TLMA Has Significant Impact on Withdrawal of Rulemaking at Railroad Commission of Texas - June 2018
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:
- the well is recompleted into a different regulatory field;
- the well is reclassified from gas to oil;
- the well is an inactive well and the operator resumes production from the well;
- necessary to reinstate an allowable; or
- required by Commission order, special field rule, or other Commission rule.
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.
Thank you to those of our members who submitted comments. They made an impact.
You can read TLMA’s comments here.
Texas Supreme Court Issues Opinion in Murphy v. Adams - June 2018
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.
TLMA Files Brief in Case that Would Change Post-Production Cost Deductions for Many Leases - April 2018
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 Files Brief in Case that Would Impact Shut-In Royalty Clause - August 2017
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.
Bill Protecting Open-Space Landowners Signed into Law - June 2017
Governor Abbott signed HB 3198 - a bill authored by Rep. Drew Darby and sponsored in the Senate by Sen. Craig Estes. The bill protects landowners from a recent trend in a few Texas counties - the county tax appraiser carves out bits of acreage used for oil pad sites on larger agricultural parcel of land, removes the ag exemption from that carve-out, taxes the land at market value, and charges the landowner with 5 years of rollback taxes plus interest. HB 3198 provides that as long as the surrounding land continues to qualify for an open-space exemption, the well pad site does not lose its eligibility for the same.
You can find the history and text of HB 3198 here.
Texas Supreme Court Decides Contamination Case and Preserves Landowner Rights - April 2017
The Court has issued its ruling in Forest Oil v. El Rucio Land & Cattle Co. and denied the oil company's claim that the Texas Railroad Commission should have exclusive jurisdiction over oilfield contamination claims. The Court's decision preserves your rights and remedies, including filing a lawsuit for damages in a court of law. This news comes as a big relief for Texas landowners. A decision that the Railroad Commission controlled all contamination claims would have subjected landowners to first go through the lengthy process of seeking relief and remediation through the Commission, and it would have nullified carefully-negotiated surface use agreements between landowners and oil companies.
You can read the Court's decision here.
TLMA Files Brief in Case that Could Affect the Power of Offset Provisions in Mineral Owners' Leases - March 2017
TLMA filed an amicus curiae brief in Murphy Oil v. Herbst asking the Court to uphold the Court of Appeals and recognize the definition of and purpose of an offset well. When a well drilled on a neighboring lease triggered the offset clause of the Herbsts' lease, Murphy Oil claimed that a well it drilled at the far opposite side of the property from the neighbor's well counted as the required 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 TLMA's brief here.
TLMA Jointly Files Brief In Support of Landowners in Oilfield Contamination Case - March 2017
TLMA recently filed an amicus curiae brief jointly with South Texans’ Property Rights Association, Texas and Southwestern Cattle Raisers Association, Texas Farm Bureau, Texas Wildlife Association, Texas Cattle Feeders Association, Landowner Coalition of Texas, and Texas Forestry Association in Forest Oil v. El Rucio Land & Cattle Co. The case is critical for landowners in Texas because an unfavorable decision by the Court could strip rights and remedies from landowners faced with contamination by oil and gas companies. In an effort to avoid an expensive arbitration decision, the oil and gas company now argues before the Supreme Court that the Railroad Commission ("RRC") should have exclusive jurisdiction over all oilfield contamination claims. A court decision finding the RRC has exclusive jurisdiction would nullify carefully-negotiated surface-agreement contract terms for clean-up and remediation, forcing claims through the RRC process and subject to RRC standards for remediation with no option for necessary monetary damages.
You can read the brief filed by TLMA, et al, here.
Supreme Court of Texas Sides with Pipeline Company in Denbury Green v. Texas Rice Land Partners - January 2017
In a disappointing decision for landowners, the Supreme Court of Texas today published its decision in a case for which TLMA filed an amicus brief supporting the landowners - Denbury Green v. Texas Rice Land Partners. The Court addressed the question of whether or not Denbury Green was entitled to exercise eminent-domain authority as a common carrier when it condemned land to build a pipeline to transport its CO2 to Texas for tertiary oil recovery operations.
This is the second time the Court has heard this case. In 2012, the Court found that Denbury did not merit common-carrier status simply by checking the common carrier box on a T-4 application from the Railroad Commission. It remanded the case back to the trial court to determine whether there was a reasonably probability that Denbury's pipeline would serve the public. The trial court granted Denbury summary judgement, but the Court of Appeals overturned the decision, focusing on Denbury's intended use for the pipeline at the time it began planning to build. Denbury appealed to the Supreme Court.
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.”
You can read the Court's opinion written by Justice Green here, and you can read the amicus curiae briefs filed by TLMA here and here.
TLMA Files Letter of Support in BMT O&G v. Clayton Williams Energy - November 2016
TLMA filed an amicus curiae letter in support of royalty owners in a dispute with Clayton Williams Energy and Chesapeake. BMT, et al, leased minerals to Chesapeake Exploration, and in the lease specifically stated that no operator other than the lessee, Chesapeake, could conduct operations on the leased premises. Very shortly before the lease was set to expire, Chesapeake farmed out the operations to Clayton Williams Energy, without notifying the royalty owners or getting consent from the royalty owners, to drill the first well on the lease. It was only when the royalty owners asked Chesapeake for an executed release of the lease that they were informed that Clayton Williams Energy was drilling a well on the leased land in violation of the lease terms. The trial court found in favor of BMT, et al, terminated the lease, and awarded damages to the royalty owners for Chesapeake's and Clayton Williams Energy's breach of the lease. The 8th Court of Appeals reversed the trial court, seemingly failing to find a distinction between "Lessee" and "Operator" in the lease terms.
The Texas Supreme Court declined to hear the royalty owners' appeal. In November, BMT, et al, filed a motion for rehearing, and TLMA filed its letter in support of the royalty owners. Citing the importance of understanding TLMA believes that the Court of Appeals’ opinion evidences a basic lack of understanding of the nature and role of the operator of an oil and gas lease, and the importance of respecting the meaning and intent of negotiated contract terms. You can find a link to all of the filings in this care here, and read TLMA's letter here.
TLMA and TSCRA File Amicus Brief in Exxon v. Lazy R Ranch - November 2016
TLMA, together with the Texas and Southwestern Cattle Raisers Association, filed an amicus curiae brief in a Texas Supreme Court case that may have strong repercussions for landowners and their ability to seek relief from ongoing damage by oil and gas operations. Exxon caused groundwater contamination on the Lazy R Ranch that the landowners did not discover for some time. When Exxon refused to clean up the site, the Lazy R filed for an injunction asking for Exxon to take immediate measures to prevent further groundwater contamination. Exxon claims the lawsuit is barred by the statute of limitations because the surface contamination occurred more than two years ago. However, the statute of limitations applies only when seeking legal damages; Lazy R is not seeking money but an injunction to halt an ongoing nuisance. You can read the full brief here.
TLMA Files Comments in Railroad Commission Proposed Rulemaking - September 2016
On September 26, TLMA filed formal comments on a proposed rulemaking by the Railraod Commission to amend Statewide Rule 3.15. TLMA's comments recommended against the relaxation of the regulations, which also have potential to affect the terms of certain leases. We also took the opportunity to highlight a related, existing problem - the inability to audit production reports to ensure oil or gas production attributed to a well in fact came from that well. You can read the full comments and all of the other comments filed on the rulemaking by visiting the Railroad Commission website here.
On August 22, TLMA attended the public hearing of the Sunset Advisory Commission to testify on the sunset review of the Railroad Commission.The proposed changes to the rules would reduce the volume of oil or gas that must be produced from a well in order for the well to be deemed "active" under Commission rules. TLMA commented against the relaxing of the rules, but also took the opportunity to highlight the existing problem of a lack of auditing of production reports to ensure that production attributed to a particular well did indeed come from that well. You can read the complete comments here.
TLMA Testifies at Sunset Advisory Commission Hearing on the Railroad Commission - August 2016
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