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The United States Court of Appeals for the Fifth Circuit recently certified a question to the Texas Supreme Court asking what effect a free-use clause and an off-lease clause have on a royalty clause valuing royalties at the well. At issue was whether gas used as fuel off the leased premises could be deducted from royalties when the royalties were to be valued at the well under an oil and gas lease containing an off-lease clause and a free-use clause. Texas Supreme Court precedent provides that when a lease states that royalties must be valued on the gross proceeds received by lessees, free-use clauses do not allow for gas used as fuel off the leased premises to be deducted, but it is not clear on whether that same rationale would apply when royalties are valued at the well. Given that uncertainty, the Fifth Circuit could not confidently make an Erie guess on the issue and instead opted to certify the question to the Texas Supreme Court.
Continue Reading At the Well vs. Off the Lease: The Fifth Circuit Asks the Texas Supreme Court to Determine Whether Off-Lease Fuel May be Deducted from Royalties Valued at the Well

Recent technology has made produced water—a byproduct of fracing that was traditionally considered waste—a valuable product. However, no legal guidance existed on whether produced water was owned by mineral owners or surface owners. The Texas Legislature resolved some of that uncertainty by passing Texas Natural Resources Code § 122.002 on September 1, 2019, which generally grants title to produced water to whoever takes possession of it for the purpose of treating it for subsequent beneficial use. However, this statute only governs parties to instruments executed after September 1, 2019, which left parties to instruments executed prior to that date uncertain on whether they owned the produced water extracted from their property. The El Paso Court of Appeals undertook to resolve this conflict in Cactus Water Services, LLC v. COG Operating, LLC, and on July 28, 2023, it held that when instruments convey “oil and gas” or “oil, gas and hydrocarbons” to mineral owners without specifically reserving title to produced water or oil and gas waste, mineral owners have the sole right to produced water extracted from their property.
Continue Reading One Man’s Waste is Another Man’s Treasure: Texas Appellate Court Holds that Produced Water Belongs to Mineral Owners

On May 25, 2023, the Nation’s first U.S.-built offshore wind substation departed from a Texas fabrication facility for the South Fork Wind Farm in federal waters on the New York outer continental shelf. This marks the start of Jones Act compliant offshore wind support vessels being manufactured domestically, including the first-ever U.S. flagged wind turbine installation vessel (“WTIV”) and offshore wind service operations vessel (“SOV”), both of which are currently under construction in Texas and Louisiana, respectively.
Continue Reading MADE IN AMERICA: U.S.-Built Offshore Wind Substation and Support Vessels Start to Set Sail for Federal Waters

On June 16, the Texas Supreme Court considered the award of noneconomic damages in the amount of just over $15 million in a wrongful death case arising from a trucking accident. In a plurality opinion, the Court reversed and remanded for a new trial, holding that the jury’s discretion to make an award is limited and that noneconomic damages must be supported by evidence of the nature, duration, and severity of the injury to support both the existence and the amount of compensable loss. Additionally, the Court held that unsubstantiated arguments to the jury, such as comparisons of mental anguish to the cost of a fighter jet, a work of art, or miles driven by a defendant’s vehicles, are improper.
Continue Reading “Juries cannot simply pick a number and put it in the blank.” – Texas Supreme Court Remands Case Involving $15 Million Jury Award for Noneconomic Damages Where Award was Unsupported and Arguments to the Jury Unsubstantiated

Devon Energy Production Company, L.P. v. Sheppard is a royalty dispute between several lessees, Devon Energy Production Co., L.P., et. al., and several lessors, Michael A. Sheppard, et. al., concerning a novel royalty term that may have a huge impact on the way oil and gas royalties are paid in the future.  See 13-19-00036-CV, 2020 WL 6164467, at *12 (Tex. App.—Corpus Christi Oct. 22, 2020, pet. filed).  The novel term, referred to as an “add-back” or “add-to-proceeds” provision, requires any deductions to the sale of production to be added back to the proceeds in order to determine the appropriate royalty base.  The lessors argue that under this term, the deductions in the lessees’ sales contracts attributable to the buyers’ post-transfer costs must be added to the gross proceeds in order to establish a royalty base above the gross proceeds.  The lessees disagree, countering that the clear intent of the provision is merely to prohibit the deduction of their own post-production costs, not the post-transfer costs of the buyers.  The lessors won in the trial court; the court of appeals affirmed.  Now the case is before the Texas Supreme Court, with a recently submitted amicus brief containing the argument that could turn the tides back in the lessees’ favor.
Continue Reading New Developments in Shocking Case Before the Texas Supreme Court Regarding Construction of Novel Oil & Gas Royalty Term

Hours before a controversial set of new reporting requirements for government contractors was set to take effect, a federal court in Texas enjoined implementation of the requirements across the country.
Continue Reading New Government Contractor “Blacklisting” Reporting Requirements Put on Hold