National Association of Division Order Analysts April / May / June 2019
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NADOA N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s G R O W T H T H R O U G H E D U C T I O N
Volume MMXIX • No 2
www.NADOA.org
Contents Feature
NADOA 2019 Officers President Jason Lucas 1st Vice President Luanne Johnson, CDOA 2nd Vice Presiden t Lewis Box, CDOA Treasurer Jeff Kliewer, CDOA Corresponding Secretary Jennifer Lujano Recording Secretary Michelle Harris, CDOA The NADOA News Magazine is a quarterly publication of the National Association of Division
Articles
In This Legal Update Louisiana filing fees........................................................ 8 Colorado SB 19-181....................................................... 9 Energy Strong............................................................... 10 Pennsylvania State Owns Minerals. ................................................ 11 Texas Texas Outfitters v. Nicholson....................................... 12 Marsha Ellison v. Three River Acquisition LLC et al.................................................. 13 Unclaimed Property...................................................... 15 FERC Chairman Speaks Out....................................... 23 Institute. ....................................................................... 24 President’s Corner. .................................................1 Decimal Points.......................................................2 Division Order $al.................................................3 Certification...........................................................4 2019 Membership Recognition Nominations..........4 2020 Election Nominations....................................6 Interaction – NAPE................................................7 Counterpart Connection.......................................18 New Members.......................................................23 2019 NADOA Board/Committee Chairs...............38 Calendar of Events. ..............................................40 Issue
Order Analysts PO Box 44009 Denver CO 80201
Subscription: By membership to NADOA, at $75.00 per year. News Magazine Editor Rona L. Erickson, CDOA Kaiser-Francis Oil Company Ronae@KFOC.net 918.491.4319 Associate Editor April Luedecke, CDOA April.Luedecke@anadarko.com
Graphic Design Paul Beach
On the Cover: Fort Worth Water Gardens Photo Courtesy of Fort Worth Convention & Visitors Bureau
All rights reserved. No part of this publication may be reproduced/copied without written permission. Editorial disclaimer: The contents of this newsletter are intended for member use only and any other use without permission from the NADOA Board of Directors is strictly prohibited.Articles published herein represent the view of the authors; publication neither implies approval of the opinions expressed nor accuracy of the facts stated and NADOA accepts no liability for misprints.
President’s
Corner
Jason Lucas 2019 NADOA President
Ever the eternal optimist, Spring has Sprung! The temperature has changed from pipe bursting cold to just simply unpleasant. The allergies are blooming like the Cherry Blossoms in D.C. However, spring is a time of new beginnings, a time for hope! January 2019 saw oil prices averaging 46.00 per barrel. Today the price sits at 63.60 a barrel, with forecasts calling for a price increase. World volatility and sanctions could drive prices higher. Our industry thrives domestically with the help of several basins, including the monster Permian basin in West Texas and New Mexico, the Powder River in Wyoming, the Bakken in North Dakota and the Marcellus and Utica in Appalachia. This is going to make for an exciting Institute! Our committee, led by Stephanie Moore and Michele Lawton, has gone above and beyond the call to deliver one of our best Institutes ever. I am not going to spoil the surprise(s), but pack your bags and boots.
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NADOA
Better together.
Decimal Points
We’re integrating industry leading land and accounting systems to deliver the best in class field-to-finance solution.
April Luedecke, CDOA Associate Editor
Rona Erickson, CDOA Editor
Regional Reporters
ABADOA
Steptoe & Johnson PLLC dan.swiger@steptoe-johnson.com Donna King, CDOA donna.king@flywheelenergy.com Sharon Siemer, CDOA sharon.siemer@anadarko.com
BOLO
CAPDOA
VENDORS
CUSTOMERS
OWNERS
DADOA
NAME RECORDS
LESSEES
LEASE COST CENTER
DALWORTH Lewis Box, CDOA
lbox@comstockresources.com
LEASES
INVOICES
HADOA
Dale Bender, CDOA dalebender1433@yahoo.com
PAYMENTS
ACCOUNTSPAYABLE
ACCOUNTSRECEIVABLE
MAADOA
Angie Coady, CDOA
PAYMENTSTATUSUPDATES COMMON IDsONLESSEES+OWNERS
acoady@vessoil.com
PBADOA
Nicki Scoggins
nicole.scoggins@pxd.com
SADOA
Jane Green, CDOA
Contact us today to learn more! Call 1.833.369.7092 Email sales@ilandman.com
jmgreen@cimarex.com
Arkansas
Jackie Clotfelter, CDOA jclotfelter@hannaoilandgas.com
North Dakota Kimberly A. Backman
kbackman@crowleyfleck.com
New Mexico
Zachary P. Oliva
zoliva@kolawllp.com
www.ilandman.com
Louisiana
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If you have a suggestion for someone to act as a Regional Reporter to help NADOA keep abreast of current legislation and legal issues for your region, please submit the name or the name of the firm.
2019 NADOA Article Deadlines
Special Institute Edition.....................June 7 Third Quarter........................ September 13
Fourth Quarter........................ November 8
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CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “… applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published: NADOA Certification Committee P O Box 44009 Denver CO 80201 If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail.
CANDIDATES FOR CERTIFICATION David Carrico - Oklahoma City, OK Brandon Wallace - Dallas, Texas
Joan Jackson - Houston, Texas
2019 Membership Recognition Awards It’s never too early to think about the accomplishments of our members and the companies that support them, but it can be too late. So, start thinking now about that special person and/or company who should be nominated to receive one of NADOA’s Special Recognition awards. the Division Order profession through demonstrated leadership contributions to the industry and the profession during their career.
Russell Schetroma Memorial Speaker’s Award:
NADOA will recognize the following at the 2019 Institute in Fort Worth, TX:
Presented to the individual who has contributed to NADOA’s growth and development by speaking, educating and sharing knowledge on numerous occasions to the NADOA membership, the Division Order profession and/or the industry during the past year. Corporate Award: Presented to the group/company that has contributed the most to NADOA’s growth and development, the Division Order profession, and/or the industry during the past year. Nomination form follows or may be found on the homepage of the NADOA website (www.NADOA.org) Please forward nominations to Sandi Rupprecht (srupprecht@enerplus.com)
Interaction Award: Presented to the NADOA member or affiliated organization who has demonstrated leadership in the promotion of the profession to the industry and the community. Education Award: Presented to the NADOA member who has achieved a level of unusual distinction in NADOA’s education activities, as demonstrated by their contribution of time and service to the betterment of Division Order professionals. Ellis Rudy Memorial Lifetime Achievement Award: Presented to the NADOA member who has exemplified
Deadline for nominations is May 31, 2019.
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2019 Nomination Form for NADOA Membership Recognition Awards
I would like to nominate ___________________________________________ for the award(s) marked below:
_____ Interaction Award : Presented to the NADOA member or affiliated organization who has demonstrated leadership in the promotion of the profession to the industry and the community. _____ Education Award : Presented to the NADOA member who has achieved a level of unusual distinction in NADOA’s education activities, as demonstrated by their contribution of time and service to the betterment of Division Order professionals. _____ Ellis Rudy Memorial Lifetime Achievement Award : Presented to the NADOA member who has exemplified the Division Order profession through demonstrated leadership contributions to the industry and the profession during his/her career. _____ Russell Schetroma Memorial Speaker’s Award : Presented to an individual who has contributed to NADOA’s growth and development by speaking, educating and sharing knowledge on numerous occasions to the NADOA Membership, the Division Order profession, and/or the industry during the past year. _____ Corporate Award : Presented to the group/company that has contributed the most to NADOA’s growth and development, the Division Order profession, and/or the industry during the past year. Please detail the nominee’s involvement in NADOA, the services they have performed and/or contributions they have made (You may attach a separate sheet if necessary).
Nominator:
____________________________________________________ (Please Print) ____________________________________________________ (Signature) ____________________________________________________ (Daytime Phone) Send nominations to: Member Recognition Awards Committee, c/o Sandi Rupprecht (srupprecht@enerplus.com) Nominations will be accepted through May 31, 2019
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CALLING ALL HANDS! – IT’S ELECTION TIME! Cheryl Hampton 2019 Board Advisor
Howdy folks! It’s that time of year when we start thinking about NADOA Board elections for 2020. Having served on the NADOA Board for many years, I can tell you that it is a very worthwhile experience. Not only are you serving the NADOA membership and making sure our organization continues to be top notch, you will meet many of your industry counterparts and make many lifelong friendships along the way.
We are looking for candidates for the following offices:
Recording Secretary Corresponding Secretary Treasurer 2nd Vice President
The office of 1st Vice President is filled by the 2019 2nd Vice President and the office of President is filled by the 2019 1st Vice President as per NADOA By-Laws. Directors are chosen by each local association to represent them on the Board of Directors. Each local association has their own by-laws and/or rules for filling those positions. Please note that NADOA holds four meetings per year and does not pay for expenses for travel or lodging. You may wish to speak with your employer as to sponsoring you for the position. If you are interested in running for an office next year, please contact me at champton@limerockresources.com. If you have any questions about the positions available, please do not hesitate to ask me.
• If you love our industry and what we do, you should run for an office!
• If you aren’t afraid of working hard but having fun, you should run for an office!
• If you want to help keep NADOA the best organization in our industry, you should run for an office!
• If you’re interested in making new friends and lifelong friendships, you should run for an office!
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Interaction – NAPE By April Luedecke, CDOA
geologists and even members of the media stopped by for information.
The spring 2019 North American Prospect Exposition was held in Houston once again. We had two NADOA representatives in attendance, Michele Lawton and April Luedecke, both Staff Division Order Analysts at Anadarko Petroleum. It was a productive day for the association, handing out hundreds of packs of gum and breakfast bars to attend- ees that stopped by to learn more about our discipline and the organization. Landmen, engineers, attorneys,
NADOA has good odds to grow its membership and its standing in the oil and gas professional community through important outreach events, such as NAPE. If you have interest in volunteering for an interaction event, email the current committee chair (Lauren Roswold @ lauren.roswold@whiting.com) for more opportunities.
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Legal
Update
Louisiana
Louisiana filing fees increased dramatically effective August 1, 2017
RS 13:844 §844. Fees of ex officio recorders*
(3) For certificate of real estate mortgage and lien certificate with seal, for each name in which search is made, and for one definable property only, twenty dollars for the first name and ten dollars for each additional name. There shall be an additional charge of one dollar per exception in the event that more than ten exceptions are contained on a certificate. (4) For canceling real estate mortgage, with original note, ten dollars. (5) For making copies of all official documents, no more than two dollars per page. (6) Except as provided in Item (1)(f )(ii) of this Subsection for attesting any record or copy thereof, ten dollars. For a file-stamped conformed copy, five dollars. B.(1) As used in this Section, a “document” is defined as those pages presented together for filing or recording, inclusive of the act, together with exhibits, riders, or additional documents attached thereto, including but not limited to powers of attorney, property description (2) Every document filed for recordation shall be captioned as to type of act on the first page, and shall have on the first page a margin of two inches at the top and one inch at the bottom and sides. The type size shall not be less than eight point. C. In addition to the above charges, the clerks of court as ex officio notaries public may make a reasonable charge for drawing deeds, mortgages, chattel mortgages, liens, or other similar instruments. Amended by Acts 1964, No. 398, §1; Acts 1974, No. 541, §1; Acts 1981, No. 360, §1; Acts 1982, No. 86, §1; Acts 1984, No. 438, §1; Acts 1985, No. 749, §1; Acts 1986, No. 317, §1; Acts 1986, No. 435, §1; Acts 1988, No. 920, §3, eff. July 26, 1988; Acts 1995, No. 994, §1; Acts 2001, No. 769, §§1 and 2; Acts 2017, No. 173, §2. *Pursuant to R.S. 13:754, the $5.00 LCRAA fee shall be collected in the cost of each recorded document for parishes in the statewide portal. exhibits, tax certificates and researches, mortgage certificates, resolutions, certificates, and surveys.
A.(1) Clerks of the district courts as ex officio recorders shall charge the following fees for filing and recording documents: (a) For one to five page documents, one hundred dollars. (b) For six to twenty-five page documents, two hundred dollars. (c) For twenty-six to fifty page documents, three hundred dollars. (d) For documents in excess of fifty pages, three hundred dollars for first fifty pages and five dollars for each subsequent page. (e) For indexing of all documents filed for record for each name after the tenth name that is required to be indexed, five dollars per name. (f ) The above set forth fees shall be inclusive of the following: (i) Indexing of all documents filed for record for up to ten names. (ii) One certified copy of the recorded document or e-certification of document. (g) Notwithstanding any other provision of law to the contrary, there shall be a fee of fifty dollars for the recordation of an act or affidavit to cancel a single mortgage, lien, or privilege. (h) If a document is to be recorded and filed in both the mortgage and conveyance records, the fees provided in this Section shall be assessed separately for recording in the mortgage records and in the conveyance records. (i) Documents to be recorded may be either on eight-and- one-half-inch-by-eleven-inch paper or on eight-and-one- half-inch-by-fourteen-inch paper and the recording fees set forth in this Section shall be the same regardless of which size paper is used. For any other size paper, there shall be an additional fee of twenty dollars per page. (2) For notarizing acknowledgments of acts executed under private signature, with seal and certificate, ten dollars.
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Colorado
COLORADO SB 19-181
To: DNR_COGCC.Hearings_Unit Subject: Fwd: SB 19-181: Draft Objective Criteria and Guidance Document This afternoon, COGCC Director Jeff Robbins released Draft Objective Criteria for public comment as well as a new guidance document to move forward on implementing Colorado’s new oil and gas law, SB 19-181. The Draft Objective Criteria document provides that the Director may delay specific final permit determinations until the Director is satisfied that the permit complies with the intent of SB 19-181. The Director also released guidance on surface and drilling permits, pooling and spacing, and Comprehensive Drilling Plans, which will help inform the public on how Colorado’s new oil and gas law will be incorporated into proceedings before the COGCC. The issuance of the Draft Objective Criteria commences a 10 day public comment period on the Criteria (Deadline 5 PM Monday, April 29) where written comments may be submitted through the COGCC website at: https://cogcc. state.co.us/comments/view/. The Director will finalize the Objective Criteria after considering public comment on or before May 16, 2019. The Director will also be conducting additional and ongoing outreach on the Objective Criteria with other stakeholders and interested parties during the comment period and beyond.
On April 16, 2019, Colorado Governor Jared Polis signed SB 19-181 into law. The bill will make major changes in the way the Colorado Oil and Gas Conservation Commission (COGCC) regulates the oil and gas industry in the state. Click here for the full text of S.B. 181 “Today, with the signing of this bill, it is our hope that the oil and gas wars that have enveloped our state are over and the winner is all of us,” Polis said. The bill makes protecting public health and safety and the environment a priority when considering oil and gas projects. The Colorado Oil and Gas Conservation Commission, the main regulatory body, would no longer be charged with fostering development and will have new criteria to review permit applications that prioritize “protection of public safety, health, welfare, and the environment in the regulation of the oil and gas industry”. Nationally ranking fifth in oil and sixth in natural gas production, Colorado has struggled for some time to balance the growth of the oil and gas industry against health and safety concerns of nearby communities. Previous attempts to impose stricter restrictions have been rejected by Colorado voters. “I am encouraged by the governor’s comments about coming together as Coloradans and moving forward. To achieve that objective, it means removing politics from the technical process of providing energy to Coloradans,” Dan Haley, president and CEO of the Colorado Oil and Gas Association, said in a statement.
Mimi C. Larsen, Esq. Hearings and Regulatory Affairs Manager
The COGCC has issued the following memo in advance of new rulemaking:
From: Hearings_Unit, COGCC
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New Organization Energy Strong Unites Industry Workers Sarah Hunt – Energy Strong Strategic Communications.
in the industry. “The defeat of Proposition 112 was a victory for every field laborer, every company CEO, and everybody in between,” Case said. “I saw an opportunity to parlay the unity in victory into sustained unity industry-wide.” Energy Strong officially began with a Facebook group created by Case in November, 2018. It spread like wildfire and is now over 6200 industry professionals, families, and support- ers. The dedicated volunteers on the administrative team are loyal to the Energy Strong mission, and use the platform to inform and empower group members about legislative activities, industry-related events, and other opportunities for engagement. The first Energy Strong member-appreciation happy hour filled Rocky Mountain Taphouse to capacity. New member requests continue to pour in, and engagement and shares of posts have surpassed 300,000. “If we don’t harness this enthusiasm to unify and advance the industry in Colorado, then shame on us,” Case said. “It’s a noble mission and I have no intention of slowing down,” he added. Energy Strong representatives have attended multiple town halls, council meetings, and committee hearings. They livestream the events on their Facebook page so everyone can stay up to date, be informed about the issues and have their voices heard. “And we’re just getting started,” Case said.
We must all hang together, or assuredly we shall hang separately. The famous quote by Benjamin Franklin is a foundational philosophy of a new Colorado non-profit organization, Energy Strong .
The mission of Energy Strong Colorado is to unify the blue and white-collar profes- sionals of Oil and Gas, while fostering community among the Oil and Gas work- force, the supporting-industry workers, and industry supporters. We proudly educate others about the benefits of promoting the advancement of natural resource explora- tion and extraction in Colorado.
When Colorado’s energy industry was attacked during the last election cycle with ballot initiative Proposition 112, a sleeping giant awoke. Industry workers, their families, and energy advocates responded with desperation and fury. The energy community was officially in a fight for its life.
Colorado’s energy industry is represented by several quality organizations, but something was missing, namely unity.
Larger energy companies can afford trade-organization memberships, which come with lobbyists and political advo- cacy, but there are a slew of small to mid-size companies in Colorado, and it’s these companies that are unable to expend resources on government relations and public policy. The result of this dichotomy is a gulf created over time between the women and men in the field, and the smaller companies, and the larger, well-funded and well-connected companies.
Inquiries and Donations: Hello@EnergyStrongUSA.com To purchase Energy Strong merchandise, visit EnergyStrongColorado. com Facebook: facebook.com/EnergyStrongColorado Twitter: @EnergyStrongCO LinkedIn: Energy Strong Instagram: Energy_Strong_Colorado
After voters rejected Proposition 112, Dustin Case observed overwhelming and ongoing enthusiasm from his colleagues
Reprinted by permission of the author.
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Pennsylvania
Pennsylvania Court Rules that State Owns Minerals Under Turnpike
and emphasizes the importance of careful title examination when trying to determine the ownership of mineral rights under Pennsylvania roadways. Click here to view the opinion. If you have questions about how this opinion could affect your business, contact the author of this alert.
On March 5, 2019, the Pennsylvania Commonwealth Court issued an opinion in O’Layer McCready v. Dep’t of Cmty. & Econ. Dev., No. 778 C.D. 2018, _ A.3d _ (Pa. Commw. Ct. Mar. 5, 2019), affirming a Board of Property ruling that the Commonwealth of Pennsylvania owned the mineral rights under a tract of land that was conveyed to the Pennsylvania Turnpike Commission in 1990 in lieu of condemnation. The former owner filed an action in 2012 to quiet title to the mineral estate that was ultimately rejected by the Board. On appeal, the Court reviewed the terms of the deed and found that the deed was unambiguous and did not reserve any mineral rights to the plaintiff. The Court rejected plaintiff ’s additional arguments that the Turnpike Commission lacked the authority to acquire the minerals or that acquiring the minerals was unreasonable. The Court’s decision confirms that even in the case of public roadways, the terms of the deed generally control the nature of the interest conveyed
About the Author:
Nathaniel I. Holland MEMBER, Steptoe & Johnson PLLC
Nate Holland assists clients with business transactions and litigation involving the oil and gas industry. In particular, Mr. Holland helps clients develop solutions for novel challenges or new applications of oil and gas law.
Phone: (814) 333-4906 Email: nate.holland@steptoe-johnson.com
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Texas
Texas Outfitters v. Nicholson
On April 12, 2019, the Texas Supreme Court handed down its opinion in Texas Outfitters Limited, LLC v. Nicholson , No. 17-0509, addressing the duty of the holder of executive rights to minerals owned by another. The Court affirmed the trial court and court of appeals decisions in a judgment against Texas Outfitters for breaching that duty. Finding against Texas Outfitters, the courts agreed that the holder of the executive right to lease a mineral estate violated its duty of utmost good faith and fair dealing by refusing to lease in violation of the non-executive’s known wishes to enter a lease. The executive was found to have engaged in acts of self-dealing that unfairly diminished the value of the non-executive interest. Dora Jo Carter owned the surface estate of 1,082 acres of land in Frio County. She and her two children collectively owned an undivided 50% of the minerals; the other 50% were owned by the Hindes family. The Carters sold the land to Texas Outfitters, owned solely by Frank Fackovec, for about $1 million in 2002, partially financing the purchase price. Fackovec intended to reside on the ranch and operate a hunting business. The Carters sold Texas Outfitters 1/24 of the minerals along with the land, also conveying to Texas Outfitters the exclusive right to lease the 11/24 mineral interest retained by the Carters. Fackovec wanted the right to lease the entire 50% mineral interest to be sure his surface estate was protected should oil and gas development take place. This executive right to lease the Carters’ minerals became the source of the subsequent litigation. In June 2010, the Hindes family leased their 50% mineral interest to El Paso Exploration for $1,750 per acre and 25% royalty. El Paso made the same offer to Fackovec, which he declined, despite the Carters’ request that he accept. The Carters and Fackovec entered settlement negotiations that resulted in an agreement in principle whereby (1) Texas Outfitters would convey to the Carters the executive rights on their retained mineral interest; (2) the deed conveying those rights would include as- The facts:
yet unspecified surface protections to be included in the El Paso lease and any future lease; (3) Texas Outfitters would execute the lease as to its own 1/24 mineral interest; (4) the Carters would forgive $263,000 of the owner-financed note on the ranch. This agreement never finalized due to failure of the parties to agree on the scope of the additional surface protections. The Carters sued Texas Outfitters and Fackovec in June 2011, alleging that Texas Outfitters, as holder of their executive rights, had breached the duty of “utmost good faith and fair dealing” by refusing to lease to El Paso. Subsequent drilling in the area established that the ranch did not have as much potential for oil and gas production as had been believed and no further lease offers were received by Texas Outfitters. In 2012, Texas Outfitters sold the ranch for approximately $3.5 million, retaining a portion of the mineral interest. Following a bench trial, the trial court found that Texas Outfitters had breached its duty to the Carters, awarding them the amount they would have received in bonus if the lease to El Paso had been granted. The trial court made extensive findings of fact, the only one of which Texas Outfitters challenged on appeal being the critical fact that Texas Outfitters had breached its duty. The court of appeals in San Antonio affirmed. In its opinion, the Court reviewed prior cases on the duty of the holder of the executive right: Manges v. Guerra, 673 S.W.2d 180 (Tex. 1984), Lesley v. Veterans Land Bd. of State, 352 S.W.3d 479 (Tex. 2011), and KCM Financial LLC v. Bradshaw, 457 S.W.3d 70 (Tex. 2015). Based on these prior cases, most recently Bradshaw, the court provides “the ‘controlling inquiry’ in ascertaining whether an executive breached his duty to a non- executive: ‘ whether the executive engaged in acts of self-dealing that unfairly diminished the value of the non-executive interest. ’” Stating that this “controlling inquiry” test applies whether the challenged conduct by the executive consists of leasing or refusal to lease, the Court further noted “we continue to recognize that evaluating compliance with the executive duty is rarely
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actions “crosses the line” “from lawfully promoting his own surface interest to unlawfully doing so at the expense of the non-executive interest, thereby engaging in self-dealing that unfairly diminishes the value of that interest.” “We certainly do not hold that an executive must always accept an offer to lease both the executive’s and the non-executive’s mineral interests when the non- executive wishes to accept. But we also do not hold that an executive is never required to accept such an offer.”
straightforward and is heavily dependent on the facts and circumstances.” Examining the facts and circumstances of this case, the Court found that there was sufficient evidence to affirm the judgment. Although “an executive generally does not breach his duty by declining a lease in honest anticipation of obtaining better terms for all”, the Court found sufficient evidence that Texas Outfitters had breached its duty by refusing to lease to El Paso in order to benefit its surface interest in the ranch. The Court said Texas Outfitters’ On February 14, 2019, the Corpus Christi Court of Appeals opined on a Stipulation of Interest that should give pause to oil and gas practitioners. It held that a Stipulation of Interest is of no avail if there is not a pre- existing defect in title. Suggs owned a 640 acre tract in Irion County, Texas (Section 1). A county road crosses the section near the SW corner of the tract and exits at the NE corner. As part of a 1927 land swap the owners conveyed the lands “located North and West of the public road … [containing 147 acres]” it was called the Northwest Tract. In 1930 a partition deed gave A.A. Sugg the remaining 493 acres (640 – 147 = 493). A survey in 1939 said the 1927 deed conveyed all of the land north and west of the public road, including what came to be the disputed
A Stipulation of Interest Case Marsha Ellison v. Three River Acquisition LLC et al. 13-17-00046-CV (Corpus Christi Court of Appeals, 2019
154 acres; it said the Northwest Tract contained 301 acres (147 + 154 = 301). By numerous conveyances the Northwest Tract came to be owned by the Pilon Family Trust. The Trust leased to Questa. Questa assigned to Ellison. Richey received the minerals in the Northwest Tract; Ellison continued as operator/lessee. Sugg leased the Southeast Tract to Samson. In 2006, a title examiner said that the 1930 partition deed to Sugg provided no evidence of where the 493 acres was located on the ground. Samson wanted to drill on the 154 acre tract. The landman, Reece, drafted a boundary stipulation for execution by the mineral owners; it stated that “the Parties desire to declare, stipulate, acknowledge, and establish of record the location of the 147 acre tract and the 493 acre tract in the mineral estate in the Lands.” The “Boundary Stipulation of Ownership of Mineral Interest” described the mineral tract owned by Richey as being 147 acres and the Sugg tract as being “the balance of Section 1, … less and except the Richey 147 acre tract ….” Ellison, the lessee from Richey, was not joined because the stipulation was only as to mineral ownership. There followed: This Stipulation shall be deemed to contain adequate words of grant and conveyance as are necessary and proper to transfer and vest the ownership of the minerals estate in the Lands in each of the Parties in the amounts and proportions set out above.” In 2008, Samson sent a letter to Ellison (the mineral lessee of the Northwest Tract) describing the stipulation, noting that Samson planned to spud the Sugg #3 well
Northwest Tract (147 acres)
Pilon Well #1
“New” Boundary Line
Sugg Well #4
Sugg Well #3
Public Road
Disputed 154-Acre Tract
Southeast Tract (339 acres)
Sugg Well #2
Sugg Well #1
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and asking Ellison to “signify your acceptance of the description of the Richey 147 acre tract as set out in the Stipulation … Upon your acceptance, a more formal and recordable document will be provided.” Ellison signed. No more formal acceptance was ever tendered. In 2013 Ellison sued the then Operator of the Southeast Tract (Concho) and Samson in trespass-to-try-title. The Jury said the 2008 letter was a binding agreement and found against Ellison. Starting with the general rule that “the specification of acreage is the least reliable data point in descriptions”, the court argued that the 1927 deed description controlled over the acreage designation: All of Survey 1, Block 6, H&T.C. Ry. Co. lands located North and West of the public road which now runs across the corner of said Survey, containing 147 acres, more or less. and held that the 1927 deed was unambiguous and conveyed the disputed 154 acres as part of the Northwest Tract. As to the Stipulation, the court stated that where “there is uncertainty … as to where the true division line between the lands of the parties may be, they may fix it by parol agreement … but the existence of uncertainty, doubt or dispute is essential to the validity of such agreement [emphasis in original]”. Since there was no ambiguity in the 1927 deed, any attempt to fix it was invalid. In addition, the court said “the Boundary Stipulation does not identify a grantor or grantee; and there are no operative words of grant showing an intention by a grantor to convey the disputed 154-acres to anyone else …Thus, the Boundary Stipulation was not a legally effective conveyance.” Likening the Stipulation to a correction deed, the court cited §§5.027-.031 of the Texas Property Code to require an ambiguity or error in the underlying deed in order to correct it. The Stipulation, the court held, was “void and ineffective as a conveyance because (1) the Boundary Stipulation did not identify a grantor, a grantee, or clear words of conveyance; and (2) there was never any ambiguity or uncertainty in the 1927 Deed, which is a requirement for a correction deed to be valid.”
Like most stipulations of interest, this one did not try to say that “John gets 3% more and Carol gets 2% more while Jake and George each lost 2.5%”. It simply said that the stipulation “shall be deemed to contain adequate words of grant … to transfer … the ownership of the mineral estate … in the proportions set out above ….” It listed the parties who were to own the minerals under the 493 acre tract and those who were to own the minerals under the 147 acre tract. The court’s finding relies on cases relating to parol evidence of boundary agreements – that is where there is no written boundary agreement – and, first, morphs a requirement of a dispute into a requirement for a legal ambiguity and, second, imposes a canon of construction (metes and bounds prevails over acreage calls) to deny the ambiguity. To this practitioner a disagreement over whether a tract contains 147 acres or 301 acres is ample evidence of a dispute sufficient to satisfy the parol evidence requirement and where the parties actually enter into a boundary agreement, replete with words of grant, there is no reason not to give that agreement validity even if the parties were wrong about what the underlying documents said. Assuming this case is, indeed, Texas law, how does the practitioner respond? First, the failure to include the mineral lessees in the stipulation is what caused the problem so all parties owning interests need to be included. Second, there must be a real ambiguity in the documents; if this case is correct, you cannot do a stipulation just because one family member claims a bigger or different interest or because they disagree over acreage, or just cannot get along. Third, you should be prepared to try the dispute that gave rise to the stipulation of interest; according to this court of appeals the parties to the stipulation will be given the opportunity to re- argue what was settled in the stipulation and if the court thinks the underlying docs are without ambiguity, the stipulation, which is an agreement of conveyance by all of the owners, fails. Fourth, create a separate granting clause that says what this one said but looks more like a traditional granting clause; here one might have said that the Sugg group grants all of its rights in the minerals under the 147 acres to Richey while Richey grants all of its rights in the minerals under the 493 acres to the Sugg group.
What about that paper Ellison signed in 2008? This is
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especially troublesome because Ellison had taken steps to claim the disputed 154 acres including placing signage on it and making filings with the RRC. Could Ellison really have been bound by signing a paper accepting the description of the 147-acre tract as being the entire interest without signing the underlying stipulation? That’s difficult but it sure seems like a waiver defense arose for Sugg and Richey, but what did it do? Most stipulations are effective from the date they are signed forward but, in this case, production from the Suggs #3 pre-dated the date the boundary agreement was signed. Ellison argued that giving it retroactive effect made it into a correction deed and subject to §5.027 of the Property Code which requires some error to correct. The Boundary Agreement was signed in 2008 but was made effective July 8, 1987 (the date of the Richy/Pilon lease), but there seems to be no reason why any boundary agreement or stipulation of interest cannot be made effective whenever all of the affected parties agree to make it effective and, since it is a cross conveyance, the effective date cannot make it into a correction deed.
with the Supreme Court have been filed. However, the petition for review has not been filed, much less granted, so it may be quite some time before we see a new opinion.
About the Author:
Martin Gibson Martin Gibson’s practice concentrates on energy law, with a particular focus on the exploration and production activities of independent oil and gas companies and individuals, both domestically and internationally. He is Board Certified in Oil, Gas and
Mineral Law by the Texas Board of Legal Specialization and has deep experience in equity and debt financing of oil and gas related entities.
P.O. Box 864 Cedar Creek, Texas 78612
Motions for extension of time to file a petition for review
These materials reflect only the personal views of the author and are not individualized legal advice. It is understood that each case is fact- specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the author and their law firm cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney- client relationship with the author or their law firm. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed. Unclaimed Property Audits of the Oil & Gas Industry: Why Us? Written by: Gary Joseph & Ann Fulmer, Keane Consulting & Advisory
More and more companies are finding themselves as unlucky participants in multi-state unclaimed property (“UP”) audits. Upon receipt of audit notification letters, feelings of anxiety and concern may render the recipient confused and slightly frustrated. Once the realization that the audit is happening settles in and the initial game planning commences, a common question may come to mind: “How did our company get selected for audit?” Unfortunately, the answer you’ll receive from industry
professionals and State Unclaimed Property personnel is similar: “There’s a number of reasons why your company may have been selected!” While this response may seem to be vague, it is indeed true. For those dissatisfied with such a broad, inconclusive response, one need only reference the Priority Rules to understand why this response is appropriate and so widely distributed. As the Priority Rules provide custodial right of unclaimed
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property to the State of last known address, the State may reasonably assume that a company may have employees, customers, vendors, and/or landowners addressed in their jurisdiction. To expand further, in the absence of an address, the custodial right is passed to the State of Incorporation. “Our company only operates in the Marcellus and Utica shale plays. Why would Delaware, California and Texas select us for audit? We have no operations in those States? Do they even have the right to examine us?” Using the logic expressed in the statement above would appear reasonable to most other situations, but the lack of physical presence, economic nexus, or other taxation concepts do not disqualify or prohibit the State from conducting an examination to confirm compliance with unclaimed property provisions. It is also important to note that as States continue their pursuit to both educate on and enforce their statute, there are a number of industries that have been flagged as prime candidates for review. Each industry has its own unique area of exposure that can create unclaimed property risks. Unfortunately for businesses operating in the oil and gas sector, material exposure to mineral proceeds and royalty properties have placed a huge bullseye on their backs! Others may be operating under the impression that past unclaimed property compliance efforts would provide a level of protection from audit. We’ve heard the following statement many times: “Oh, but my company reports mineral proceeds and royalties to the States timely. We use UP software, are aware of and apply the current pay provisions by State, and work our royalty owner accounts aggressively to resolve suspense issues! We are 100% in compliance without question!” While past filing history may influence a State’s decision of whether or not to participate in an examination, it does not preclude the State’s examination rights. Most States have the statutory authority to ensure compliance with their respective unclaimed property law at any reasonable time. Common Radar Triggers There are a number of structural profiles or activities that may put a company on a State’s radar for unclaimed property examination: • Presence in State or in a Contiguous State • Incorporated or Chartered in State • Events of high profile covered by media – such as
mass layoffs or reorganization • Mergers, Acquisitions, Divestitures, and/or spinoffs • Primary Business Activity – industry wide noncompliance (business type) • Reporting history (not reporting any unclaimed property, not reporting expected property types, or inconsistent filing history) • Consumer Complaints Related to Unclaimed Property Recommendations and Best Practice Even if your company does not have any of the above listed risks, companies operating in the oil and gas sector have a high probability that they will eventually be subjected to a State unclaimed property audit. Given the high likelihood of audit, it is imperative that management’s position on unclaimed property exposure shifts from a thought of “If my company gets audited, will I be prepared?” to “When my company gets audited, I’ll be prepared.” Experience supports that companies best prepared to address an audit share a similar profile: • The companies perform internal risk assessments focused on unclaimed property with support from management and legal counsel. • Mineral proceed and royalty title resolution are regularly worked by subject matter experts familiar with exposure to unclaimed property risks. • Merger and acquisition accounts are reviewed as part of the due diligence process before the deal closes, and aggressively worked upon consolidation. • Internal Unclaimed Property process owners and Conclusion We do not foresee the targeting of companies operating in this sector slowing down any time soon. The high rate of M&A and other restructuring activity supports the notion that there will be an increase in companies receiving audit notices for years to come. It is important that companies in this sector recognize unclaimed property as a material risk warranting allocation of resources for mitigation purposes. In doing so, companies ensure their preparedness for WHEN it receives the State UP audit notice(s). management regularly partake in continuing education courses and conferences with courses on unclaimed property – such as NADOA and UPPO.
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MARKETABLE TITLE SEMINAR, KEYNOTE PRESENTATIONS AND 32 DIFFERENT BREAKOUT SESSIONS
TWO EVENING NETWORKING EVENTS
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3 FULL DAYS OF PREMIER EDUCATION AND NETWORKING SPECIALLY CRAFTED FOR LAND AND TITLE PROFESSIONALS
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www.NALTA.org
Counterpart
Connection
Kaprice Pearson Local Association Coordinator
Local Reporters for 2019 Magazine:
APPALACHIAN BASIN ASSOCIATION OF DIVISION ORDER ANALYSTS (ABADOA) Association Based in the Pittsburgh, Pennsylvania Area Serving NY, OH, PA, WV (Inactive)
ABADOA: Inactive ALTDOA: Inactive CAPDOA: Whitney Katigan –
whitney.katigan@flywheelenergy.com
DADOA: Lauren Roswold –
………………………………… ARKLATEX ASSOCIATION OF DIVISION ORDER ANALYSTS (ALTDOA) Association based in the Shreveport, LA Area (Inactive) ………………………………… CAPITAL ASSOCIATION OF PROFESSIONAL DIVISION ORDER ANALYSTS (CAPDOA) Association based in the Oklahoma City, OK Area
lauren.roswold@whiting.com
DALWORTH: Kimberly Ginter –
KGinter@finleyresources.com
HADOA: Sara L. Galloway –
sara.galloway@energytransfer.com
MAADOA: Diana Richecky – diana@dukedrilling.com PBADOA: Kaprice Pearson – KPearson@concho.com SADOA: Jamie Donohue – jamie.a.donohue@cop.com
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2019 - DALWORTH/DFW- ALTA JOINT MEETINGS
June 10 – (DFW-ALTA) Dallas –
Luncheon – Maggiano’s North Park
June 25 - (DALWORTH) (Seminar) Comstock Resources Frisco July 23 – (DFW-ALTA) Fort Worth –
Luncheon – Petroleum Club of Fort Worth
August 20 – (DFW-ALTA) Dallas –
CAPDOA 2019 BOARD President – Whitney Katigan Vice President – Kodi Foreman Treasurer – Amy Smith Secretary – Maryann Maimo Directors – Chasta Butler Amy Lofgren Hailey Price CAPDOA Advisor – Melissa Martin NADOA Director – Valerie Wible, CDOA
Luncheon – Maggiano’s North Park September 4 – 6 – NADOA 46th Annual Institute – Omni Hotel, Fort Worth October 15 – (DALWORTH) Dallas – Luncheon – Petroleum Club of Fort Worth November 12 – (DFW-ALTA) Fort Worth – Petroleum Club of Fort Worth December 10 – (DALWORTH) Dallas – Maggiano’s North Park
For more information regarding CAPDOA, please visit our website at www.capdoa.org. ………………………………… DALWORTH ASSOCIATION OF DIVISION ORDER ANALYSTS (DALWORTH) Association serving the Dallas/Fort Worth, TX Area
Shown in Picture (left to right): Cindy Marhanka (Acacia Energy Partners LLC – Irving, Texas), Christy Ewert (Resource Royalty LLC – Dallas, Texas), Kimberly Ginter (Finley Resources – Fort Worth), Eli Murray (Concho Resources – Dallas, Texas) , Angie Roberts (Range Resources – Fort Worth, Texas), Lindsay Grose (Eddye Dreyer Financial Services LLC – Dallas, Texas), Lauryn Barnes (Eddye Dreyer Financial Services LLC – Dallas, Texas), Megan McKee (Range Resources). Not shown: Sharon Clute (Eland Energy, Inc. – Dallas, Texas), Melanie Finnegan (Comstock Resources, Inc. – Frisco, Texas), Vickie Coles (Pioneer Natural Resources – Irving, Texas), Isabel Zhang (Berry Petroleum Company, LLC – Dallas, Texas)
DALWORTH 2019 BOARD President: . ....................................... Megan McKee, CDOA 1st Vice President: ....................................... Christy Ewert 2nd Vice President: ................................................... Open 3rd Vice President: . ................................. Kimberly Ginter Recording Secretary: .....................................Sharon Clute Corresponding Secretary: . ..........................Angie Roberts Treasurer: . ..............................................Eli Murray, CDOA Director – Compliance: ..............Melanie Finnegan, CDOA Director – House: ...........................................Vickie Coles Director – Hospitality: ... .Lindsay Grose & Lauryn Barnes Director – Historian: ................................ Cindy Marhanka Director – Scholarship: . ................................ Isabel Zhang Board Advisor: ............................Melanie Finnegan, CDOA NADOA Liaison: ...................................... Kimberly Ginter
3rd Vice President – KIMBERLY GINTER
Kimberly is currently a Senior Division Order Analyst at Finley Resources in Fort Worth, Texas. She moved from her hometown of Yukon, Oklahoma in April 2014. She resides in Hudson Oaks,
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