On September 2, 2022, the Texas Supreme Court granted DGC client Petro Canyon Energy, LLC’s petition for review in a $54,500,000 dispute over the construction and application of a settlement-and-release provision in an acreage-swap agreement between oil-and-gas companies. The case will be argued to the Texas Supreme Court on November 30, 2022.

The primary issue is whether a comprehensive settlement-and-release provision—which states that each party releases the other, the other’s affiliates, and their “predecessors” from all liability related in any way to the conveyed oil-and-gas property—applied to a suit later brought against Petro Canyon’s predecessor in interest, title, rights, and liabilities. The trial court answered that question “yes.” But the Dallas Court of Appeals reversed, holding that releases of liability are “forfeitures” under Texas law and therefore their application must be rejected if there is any plausible way to construe them as not applying to a particular factual circumstance. The court of appeals ultimately held that the word “predecessor” in the release of liability must mean “corporate predecessor” only—even though Petro Canyon doesn’t have a formal corporate predecessor.

DGC shareholder Ryan Clinton was hired to prepare Petro Canyon’s appellate briefing at the Texas Supreme Court. The Court has granted Petro Canyon’s petition for review and set the case for oral argument in November.

Additional Resources:
Petro Canyon’s Brief on the Merits
Petro Canyon’s Reply Brief on the Merits
Dallas Court of Appeals Opinion

On March 11, 2022, the Texas Supreme Court sided with DGC client Energen Resources Corp. in a dispute over an accident during the drilling of a water well on an oil-and-gas lease. In the case, Energen Resources Corp. v. Wallace, No. 20-0451, a water well contractor and its employee sued oil-and-gas lessee Energen after suffering injuries in the accident. Appellate attorney Ryan Clinton wrote Energen’s briefing and presented oral argument at the Texas Supreme Court.

In the trial court, Energen moved to dismiss the plaintiff’s suit based on Chapter 95 of the Texas Civil Practice and Remedies Code. Chapter 95 limits liability for Texas commercial property owners sued for injuries arising from conditions or uses of improvements that the contractors were hired to construct or repair. The plaintiffs argued that Chapter 95 didn’t apply. Energen argued that Chapter 95 applied because, according to the plaintiffs’ own pleadings, the accident arose from a condition of the water well—the presence of natural gas. The Texas Supreme Court agreed with Energen and rendered judgment that the plaintiffs take nothing on their claims.

Additional Information:
Texas Supreme Court opinion
Energen Brief on the Merits
Energen Reply Brief on the Merits

On February 18, 2022, the Texas Supreme Court denied the petition for review filed in Posse Energy, Ltd. v. Parsley Energy, LP, No. 21-0754. The Court’s decision to deny the petition for review lets stand DGC client Parsley Energy’s court of appeals victory in a dispute of ownership of working-interest rights in Upton County, Texas.

In this highly complicated dispute over oil-and-gas rights, plaintiff Posse Energy asserted that it—rather than Parsley and co-defendant Pacer Energy—owned the deep-depth working interest at issue. The case involved interpretations of multiple mineral deeds and complex contracts. Ultimately, the El Paso Court of Appeals determined that Parsley and Pacer owned the disputed working interests.

Additional Information:
Court of Appeals opinion
Parsley Energy’s Appellee’s Brief
Pacer & Parsley’s Joint Response to Petition for Review

On December 14, 2018, the Texas Supreme Court declined to review a Davis, Gerald, & Cremer client victory in a dispute over the meaning of a covenant-to-release clause in an oil-and-gas lease. The Court’s decision leaves intact the El Paso Court of Appeals’s holding that Apache Deepwater, LLC did not lose previously developed acreage long after the expiration of the primary term. See Apache Deepwater, LLC v. Double Eagle Dev., LLC, 557 S.W.3d 650 (Tex. App.—El Paso 2017, pet. denied).

The key issue presented in the case was whether the disputed clause was triggered once—at the expiration of the primary term—or over and over again anytime production ceased on a well in the lease’s secondary term (a theory sometimes called “rolling termination”). DGC argued on behalf of Apache that the clause’s language, read in harmony with the lease’s habendum and drilling-operations clauses, could mean only one thing: the covenant-to-release clause was triggered just once.

The court of appeals agreed with Apache. And after requesting full briefing on the merits, the Texas Supreme Court denied Double Eagle’s petition for review.

RESOURCES:

Court of Appeals opinion
Apache Deepwater’s Brief on the Merits

On March 22, 2018, the highly respected and influential Texas Oil and Gas Association filed amicus briefs supporting Davis, Gerald & Cremer's clients in two high-profile Texas appeals currently pending before the Texas Supreme Court.

The two cases are Endeavor Energy Resources, L.P. v. Discovery Operating, Inc., No. 15-0155, and XOG Operating, LLC v. Chesapeake Exploration Ltd. Partnership, No. 15-0935.  Both cases involve a dispute over the number of acres retained by the lessee or transferee after the expiration of an oil-and-gas contract's primary term.  The contracts in each case define retained acreage differently, but the Petitioners in both cases have argued that the two contracts should be construed to lead to the same conclusion.

Respondents Discovery Operating and Chesapeake Exploration, both represented by Ryan Clinton of Davis, Gerald & Cremer, assert that the court of appeals's judgments in each case correctly determine the number of acres retained under the particular language of each contract. 

The Texas Oil and Gas Association agrees.  In a brief to the Court, TXOGA wrote:

TXOGA urges the Court to carefully consider the technical drafting associated with each of the retained acreage clauses involved in these two cases.  Retained acreage clauses that refer to Railroad Commission rules potentially are confusing, and the industry relies on careful interpretation of these clauses to avoid unnecessary risk in development areas that may be subject to retained acreage clauses.

TXOGA believes that the courts of appeal in each case correctly interpreted the retained acreage clause in each lease.  Although the courts reach different results for what may seem to be similar clauses, TXOGA notes that the wording in each clause is different.  Accordingly, TXOGA encourages the Court to affirm the decisions of the courts of appeals in these matters.

To reach TXOGA's amicus brief in full, click here.
 

On January 9, 2018, Ryan Clinton presented oral argument to the Texas Supreme Court in the case of XOG Operating, LLC v. Chesapeake Exploration Ltd. P’ship, Cause No. 15-0935.

The case involves a term assignment in which XOG assigned its leasehold rights to Chesapeake for a particular term.  After the initial term expired, the contract provided that Chesapeake had the right to retain all lands in a “proration unit,” which was defined in the contract as either 320 acres in size (for wells placed into fields not governed by special field rules) or the acreage “prescribed” by Railroad Commission field rules (for wells placed into fields governed by special field rules).  Five wells were drilled into a field prescribing 320-acre proration units, and one well was drilled into a field not governed by special field rules.

At oral argument, Ryan Clinton argued on behalf of Chesapeake Exploration, arguing that each of Chesapeake’s six wells retained 320 acres—-far more than enough to retain all of the acreage transferred to Chesapeake in the term assignment.  The parties now await a decision from the Texas Supreme Court.

Chesapeake’s Brief on the Merits
Ryan Clinton’s Oral Argument on Behalf of Chesapeake 

In Mercury-Ward LLC v. Anadarko Petroleum Corp., a top lessee and family members of the lessor argued that Anadarko's lease had terminated because an extension of the lease was executed by one family member but not her children.  Anadarko argued that its lease extension was valid because, among other reasons, (1) the lessor inherited the minerals in fee simple, not in life tenancy, and thus had full authority by herself to execute the lease extension; and (2) the lessor's children had no standing to challenge the lease extension's validity because, under their father's will, their prospective interest in the minerals was unvested as a matter of law.  The trial court agreed with Anadarko, entering judgment that Plaintiffs take nothing on their claims.

Anadarko's Motion for Summary Judgment

In XOG Operating, LLC v. Chesapeake Expl. Ltd. P'ship, the assignor of a leasehold-assignment contract asserted that the assignee's leasehold rights had partially terminated based on the contract's retained-acreage clause.  That clause stated that at the end of the assignee's continuous-development operations, the transferred rights terminated except for those rights associated with acreage in a "proration unit," which "shall mean the area within the surface boundaries of the proration unit then established or prescribed by field rules or special order of the appropriate regulatory authority for the reservoir in which each well is completed."  The assignee argued that each producing well retained the number of acres in a prescribed proration unit under Railroad Commission's field rules, and the court of appeals agreed.  XOG Operating, LLC v. Chesapeake Expl. Ltd. P'ship., 480 S.W.3d 22 (Tex. App.--Amarillo 2015, pet. filed). 

Chesapeake's Brief on the Merits
Court of Appeals's Opinion

In Clayton Williams Energy, Inc. v. BMT O&G TX, L.P., a group of lessors sued lessee Chesapeake Exploration L.L.C. and farmee Clayton Williams Energy, Inc., asserting that Chesapeake's lease expired because it was developed under a farmout agreement rather than by Chesapeake itself.  The trial court entered a multi-million dollar judgment and declared the lease terminated.  On appeal, Chesapeake argued that Clayton Williams's timely development under the farmout agreement perpetuated the lease under its plain terms and that no evidence supported the trial court's damages award.  The El Paso Court of Appeals agreed with Chesapeake, reversed the trial court's judgment in its entirety, and rendered judgment that the lessors take nothing on their claims.  Clayton Williams Energy, Inc. v. BMT O&G TX, L.P., 473 S.W.3d 341 (Tex. App.--El Paso 2015, pet. denied).

Chesapeake's Brief
Court of Appeals Opinion

In Pioneer Natural Resources USA, Inc. v. Petroplex Energy, Inc., Petroplex claimed that Pioneer's lease had partially terminated and segregated into separate leases at the end of the lessee's continuous-development operations.  Pioneer moved for summary judgment, arguing that production on the fully developed lease perpetuated the lease in its entirety, and that no language in the lease supported Petroplex's argument that production in any particular drilled area perpetuated the lease only as to that area.  The trial court agreed with Pioneer and granted its motion for partial summary judgment.

Pioneer's Motion for Summary Judgment

In Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, the trial court vacated a $125 million arbitration award in a dispute over the sale of a power plant.  After the court of appeals reinstated the arbitration award, Tenaska appealed to the Supreme Court of Texas.  Tenaska argued that the award should be vacated due to the evident partiality of the arbitrator, who failed to disclose the full scope of his contacts with opposing counsel and their law firm.  The Texas Supreme Court agreed, vacated the $125 million arbitration award, and remanded for a new arbitration.  Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518 (Tex. 2014).

Tenaska's Brief on the Merits
Supreme Court of Texas Opinion

In this large oil-and-gas dispute, Plaintiff Community Bank of Raymore asserted that the drilling rights of Defendants Chesapeake Exploration, L.L.C. and Anadarko Petroleum Corporation terminated as to certain deep depths.  Plaintiff had two theories:  (1) that a horizontal-termination clause had terminated Defendants’ deep-depth drilling rights at the expiration of the lease’s primary term; and (2) that a severance clause was triggered, effecting a partial termination of deep-depth drilling rights as to areas of the lease in which Defendants had already achieved production at the expiration of the primary term.  On appeal, Defendants argued that neither partial-termination clause had been triggered because the lease continued to be held in full force, past the expiration of the primary term, by the lessee's continuous-development operations.  After briefing and oral argument, the El Paso Court of Appeals sided with Defendants and affirmed the trial court’s judgment that Plaintiff take nothing on its claims.  Community Bank of Raymore v. Chesapeake Exploration, L.L.C. & Anadarko Petroleum Corp., No. 08-12-00025-CV (Tex. App.–El Paso Nov. 6, 2013).

Chesapeake's Brief
Court of Appeals Opinion

In two related and novel oil-and-gas disputes, a group of investors leased to themselves partial mineral interests in West Texas properties based on a disputed fractional executive interest.  The group asserted that they had inherited the stranded (or “naked”) fractional executive interest in the properties, which they in turn asserted gave them a right to considerable oil-and-gas profits after they executed a contract leasing the minerals to themselves.  The trial court agreed with the investors and held that they were owed a substantial sum of back and future payments.  Ryan Clinton led the appellate efforts and presented oral argument on behalf of Defendants/Appellants Chesapeake Exploration, L.L.C. and Anadarko Petroleum Corporation.  After briefing and argument, the court of appeals reversed and rendered judgment that the investors take nothing from Chesapeake and Anadarko.  The court held that the investors did not own the executive interest upon which they based their claims, but instead that a non-party to the dispute had previously purchased the disputed executive rights.  Chesapeake Exploration L.L.C. v. BNW Property Co., No. 08-11-00239-CV, 2012 WL 5987573 (Tex. App.—El Paso Nov. 30, 2012, no pet. h.); Anadarko Petroleum Corp. v. BNW Property Co., No. 08-11-00238-CV, 2012 WL 5987570 (Tex. App.—El Paso Nov. 30, 2012, no pet. h.).

Anadarko's Response to Petition for Review
Court of Appeals Opinion

In Occidental Permian Ltd. v. Helen Jones Foundation, et al., a group of Texas royalty owners alleged that OPL, an oil and gas producer, had underpaid royalties for casinghead gas produced during carbon dioxide-injection tertiary recovery operations in West Texas. After the jury reached a multi-million dollar verdict for the plaintiffs, OPL appealed and the Amarillo Court of Appeals reversed the trial court’s judgment, concluding that no evidence supported the jury’s findings. The court of appeals rendered judgment that the plaintiffs take nothing against OPL. Occidental Permian Ltd. v. Helen Jones Foundation, 333 S.W.3d 392 (Tex. App.—Amarillo Jan. 31, 2011, pet. denied).

Occidental's Response to Petition for Review
Court of Appeals Opinion

In Petroleum Synergy Group, Inc. v. Occidental Permian, Ltd., the owner of an overriding royalty interest in an oil-and-gas lease sued Occidental, claiming that Occidental breached its implied covenant to prevent substantial drainage from the leased acreage.  The trial court entered judgment on the jury's verdict that Occidental did not fail to prevent substantial drainage, and the plaintiffs appealed.  The Amarillo Court of Appeals affirmed, holding that the plaintiffs did not demonstrate substantial drainage as a matter of law.  Petroleum Synergy Group, Inc. v. Occidental Permian, Ltd., 331 S.W.3d 14 (Tex. App.--Amarillo 2010, pet. denied).

Occidental Permian's Brief on the Merits
Court of Appeals Opinion