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The Texas Supreme Court recently ruled in the case of Forest Oil Corporation v. El Rucio Land and Cattle Co. The Court originally denied the review of the Corpus Christi Appeals Court decision affirming a $15 million dollar arbitration award against Forest Oil Corporation (now Sabine Oil & Gas), however, after a motion for rehearing the Court granted the petition for review. The primary issue is who has jurisdiction of a landowner’s claim against an oil and gas company for the contamination of a landowner’s property.

Background

Forest Oil leased roughly 1500 acres from McAllen Ranch (owned by James McAllen) in the mid-1980’s, where it has been producing and processing natural gas. About a decade after the lease was signed, McAllen Ranch and Forest Oil entered into another agreement in which Forest agreed to remove and clean up any hazardous materials from the lease site. The parties agreed that any disputes would be resolved by arbitration rather than by going to court.

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The U S Geological Survey (USGS) just published a revised assessment of oil and gas reserves in the Sprayberry formation in the Permian Basin in Texas. In the revision, USGS estimates the formation holds 4.2 billion barrels of recoverable oil and 3.1 trillion cubic feet of gas. This represents a 700% increase over its prior assessment in 2007. The researchers at USGS said that as more wells are drilled in this region, the more data they have with which to calculate assessments and the better their ability to map and understand these formations. This assessment is the largest ever released by USGS and represents the largest oil and gas reserve in the lower 48 states.

The Sprayberry formation is one of seven formations in the Permian Basin area of Texas.   The Permian Basin is the largest petroleum-producing basin in the United States and has produced a cumulative 28.9 billion barrels of oil and 75 trillion cu ft. of gas. This news probably means more oil and gas wells will be drilled on existing leases, and that oil companies may be seeking new leases as well.

Hydrocarbon_Plays_within_the_Permian_Basin

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The Texas Railroad Commission  regulates oil and gas production activities in Texas. The Commission has the authority to issue and suspend permits for production companies. Periodically, an energy company’s drilling and wastewater injection permit will be challenged by members of the public on the grounds that the well has caused earthquakes, and the Commission conducts hearings to review the evidence of whether the permit should be revoked. The issue of whether injection wells cause earthquakes has come before the Commission several times over the past few years.

The Commission’s investigations have consistently determined that the earthquake swarm activity experienced in Oklahoma and north Texas over the past few years has not been linked with any specific oil and natural gas drilling activity, and until the seismic activity can be linked to a specific producer’s drilling activity, wells should remain open and operational. While scientists at the United States Geological Survey and other research institutions have opined that there is a link, Texas oil and gas regulators have indicated that oil and natural gas production should not be terminated until there is definitive proof of a correlation between drilling/wastewater activity and earthquake activity.

Some of the specific incidents and findings by the Texas Railroad Commission are:

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A case that has gained attention in the Texas oil and gas industry is the case of Samson Exploration v. T.S. Reed Properties which is currently awaiting a decision by the Texas Supreme Court. The case involves three gas wells and two mistakenly overlapping pooling units in Hardin County, Texas.  The boundaries of the first unit were amended by the well operator, but the boundaries of the second unit were not. The two main issues, as stated by the Texas Ninth Court of Appeals, are : “First, whether the stakeholders participating in (the first unit) can recover damages from the operator of the unit when the operator amended the boundaries of the unit to exclude a well that was within the boundaries of the original unit, and where the stakeholders accepted royalties attributable to the amended unit without challenging the operator’s authority to amend the original unit’s boundaries. Second, whether the stakeholders in (the second unit), based on their claims for breach of contract, can recover damages from the operator due to the operator’s failure to pay royalties on oil and gas produced from a well that the operator contends was (originally)  included in that unit by mistake”.

In October 2015, the Texas Ninth Court of Appeals opinion ruled that the stakeholders in the first unit had ratified the amendment to the unit by accepting royalties attributable to the amended first unit. Therefore, those stakeholders should recover nothing. The Ninth Circuit further determined that the stakeholders in the second unit could recover damages from the well operator for the operator’s failure to file an amendment to the description defining the pooling unit’s boundaries, but that the award of damages in the trial court was excessive because it awarded royalties for prior to the time the unit existed.

Many in the Texas oil and gas industry, like Texas Alliance of Energy Producers, support Samson’s claim that the royalty owners in the first gas unit ratified the unit amendment by accepting royalties after the unit was amended, and that they should not be required to pay royalties from one well to lessors in both gas units.

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The Texas Court of Appeals in Houston recently decided a case, UNION PACIFIC RAILROAD COMPANY v. AMERITON PROPERTIES INCORPORATED, that contains an important caveat for anyone preparing or interpreting a deed.

Background

Galveston, Harrisburg & San Antonio Railway Company (GHSR), the predecessor to Union Pacific Railroad Company, acquired title to certain Texas land in 1879 after commencing a condemnation proceeding against the owner, Mary Lawrence. GHSR and Mrs. Lawrence agreed to settle the condemnation proceeding, and Mrs. Lawrence gave GHSR a deed in return for GHSR’s payment of $437 for a portionthe land.

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On March 28, 2017, President Trump signed an executive order entitled “Presidential Executive Order on Promoting Energy Independence and Economic Growth”, rolling back regulations governing emissions. The order is aimed at changing the Obama Administration’s climate policies and regulations.  The order comes as a fulfillment of repeated campaign promises for the overhaul of emission standards for the oil and gas industry and the Clean Power Plan. The exact wording of the executive order states that it is in the best interest of the United States to continue to perpetuate the growth of energy development “while at the same time avoiding regulatory burdens that universally encumber energy production, constrain economic growth, and prevent job creation.” Detractors take this as a direct blow against environmental protection and climate change. However, many in the industry who saw the Clean Power Plan as putting too much power in the hands of federal bureaucrats (who are not elected and not accountable to anyone), and taking it away from state regulatory agencies, applaud the order.

Among other things, the order requires the review of the Environmental Protection Agency’s (EPA) carbon emission restrictions for power plants in the United States and the standards that new power plants must meet. Additionally, the order rescinds a memorandum by President Obama to the EPA which directed carbon pollution standards for power plants and that were aimed at cutting carbon emissions in the United States and curbing the impacts of climate change.

The order directs U.S. Attorney General, Jeff Sessions, to ensure that the EPA cooperates with these requests. The EPA responded by stating they will review the Clean Power Plan and will hold any environmental litigation in abeyance while they conduct their review of the order.

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In Caffe Ribs, Inc. v. State of Texas, the State of Texas filed an eminent domain suit to obtain property from Caffe Ribs to use for a storm water detention pond as part of an expansion of Interstate 10. The property is near the intersection of Beltway 8 and Interstate 10.

Prior to ownership by Caffe Ribs, the property was used to store and manufacture oil field equipment, which resulted in environmental contamination on the property. Weatherford owned the property from 1977 to 1988, until the property was foreclosed on by Paul Revere Variable Annuity Insurance Company. Weatherford continued operations on the property as a lessee into the 1990s.

In February 1995, Paul Revere sold the property “as is” to Caffe Ribs for $487,000.  Ribs expressly agreed “to accept the conveyance of the Property subject to any presently known or subsequently discovered Hazardous Materials or Hazardous Materials Contamination.” Paul Revere retained the exclusive right to evaluate and analyze the environmental condition of the property and take any actions that Paul Revere determined to be necessary regarding environmental conditions. Subsequently, Weatherford and Paul Revere  began remediation of the property. They were well into that process when their efforts were interrupted by the condemnation lawsuit.

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In a case that could have a substantial impact on the rights of Texas mineral right and landowners, the Supreme Court of Texas recently heard the oral arguments in the case of Atmos Energy Corporation et al v. Town of DISH, et al. The case involves the residents of DISH, Texas– named after the cable television provider–who are seeking are damages for nuisance and injuries. The town claims that the oil pipeline company’s operation of gathering and compression facilities near the town has resulted in adverse health effects to its residents. This case is of particular importance because it calls into question whether a company operating legally and within government regulation can still be liable for damages for trespass and nuisance .

Background

The dispute between the Town of DISH and various pipeline companies began in 2005 when pipeline companies began constructing a compressor outside the town.  Initially, the residents of DISH complained of odors and excessive noise, and in 2008 the town issuedfiled a complaint with the Texas Commission On Environmental Quality (TCEQ). However, after investigations in 2009 and 2010, the TCEQ concluded that the facilities would not cause the effects the residents of DISH complained about.

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When a crime occurs on someone else’s property, who is liable for the harm caused by that crime? Of course, the person who committed the act of crime should be held accountable, but does a property owner have any sort of obligation to a crime victim? Does a property owner have a duty to protect third parties from falling victim to crimes committed on their property?

Man Victimized By Crime In The Parking Lot of An Apartment Complex

The Texas Supreme Court recently weighed in on this issue in UDR Texas Properties LP et al. v. Alan Petrie. In this case, Petrie was waiting for a coworker at The Gallery apartment complex, which is owned by UDR Texas Properties. Petrie was attending a party at the apartment complex, but needed to be let into the gated facility and so was in the process of calling someone to give him access.  The visitor parking area was not gated. While he was on the phone, a vehicle pulled up behind Petrie’s vehicle and blocked him in. Two men exited the vehicle and pointed a rifle at Petrie, telling him to get out of the car and to give up his wallet and keys. When Petrie did not get to the ground fast enough for his assailants, the gunman shot Petrie.

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With so many new oil and gas pipelines being constructed presently in Texas, the Texas Supreme Court’s timing for additional guidance on when a pipeline company is a common carrier in the case of Denbury Green Pipeline-Texas L.L.C. v. Texas Rice Land Partners Ltd, et al. could not be more appropriate. A second opinion in that case focuses on when a pipeline company can be considered a “common carrier”, a status that grants the company the right to exercise eminent domain powers.

The Denbury Pipeline case has been making its way through the Texas court system for a number of years and this is not the first time that some aspect of the case has been heard by the Texas Supreme Court. In 2012, in Texas Rice Land Partners Ltd, et al v. Denbury Green Pipeline-Texas L.L.C.,  the Texas Supreme Court articulated a standard based on the Texas Natural Resources Code to determine when a pipeline company can have common carrier status. The standard or test is referred to as the Texas Rice I test. At the time, the Texas Supreme Court did not apply the test to the facts of the case, but instead reversed and remanded the case to the trial court for proceedings consistent with the common-carrier test it established, thus “affording Denbury Green the opportunity to produce reasonable proof of a future customer, thus demonstrating that [the pipeline] will indeed transport to or for the public for hire and is not limited in [its] use to the wells, stations, plants, and refineries of the owner.”

Test Under Texas Rice I