline, TLMA was invited to a meeting with commission staff. Our meeting was successful and the Chairman agreed to withdraw the proposal. In her comments while formally withdrawing the rule proposal at an open meeting, Chairman Craddick stated that while the purpose of the initiative is to eliminate the collection of information that is not being used by the RRC, it is clear that the public and industry use the information received from the annual well test.
You can read TLMA’s comments here.
The Supreme Court issued an opinion and dissenting opinion in the Murphy v. Herbst offset well case. The case was decided 5-4 in Murphy’s favor. The opinion stated that the lease was ambiguous to the location of the offset well because it didn’t contain a “proximity requirement” and that they “do not read into the lease more stringent obligations than the parties intend.” The dissent stated that the lease required Murphy to drill an offset well “reasonably located” to protect against drainage.
As mentioned in a previous news post, TLMA’s brief asked the Court to uphold the Court of Appeals and recognize the definition of and purpose of an offset well. In its brief, TLMA asserts that an offset well, by its commonly understood definition, is meant to protect against drainage. A company cannot simply drill a well anywhere on the lease and call it an offset well; it must show evidence that the well is actually offsetting drainage by the neighboring well.
You can read the opinion here and the dissent here. The TLMA amicus brief can be viewed here.
The Supreme Court has granted the petition for review in the Burlington v. Texas Crude case on post-production costs, which is the first case on this issue since Chesapeake v. Hyder. The Burlington v. Texas Crude case deals with the issue of post-production costs in an overriding royalty interest situation.
TLMA and NARO-TX jointly filed a brief in this case asking the Supreme Court to deny the petition and allow the decision made by the Court of Appeals to stand. The Supreme Court granted the petition. Oral arguments have not been set, but TLMA will post when the date and time are determined.
You can view the amicus brief here.
TLMA filed an amicus curiae brief in BP America v. Red Deer Resources asking the Court to grant the motion for rehearing filed by Red Deer Resources LLC. A trial jury ruled in favor of Red Deer regarding the date that the well was not “capable of producing”. The case made it all the way to the Texas Supreme Court where the Court found in favor of BP America. The Supreme Court decided June 4, the last day the well produced, was the date the shut-in clause would go into effect and the lessor is required to prove that a well is “incapable of production in paying quantities”. In its brief, TLMA asserts that the “operative date for determining a well’s capability to produce gas” is incorrect and it is “inconsistent with the intent and purpose of the shut-in royalty clause” to place that requirement on a lessor.
You can read TLMA’s brief here.
The Supreme Court rejected the appellate court’s notion that it should consider Denbury’s intent at the time it began planning to construct the pipeline. Instead, the Court found Denbury’s contracts to transport CO2 entered into after the pipeline was built (and in the case of the only contract that is truly independent of Denbury, entered into after the Court issued its first Denbury opinion in 2012) evidenced a “reasonable probability” that the pipeline would serve the public. It also found that the pipeline’s route in proximity to other CO2 shippers supported a probability of future public use.
In addition, the Court stated that the court of appeals got it wrong by requiring a common-carrier pipeline serve a substantial public interest. The Supreme Court held that “evidence establishing a reasonable probability that the pipeline will, at some point after construction, serve even one customer unaffiliated with the pipeline owner is substantial enough to satisfy public use.” |
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