Oil and Gas Law Digest

The Second Issue of "Producer's Edge" is now available. Producer's Edge is an oil and gas law bulletin by the McGinnis Lochridge oil and gas practice group.

This issue covers several articles by Chris Halgren, Austin W. Brister, Kevin Beiter, Lindsey Roskopf, and Martin T. Lutz.

Download Issue 2 here: http://mineral.estate/1-2
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Here are a few highlights:

1. Admissibility of Expert Testimony: In a split decision, the Texas Supreme Court in Barrow-Shaver v. Carrizo discussed the admissibility of expert testimony and other extrinsic evidence when construing oil and gas agreements. (pg. 12)

2. Post-Production Costs: In Burlington v. Texas Crude, the Texas Supreme Court held that the phrase “into the pipeline” set a valuation point even though the lease required royalties to be paid on the basis of “amount realized,” thus allowing the lessee to “netback” certain post-production costs. (pg. 4)

3. Executive Mineral Interests: In Texas Outfitters v. Nicholson, the Texas Supreme Court held that the owner of executive mineral rights breached its duty to non-executive interests by refusing to execute an oil and gas lease. (pg. 6)

4. Offset Obligations: In Bell v. Chesapeake, the San Antonio Court of Appeals held that express offset obligations in two similar lease forms implicitly conditioned the obligation on proof of actual and substantial drainage and a reasonable expectation of profit, and that compensatory royalties must be calculated based on the entire adjacent horizontal wellbore, not merely that portion within the triggering distance. (pg. 2)

5. RRC Double-Assignment: An article surveying certain issues relating to the prohibition against double-assignment of acreage at the Railroad Commission. (pg. 9)

6. Surface Use Disputes: In this first installment in our series on surface use disputes, we survey the extent of the implied easement to use the surface. (pg. 14)

7. International Trade: An article surveying U.S. regulation of cross-border transactions relating to the oilfield sector. (pg. 16)

New case law alert. "The majority reviewed an Eagle Ford oil and gas lease, and held that, in light of the 'surrounding circumstances' of Shale Plays and drainage patterns for horizontal wells, the phrase “offset well” in the offset clause in that lease does not necessarily refer to a well that would protect the leasehold against drainage, but instead referred to a well drilled anywhere on the leased premises that was drilled to a depth required by the lease."

Tex. Supreme Court Splits Over Meaning of “Offset Well” in Shale Plays - Oil and Gas Law Digest The Texas Supreme Court issued a narrow 5-4 opinion in Murphy Exploration & Production Co. — USA v. Adams on June 1, 2018, interpreting a common “offset” clause contained in a 2009 oil and gas lease. The majority held that the phrase “offset well” in that clause does not necessarily refer ...