News & Analysis as of

TX Supreme Court Contract Terms Mineral Leases

Jackson Walker

Texas Supreme Court Clarifies Default Ownership of Produced Water in Oil & Gas Leases – Key Questions Remain

Jackson Walker on

On June 27, 2025, the Texas Supreme Court issued a pivotal decision in Cactus Water Services, LLC v. COG Operating, LLC, holding that under the language of the granting clause found in the standard oil and gas lease, produced...more

Holland & Knight LLP

Texas Supreme Court: Subsurface Storage Rights Generally Belong to Surface, Not Mineral Owner

Holland & Knight LLP on

The Supreme Court of Texas has provided helpful guidance as to ownership of subsurface storage rights and pore space. In the recent holding in Myers-Woodward, LLC v. Underground Services Markham, LLC, the court held that "the...more

McGinnis Lochridge

Tackling Free-Use and At-The-Well Royalties

McGinnis Lochridge on

This lease royalty case involved a dispute over whether the lessee was permitted to deduct volumes of gas used off the premises to power post-production activities on other gas produced from the same well. Carl v. Hilcorp...more

Gray Reed

Ratifications, Stipulations, and Fixed vs. Floating Royalty Interests

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After four stops at the lower courts, Kenneth Hahn v. ConocoPhillips has been resolved by the Supreme Court of Texas. The Court opined on the effect of two instruments often used to clarify land titles in Texas: ...more

Troutman Pepper Locke

The Texas Supreme Court Holds Interest Must Be Simple Absent an Express, Clear, and Specific Provision for Compounding

Troutman Pepper Locke on

The Texas Supreme Court has clarified Texas law concerning how to calculate interest that is being paid pursuant to an agreement or statute. Samson Exploration, LLC v. Bordages, No. 22-0215, 2024 WL 2869049 (Tex. June 7,...more

Houston Harbaugh, P.C.

Texas Supreme Court Addresses Fuel Gas Question

Many oil and gas leases across Pennsylvania allow the driller to divert and use volumes of raw gas to power and fuel production operations both on and off the leasehold. Is a driller obligated to pay a royalty on that volume...more

Gray Reed

Supreme Court of Texas Sorts Out Complicated Assignment of Oil and Gas Leases

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In Occidental Permian, Ltd. et al v. Citation 2002 Investment LLC  the Supreme Court construed a 1987 assignment from Shell Western E& P Inc. to Citation of a large number of properties. The instrument contained these...more

Gray Reed

Supreme Court of Texas Decides Another Post-Production Cost Dispute

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In Carl v. Hillcorp Energy the Supreme Court of Texas addressed the relationship between the lessee’s use of gas off-premises under a free-use clause and the lessor’s burden to share post-production costs (PPCs) under the...more

Houston Harbaugh, P.C.

Texas Supreme Court to Address the Obligation to Calculate Royalty on Gas Used to Fuel Off-Lease Operations

Houston Harbaugh, P.C. on

Let’s assume you own 165 acres in Tioga County. In 2019, you sign a new oil and gas lease with ABC Drilling. You negotiate an 18% net royalty. The royalty clause, however, requires ABC Drilling to calculate the royalty on...more

Gray Reed

Texas Supreme Court Rules on Suspension of Proceeds of Oil and Gas Production

Gray Reed on

Freeeport-McMoRan Oil and Gas, LLC and Ovintiv USA Inc. v. 1776 Energy Partners LLC  presented a recurring question faced by Texas oil and gas producers:  When can proceeds of production be withheld by the operator without...more

Houston Harbaugh, P.C.

Texas Supreme Court Rules That 1924 Deed Conveyed One Half Of The Oil and Gas Estate

Houston Harbaugh, P.C. on

The calculation of production royalties and the deduction of post-production costs remains a controversial topic here in Pennsylvania. As we have written before, there is another frustrating and often confusing...more

Houston Harbaugh, P.C.

Texas Supreme Court Rules That Post-Sale Costs Must be Added Back to Gross Proceeds Calculation

Houston Harbaugh, P.C. on

Let’s assume you own 185 acres in Washington County. In 2020, you negotiate a new oil and gas lease with ABC Drilling. During the negotiations, you insist on a “gross royalty” which prohibits the deduction of post-production...more

Gray Reed

Texas Supreme Court Rules on “Bespoke” Add-Back Royalty Clause

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In Devon Energy Production Company, LP et al v. Sheppard et al, the Supreme Court of Texas construed what it referred to as a “bespoke” and “highly unique” royalty clause in several oil and gas leases to prohibit the...more

Gray Reed

Long-Running Texas Boundary Dispute Continues

Gray Reed on

Ellison v. Three Rivers Acquisition LLC et al., on remand from the Texas Supreme Court, is the third round of a boundary dispute between mineral lessees in Irion County.   For the history of Ms. Ellison’s odyssey from...more

Gray Reed

Clause to Protect Against Drainage in a Mineral Lease Deemed Ambiguous

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Today we will skip our usual routine of explaining how court rulings on the question of the day might affect your interests. Instead we will discuss the fallout from abysmal document drafting. In Rosetta Resources Operating...more

Holland & Knight LLP

A Closer Look at Nettye Engler Energy, LP, v. BlueStone Natural Resources II, LLC

Holland & Knight LLP on

The Supreme Court of Texas has once again tackled the heavily contested issue of postproduction costs in royalty calculations. In Nettye Engler Energy, LP, v. BlueStone Natural Resources II, LLC, No. 20-0639, the Court was...more

Gray Reed

Texas Supreme Court Clarifies Postproduction Cost Decision

Gray Reed on

It was jurisprudential Groundhog Day as the Supreme Court of Texas handed down Nettye Engler Energy v. Bluestone Natural Resources, another in a series of postproduction cost disputes, only two days after Puxsutawney Phil...more

Alston & Bird

Is “Into the Pipeline” the Equivalent of a Wellhead Valuation? Not So Fast, Says Texas Supreme Court

Alston & Bird on

Our Oil & Gas Team parses a ruling from Texas that reminds courts to look at the entire contract, not just a favorite word or phrase. The parties disagreed about where along the pipeline royalty valuation should occur. The...more

Gray Reed

Texas Supreme Court to Review the Lessee’s Covenant to Protect Against Drainage

Gray Reed on

First, a word for you scriveners: Preserve your reputation and the honor of your law school writing instructor by preparing clear and understandable contracts. ...more

Gray Reed

Tax Foreclosure on Royalty Did Not Include Possibility of Reverter

Gray Reed on

Ridgefield Permian, LLC, et al. v. Diamondback E & P LLC, et al. addresses the scope of a property interest foreclosed upon by a tax suit in Reeves County, Texas. In this post we will shortcut the complicated facts and...more

Gray Reed

Texas Supreme Court Rules on Correction Deeds in a Case of First Impression

Gray Reed on

What if you pay good money for a mineral interest and record the deed in the official public records, thereby securing your title? What if your predecessors-in-title decide among themselves they made a material mistake in a...more

Vinson & Elkins LLP

To Spud Or Not To Spud? In Sundown Energy LP v. HJSA No. 3, The Texas Supreme Court Interprets What “Drilling Operations” Means...

Vinson & Elkins LLP on

“To spud or not to spud,” that was the question before the Texas Supreme Court in determining whether a lessee, Sundown Energy, maintained a lease on non-producing acreage under the lease’s continuous drilling provisions.1...more

Gray Reed

What are “Drilling Operations”?

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As Humpty Dumpty would have said to Alice if he were Justice Dumpty of the Texas Supreme Court, the term means whatever the parties to an oil and gas lease say it means, neither more nor less. In Sundown Energy LP, et al. v....more

Skadden, Arps, Slate, Meagher & Flom LLP

Supreme Court of Texas Clarifies Allocation of Post-Production Costs in Oil and Gas Royalties in BlueStone Natural Resources II,...

On March 12, 2021, the Supreme Court of Texas issued a unanimous opinion that clarifies when a lessee is entitled to deduct post-production costs from royalties paid to the lessor under oil and gas leases. Construing a lease...more

Gray Reed

Texas Supreme Court to Consider Continuous Development Clause

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The Texas Supreme Court has agreed to hear oral arguments in a dispute over an “accumulation” provision in a continuous development clause of an oil and gas lease.  The case is Endeavor Energy Resources L.P. v. Energen...more

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