National Association of Division Order Analysts April / May / June 2023
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Volume MMXXIII • No 2
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Contents Feature
NADOA 2023 Officers President Norma Dooley 1st Vice President Vicki Danielson, CDOA 2nd Vice Presiden t Kimberly Bowman Treasurer Valerie Wible, CDOA Corresponding Secretary Kelly Sandoval, CDOA Recording Secretary Sonya Turner, CDOA
Articles
Legal Watch - Texas v. EPA..........................................................8 Legal Updates King Operating v. Double Eagle Andrews (TX)........................8 Ischy v. Northwood Energy (TX)................................................9 Tres C, LLC v. Raker Resources et al (OK)..............................10 Donald Zadeck Succession v. Treme (LA)................................12 Van Dyke v. The Navigator Group (TX).................................14 Is the Supplemental Title Opinion Necessary-Part One............16 Legislative Update – Texas SB885.............................................23 2023 Institute – 50 Years in the Winner’s Circle.......................31
In This
The NADOA News Magazine is a quarterly publication of the National Association of Division
Issue
Order Analysts P O Box 1656 Palm Harbor, FL 34682
President’s Corner..............................................................1 Decimal Points...................................................................3 Certification....................................................................... 4 Nominations for 2024 Board..............................................5 Membership Recognition Nominations...............................6 New Members...................................................................24 Counterpart Connection...................................................25 President’s Spotlight – Paul Guillory................................29 Ellis Rudy Memorial Scholarship......................................30 NADOA Board & Committee Chairs................................40 Calendar of Events...........................................................41
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
Graphic Design, Paul Beach
On the Cover: Louisville downtown Courtesy of Louisville Visitors Center
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
Norma Dooley 2023 NADOA President
It has been a busy first quarter getting ready for Institute. The Institute Committee has put together an incredible lineup of Speakers to expand our knowledge of all the changes happening that affect us as analysts. Our current membership is at 807 professionals and hopefully will keep growing. I’d like to WELCOME all our new members and remind those who haven’t renewed their membership yet to get online and do so. Please be sure to verify that your information on the NADOA website is correct and up to date. Remember if you change companies, updating your information allows you to continue receiving email blasts, the News Magazine and ballots for our annual elections. In the wise words of our 2007 President, Pam Parrish, “NADOA is an organization of people and people make the organization. I believe that with the commitment from each of you, this organization will continue to grow and enhance our profession as well as our value to our respective companies.” I strongly urge and challenge all of the membership to come forward with your ideas and suggestions for improving our organization. Please email me or any of our Board members with your ideas - don’t keep suggestions to yourself or they may not get discussed. I know there are many new first time analysts who are eager for education and guidance in the multi-faceted, divergent and complex matters that confront our profession. In calls from headhunters, emails and LinkedIn, I see at least 4 or 5 new DOA positions a week. We are in high demand right now and hope it continues, which is why our organization has to keep the membership educated and on top of today’s ever changing structure. With that said, Division Order Analysts are also hard to find. It’s up to us to encourage others to give our industry a look to find and pursue the fantastic opportunities this profession has to offer. Registration is now open, and I am sure your calendars are marked for September 6 – 8 to be at the 50th Annual NADOA Institute. Get out there, get registered and take advantage of the EARLY BIRD registration, as this promises to be a PHENOMENAL year. A side note regarding registration - I know it’s very easy for you or your company to pay with a credit card. To help our organization with Pay Pal costs when paying for registration or membership dues, it would be great if you or your company would pay by CHECK. See you in Louisville.
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NADOA
Decimal Points
Remember to keep your NADOA directory information updated. Due to all the changes taking place in our industry and the world, it is more important than ever to maintain professional contacts and receive the educational benefits of membership in NADOA. NADOA online Job Bank has new postings. Visit http://www.nadoa.wildapricot.org/page- 662233
Regional Reporters
ABADOA
Steptoe & Johnson PLLC Ryan.daniels@steptoe-johnson.com
CAPDOA
OPEN
DADOA
Kelly Sandoval, CDOA Kelly.sandoval@sitio.com Lewis Box, CDOA lewis.box@gmail.com Emily Sheffield esheffield@oglawyers.com Rosanne Kidder Rosanne.kidder@pxd.com
DALWORTH
HADOA
2023 NADOA Article Deadlines
PBADOA
SADOA
Dena Blevins Drblevins2014@gmail.com Jackie Clotfelter, CDOA jclotfelter@hannaoilandgas.com
June 16...................Special Institute Edition
Arkansas
September 22.........................Third Quarter
Kansas
Amy Flaming Amy.flaming@chsinc.com
November 10.......................Fourth Quarter
North Dakota Kimberly A. Backman
kbackman@crowleyfleck.com
New Mexico
Zachary P. Oliva zoliva@oglawyers.com Margaret Patton mpatton@pattonfirm.com
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 .
Louisiana
2023 News Magazine Team Rona Erickson , CDOA Editor
Kim Bowman Associate Editor, Photography Michelle Davila Associate Editor
Cheryl Hampton Associate Editor
Joseph Carpini Associate Editor Armando Lopez Associate Editor
Susan Bradley, CDOA Associate Editor
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2023 CERTIFICATION COMMITTEE cdoa@nadoa.org
Chairman
Lewis Box, CDOA
Lewis.box@gmail.com
Riverbend Energy Group
Recertification Credits
Sherry Werth, CDOA
Srw6886@gmail.com
Independent
Recertification Applications
Darryn McGee, CDOA
Dmcgee@eag1source.com
EAG
Applications & Candidate Publications
Stephanie Moore, CDOA
stmoore1969@gmail.com
Independent
Review Manual/Forms
Lewis Box, CDOA
Lewis.box@gmail.com
Riverbend Energy Group
Testing
Bonnie Didrickson, CDOA
bonniedidrickson@gmail.com Independent
Policies
Megan McKee, CDOA
mmckee@rangeresources.com
Range Resources
CDOA Self Service Website Issues Howdy fellow CDOAs. We’ve been hearing from several of our active CDOAs that they are having issues with logging credits in our new system. Most of the issues we are seeing are around
turn your certification back on to log credits for you. You must keep track of your credits until the committee has reached out to you and let you know that your certification has been renewed. Also please keep in mind that you have 90 days from the date of the class/webinar to log any/all credits. Should you have any issues with logging your points please email cdoa@nadoa.org.
recertification dates and credits the month prior to expiration/renewal and after renewal has been completed. To help ya’ll, some simple tips and tricks are below. If your expiration date is nearing, please complete the recertification application (link: https://nadoa.org/wp-content/uploads/2023/01/ NADOA-Application-for-Recertification_ Fillable-PDF.pdf) and submit your fee and form to Chris Tucker PRIOR to your expiration. Recertifying CDOAs must still be published in the Newsmagazine. Until you’ve been published, and application and fee are received, we can NOT
We appreciate all of your help in transitioning to the new credit tracking system!
Lewis Box Certification Chair CDOA Committee
Congratulations to the following New CDOAs!!
Nichole Dwier – Arlington,TX
Sunni Turney – Midland,TX
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NEEDED: NADOA LEADERS FOR 2024!
The NADOA nominating committee is in search of candidates for the 2024 NADOA Board. This is a wonderful opportunity for volunteers who want to enhance their leadership skills, bring new and progressive
ideas to the organization and work with some of the most dedicated and hardworking volunteers in our profession. If you are interested in being a 2024 NADOA leader and are up for a very rewarding challenge or you have any questions regarding the open positions, please contact Michele Lawton at michele_lawton@swn.com by June 30, 2023. Open positions: • 2nd Vice President (Site selection) (3 year commitment) • Recording Secretary (Meeting minutes) (1 year term) • Corresponding Secretary (Membership duties) (1 year term)
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2023 Nominations for NADOA Membership Recognition
I would like to nominate ___________________________________________________ for the Ellis Rudy Memorial Lifetime Achievement Award. This award is 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. Please detail the nominee’s involvement in NADOA, the services they have performed and/or contributions they have made on page 2 (You may attach a separate sheet if necessary). Do you have a great mentor that you’d like to thank? Do you have an organization that is promoting the advancement of the Division Order profession? Consider nominating someone for an organization for an NADOA Membership recognition Award. DEADLINE IS FAST APPROACHING - GET YOUR NOMINATIONS IN TODAY!
I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Corporate Award. Presented to the group or company that has contributed to NADOA’s growth and development, the Division Order profession, and/or the industry during the past year.
I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Award for Education. This award is presented to the NADOA member who has dedicated their time and service to the betterment of Division Order Professionals through influence and mentorship.
I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Award for Interaction. This award is presented to the NADOA member or affiliated organization who has had a positive community impact and extraordinary service and dedication in leading and promoting the Division Order profession.
I would like to nominate ___________________________________________________ for the Russell Schetroma Memorial Speaker’s Award. This award is presented to the individual who has made a difference in the lives of our members by contributing to the growth, development and education of our association or industry during the past year.
N at i onal A ssociation of D i v i s i on O rder A nalys t s Send nominations to: Member Recognition Awards Committee, c/o Jean Hinton (jean_hinton@oxy.com) Nominations will be accepted through July 1, 2023
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2023 Nomination Form for NADOA Membership Recognition
2021 Nomination Form for NADOA Membership Recognition
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).
I would like to nominate ___________________________________________ for the NADOA Membe Recognition Award for Interaction . This award is presented to the NADOA member or affiliated organization who has had a positive comm impact and extraordinary service and dedication in leading and promoting the Division Order profession Please detail the nominee’s involvement in NADOA, the services they have performed and/or contribut they have made (You may attach a separate sheet if necessary).
___________________________________________________ Signature ____________________________________________________ Please Print Name ____________________________________________________ Email Address
Send nominations to: Member Recognition Awards Committee, c/o Jean Hinton (jean_hinton@oxy.com) Nominations will be accepted through July 1, 2023
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Legal
Watch
Texas v. Environmental Protection Agency
Texas
The D.C. Circuit Court of Appeals is considering a challenge by states and industry groups to the Environmental Protection Agency’s latest greenhouse gas standards for cars and light trucks. The case is State of Texas v. U.S. Environmental Protection Agency, 5th U.S. Circuit Court of Appeals, No. 23- 60069. Initially filed by Texas in February and later joined by fossil fuel and chemical industry groups and the states of Mississippi and Louisiana, the lawsuit contends the EPA’s rejection was an illegal attempt to force federal rules onto the state.
The Clean Air Act requires states to submit plans to reduce pollution from power plants and other industries that can significantly impact air quality in other states. Plans submitted by 19 states (including Texas, California, Illinois, Alabama, Oklahoma and others) were rejected by the EPA in February. EPA also partially rejected plans submitted by Minnesota and Wisconsin. According to the EPA, many of the proposed rules contained “no permanent and enforceable emissions controls.” If no revised proposals are submitted by the states, the federal government may craft its own rules.
Legal
Updates Articles are not intended to be and should not be relied upon as legal advice or to establish any kind of an attorney-client relationship with the author.
King Operating Corp. v. Double Eagle Andrews, LLC No. 11-19-00336-CV, 2021 WL 4598819 (Tex. App.-Eastland, Oct. 7, 2021)
Texas
The Eastland Court of Appeals affirmed the trial court ruling in favor of Double Eagle Andrews, stating that all references to the ‘leased premises’ must be read consistent- ly throughout the lease, including the habendum clause. Facts: There were four tracts of land in Scurry County, Texas that were owned as follows: The Robisons owned a fifty percent mineral inter- est in tract 1 and one hundred percent of the mineral in- terest in tracts 2, 3, and 4. The Robisons executed a lease that covered the “leased premises”, defined as including all
of tracts 1, 2, 3 and 4.
The Williams’ owned the other half of the mineral interest in tract 1 and all of the executive rights in tract 1. The Williams’ lease only covered tract 1. King Operating (King), successor to the original lessee, drilled a producing well on tract 1 during the primary term of the lease, but did not drill on tracts 2, 3 or 4. After the primary term, the Robison lessors executed a new lease for their interest in tracts 2 and 3 with Double Eagle Andrews (DEA). When King filed a permit appli-
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cation with the Texas Railroad Commission to drill a well on tracts 2-4, DEA protested the application and a lawsuit ensued. King argued that the language “leased premises” in the Robison lease would mean that this lease would be kept in force (even though the Robisons did not own the execu- tive rights to tract 1); however the court did not agree. The court construed that identical words would not have
different meanings in different parts of the lease and did not see intent that “leased premises” was not to be used consistently throughout the lease. The court reasoned that the intent of the parties for the term “leased prem- ises” was to refer to the tracts of land that were covered by the Robison lease in which the Robisons actually owned and conveyed a leasehold interest and in the absence of executory rights could not grant rights to lands the lessor did not own.
Pooling in Bad Faith: Look to the Lease Terms for Clarity
Texas
This case illustrates the significance of broadly drafted pooling provisions that offer wide discretion to the Lessee. In Ischy v. Northwood Energy Corp , 1 the plaintiff (“Lessor”) had leased 297 acres in Monroe County, Ohio.About a year before the expiration of the lease’s primary term, the Lessee pooled 0.19 acres of the leased acreage into a unit. Production from that unit began about four months after the lease’s primary term expiry.While the lease contained a lease extension bonus provision, the need for the bonus was not triggered because the lease was pooled.The Lessor argued the Lessee pooled the lease in a bad faith attempt to avoid having to pay the extension bonus. The Lessor brought suit claiming the lease had expired by its terms and relied on the following four arguments in justifying its claim: 1. That Northwood violated the implied duty of good faith and fair dealing in pooling the lease; 2. That operations occurred off leased premises and therefore did not satisfy the terms for holding the lease; 3. That the advanced minimum royalty payment did not count; and 4. That the Lessor’s attempts at notice did satisfy the lease terms.
The main issue addressed by the appellate court was the issue of good faith and fair dealing. The Lessor argued that the Lessee acted in bad faith when it pooled 0.19 acres of the 297-acre lease for the sole purpose of holding the lease beyond its primary term.The Lessor stated that the Lessee did this to avoid paying the $5,000/acre lease extension bonus. In analyzing, the appellate court pointed to the lease terms, which stated that “it is expressly stipulated that no implied covenants or conditions whatsoever shall be read into this Lease 2 ….” The court further pointed out that the lease provided broad authority to pool acreage at the Lessee’s discretion.Thus, the court concluded that the Lessee did not act in bad faith because the Lessee did not violate the terms of the lease. 3 Touching on the remaining arguments, the appellate court went on to state that the lease’s definition for “operations” also offered a broad meaning.As such, the Lessee’s actions complied with the lease as it served to hold the lease into the secondary term without necessitating the extension bonus payment. 4 Although the court noted there could be some question concerning how effective
1 203 N.E.3d 1249 (Ohio Ct. App. 2022). 2 Id. at 1252. 3 Id. at 1254. 4 Id. at 1256.
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CONTACT If you have any questions regarding this case law update or suggestions for topics to be covered in future issues, please call our office at 713-229-0360 or contact:
the advanced minimum royalty payments were in holding the lease, it was a moot issue as the lease was clearly held beyond its primary term under the first two analyses. 5 The court also briefly touched on the issue of notice, which warrants discussion here.The Lessor claimed it satisfied the notice requirement in the lease, yet the court pointed out that the lease required written notice while the Lessor verbally raised its concerns with the Lessee’s land team. While the court found this issue irrelevant since the lease was held by pooling, the court could have found notice was not met as the Lessor’s verbal notice did not comply with the lease terms (i.e. written notice). The bottom line in Northwood is that the lease terms prevail, and pooling is unlikely to be considered in bad faith if the pooling 6 complies with the mutually agreed upon lease terms.Thus, all parties should be aware of how lease terms can and will impact their assets now and beyond the primary term.
Andrew Good Partner, Columbus agood@oglawyers.com
www.oglawyers.com
The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice or to create a lawyer-client relationship. © 2023 Oliva Gibbs LLP. All rights reserved. This publication may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Houston (principal office): 815 Walker St., Suite 1140, Houston, Texas 77002, 713-229-0360 | Columbus: 580 North Fourth Street, Suite 260, Columbus Ohio 43215, 614- 349-4525 | Lafayette: 412 West University Avenue, Suite 203, Lafayette, LA 70506, 713-229-0360 | Oklahoma City: 301 Lilac Drive, Suite 250, Edmond, OK 73034, 405-395-2615 |
5 Id. at 1258. 6 Id. at 1259.
Unanimous Oklahoma Supreme Court Answers:
When does an oil and gas lease expire due to cessation of production? By: Jake Krattiger and Rhyder M. Jolliff
Oklahoma
The Oklahoma Supreme Court recently answered two hotly contested energy issues: when does an oil and gas lease expire due to cessation of production, and how must courts
2) Termination is not judged solely by the lease’s stated time period; and 3) Oklahoma’s strong public policy against estate forfeiture provides a grace period for protecting leasehold interests. In Tres C, LLC v. Raker Resources, LLC, Continental Resources, Inc., and Dewblaine Energy, LLC , 2023 OK 13, the Court granted certiorari to decide whether the trial judge erred by holding that a lease expires by its
apply a lease’s habendum clause? The unanimous Court explained: 1) Cessation of production can be
determined only after a reasonable period based on all economic circumstances to decide if the well can no longer produce in paying quantities;
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terms due to a cessation of production in paying quantities, based solely on analyzing a three-month period during which the well’s production decreased. Defendant-Petitioners claimed the lease’s habendum clause remained in force and maintained the lease until there was a cessation of production in paying quantities for an unreasonable period measured under all the circumstances from the perspective of a reasonable operator. The Supreme Court agreed. It explained that the trial court erred when it limited its cessation determination to a three- month period without evaluating other factors, such as operational work on the existing well and its small amounts of gas production. In reversing the Court of Civil Appeals and the trial judge, the Court stated: First, we have repeatedly explained that the cessation-of-production clause is only implicated where production has already ceased —i.e., the clause only comes into play after a cessation has occurred. . . . [t]he cessation-of-production clause kicks- in after a cessation has occurred that could result in termination of an oil and gas lease under the Habendum Clause and gives the operator an extension of time for preserving the lease through the means specified in the clause. Therefore, the cessation- of-production clause and the 60- day time-period contained therein have no bearing on anything that is done before the cessation occurs, including the assessment of whether a cessation has occurred. See id. at ¶ 28 (internal citations omitted) (emphasis in original).
The Court further stated,
[N]either the cessation-of-production clause nor the temporary cessation doctrine have anything to do with the reasonable time-period that governs the pre-cessation assessment of profitability.
See id. at ¶ 33.
Reinforcing Oklahoma’s “strong policy of our statutory law against forfeiture of estates,” Tres C will guide judges, lawyers, and litigants in evaluating cases sometimes referred to as “top-lease” litigation. Existing Oklahoma law was affirmed in Tres C, which should clarify questions regarding production in paying quantities and possible termination of existing leases. GableGotwals’ energy, oil & gas team has extensive experience assisting clients in oil and gas leases as well as royalty litigation. For more information, please contact the authors or any member of the team. _______________________ The Authors:
Jake Krattiger jkrattiger@gablelaw.com 405-568-3301
Rhyder M Jolliff rjolliff@gablelaw.com 918-595-4804
This article is provided for educational and informational purposes only and does not contain legal advice or create an attorney-client relationship. The information provided should not be taken as an indication of future legal results; any information provided should not be acted upon without consulting legal counsel.
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Real Rights Require Real Acts – And Recordation
Louisiana
The United States District Court for the Western District of Louisiana recently examined whether a real right in property could be enforced against third parties, absent a formal recorded instrument evidencing the same.The Court determined that, in the absence of a recorded instrument, an oral or written agreement creates only a personal obligation (here, a limited wellbore interest), and not a real right in the underlying immovable property interests, enforceable solely against the grantor/obligor for a ten-year prescriptive period. In Donald Zadeck Succession v. Treme , 1 Zadeck Energy, Inc. (“Zadeck Energy”) owned a fifty percent working interest in certain Mineral Leases (the “Zadeck Leases”), all containing pooling and unitization provisions. Some of the Zadeck Leases were forced pooled into a unit, and Zadeck Energy, as operator, completed a unit well for the unit (the “Brown well”). By 1992, production from the Brown well had ceased. In May 1993, Zadeck Energy allegedly conveyed to Douglas Vandiver, and his heirs (collectively, the “Vandivers” or “Defendants”), as its operations manager, a five percent working interest in the Zadeck Leases as partial compensation for his participation in the recompletion of the Brown Well; however, no assignment of this instrument was drafted or recorded in the public records.Vandiver was added to the paydeck of the Brown well and began receiving his five percent interest, less his proportionate share of the costs.
In 1994, Zadeck Energy conveyed its fifty percent working interest to Comstock Oil & Gas Louisiana, LLC (“Comstock”), reserving an overriding royalty interest in the transfer. After 1994, Comstock drilled several wells on the land covered by the Zadeck Leases and paid Zadeck Interests, (formerly known as Zadeck Energy) their overriding royalty interest. Neither Comstock nor Zadeck Interests paid the Vandivers any further compensation. In 2009, Douglas Vandiver consulted an attorney on this matter but elected not to file suit. On October 1, 2019, the Brown well was plugged and abandoned, and the issue was not raised again until the following year. On June 4, 2020, the Vandivers’ heirs sent Donald Zadeck a letter, regarding the 1993 conveyance of what they asserted was a five percent working interest in the Zadeck Leases. Unfortunately, Mr. Zadeck died shortly thereafter in 2020. Defendants filed a proof of claim in Donald Zadeck’s succession on January 26, 2021, asserting recognition as working interest owners in the Zadeck Leases, demanding a formal assignment of their five percent alleged working interest by the estate and remuneration of all past-due sums since 2007.The Donald Zadeck Succession filed a counterclaim, seeking a judgment that the Vandivers had no valid interests in the estate. ________________ (1) 2022 U.S. Dist. LEXIS 167122, 2022 WL 4280296.
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(2) See La. C.C. art. 3499; State v. Stewart, 2022 La. App. LEXIS 2162, *4, 2022 0574 (La.App.1 Cir. 12/15/22), 2022 WL 17688412. (3) See Boone v. Conoco Phillips Co., 2013- 1196, p. 21 (La. App. 3 Cir. 5/7/14); 139 So.3d 1047, 1060-61; Songbyrd, Inc. v. Bearsville Recs., Inc., 104 F.3d 773, 779 (5th Cir. 1997). (4) See TSS Props., LLC v. Ray-Bayou, LLC, 329 So. 3d 411, 413, 2021 La. App. LEXIS 1320, *1, 20-533 (La.App. 3 Cir. 09/22/21), 2021 WL 4303332. (5) See Covey Park Gas, LLC v. Bull Run Acquisitions II, LLC, 310 So. 3d 777, 2021 La. App. LEXIS 14 (La.App. 2 Cir. 2021), writ denied, 2021 La. LEXIS 811 (La. Apr. 7, 2021).
The Donald Zadeck Succession filed a motion for Summary Judgment on the issue of prescription, alleging that the Vandivers’ claim was a personal action for breach of contract against Zadeck Energy, which had been prescribed under Louisiana’s ten-year prescriptive period. 2 The Court examined whether Defendants’ claims constituted a personal action directly against Donald Zadeck, or a real action seeking recognition of ownership or enforcement of the rights in immovable property, which is imprescriptible. 3 While the Court recognized that Defendants’ claims appeared to be a real action-seeking recognition of their ownership in the Zadeck Leases, the interest was now outstanding in a third party (Comstock), and there was no recorded instrument reflecting their grant of working interests, as required under La. C.C. 3338.The Vandivers’ claims amounted to a personal action prescribed in 2019, ten years after Douglas Vandiver first consulted his attorney. Zadeck reiterates the importance of proper recordation of all interests in mineral rights, including leases, in the parish conveyance or mortgage records where the immovable is located.These are real property rights, which require purchasers to establish either privity of contract, assignment of rights, or a stipulation pour autrui as outlined in La. Rev. Stat.Ann. § 31:16. The Louisiana public records doctrine denies the effect of rights unless they are recorded. 4 Moreover, once recorded, deeds cannot be reformed to the disadvantage of third parties who relied on public records showing that the property belonged to the party from whom they acquired title. 5
_______________________ CONTACT
If you have any questions regarding this case law update or suggestions for topics to be covered in future issues, please call our office at 713-229-0360 or contact:
Kate Bailey Labue Attorney, Lafayette klabue@oglawyers.com
www.oglawyers.com
The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice or to create a lawyer-client relationship. © 2023 Oliva Gibbs LLP. All rights reserved. This publication may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Houston (principal office): 815 Walker St., Suite 1140, Houston, Texas 77002, 713-229-0360 | Columbus: 580 North Fourth Street, Suite 260, Columbus Ohio 43215, 614-349-4525 | Lafayette: 412 West University Avenue, Suite 203, Lafayette, LA 70506, 713-229-0360 | Oklahoma City: 301 Lilac Drive, Suite 250, Edmond, OK 73034, 405-395-2615 |
________________
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Van Dyke v. The Navigator Group – Double Fractions and the Presumed Grant Doctrine
Texas
On February 17, 2023, the Texas Supreme Court handed down its opinion in Van Dyke v. The Navigator Group , resolving a ten-year dispute over the ownership of royalty interests and $44 million in royalties. In reversing the court of appeals, the court concluded “that the Mulkey parties hold title to ½ of the mineral estate because the original deed so requires and because the presumed-grant doctrine would remove any remaining doubts” and remanded to the trial court for further proceedings to produce a final judgment. The opinion delivered by Justice Young begins with the following: “Only in a legal text could the formula “one- half of one-eighth” mean anything other than one-sixteenth. But in the law, “one-half of one-eighth” sometimes equals one-half–in the context of reservations of mineral interests. Likewise, the law sometimes calculates one-half of 1,000 to be 600, not 500–in the context of contracts for rabbits. [Dwyer v. City of Brenham , 7 S.W. 598, 599 (Tex. 1888)] Those results may seem bizarre, unsatisfying, and literally fuzzy math. They can also be inefficient; resolutely adhering to the rules of arithmetic would more rapidly end litigation. The rules that courts must apply, however, are not primarily those of arithmetic but of textual construction. The rules of construction, in turn, reflect the principle that legal texts–including private-law documents like contracts, deeds, and wills–still bear the meaning that their words had when they were drafted, even if the use of some words today might generate a different meaning.” In 1924, the Mulkeys conveyed their ranch to White and Tom, with the following reservation:
“It is understood and agreed that one-half of one- eighth of all minerals and mineral rights in said land are reserved in grantors, Geo. H. Mulkey and Frances E. Mulkey, and are not conveyed herein.” The successors of White and Tom contended that this double fraction was simple arithmetic and reserved a 1/16 mineral interest. The successors of the Mulkeys contend that the reservation reserved a ½ mineral interest. The trial court and the court of appeals agreed with Whit and Tom; the Supreme Court reversed, holding that each side owns ½ of the minerals in the Ranch. The Supreme Court ruled for the Mulkeys on two grounds: the “estate misconception theory,” and the presumed-grant doctrine. The Court noted that, at the time of the 1924 deed, 1/8 was “a term of art that references the entire mineral estate,” and that “the estate- misconception theory reflects the prevalent (but, as it turns out, mistaken) belief that, in entering into an oil-and-gas lease, a lessor retained only a 1/8 interest in the minerals rather than the entire mineral estate in fee simple determinable with the possibility of reverter of the entire estate. Therefore, for many years, lessors would refer to what they thought reflected their entire interest in the “mineral estate” with a simple term they understood to convey the same message: “1/8.” (1) This widespread and mistaken belief ran rampant in instruments of this time involving the reservation or conveyance of a mineral interest—so much so that courts _____________________ (1) Laura H. Burney, The Regrettable Rebirth of the Two-Grant Doctrine in Texas Deed Construction, 34 S. Tex. L. Rev. 73, 88 (1993).
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have taken judicial notice of this widespread phenomenon. Hysaw v. Dawkins, 483 S.W.3d (Tex. 2016) Therefore, the very use of 1/8 in a double fraction “should be considered patent evidence that the parties were functioning under the estate misconception.” (2) As the Court pointed out in Hysaw , “’the near ubiquitous nature of the 1/8 royalty—dubbed by some as ‘the legacy of the 1/8 royalty’ or ‘historical standardization’—is something that “influenced the language used to describe the quantum of royalty in conveyances of a certain vintage.’” “This prevalent belief and confusion resulted in parties mistakenly assuming the landowner’s royalty would always be 1/8. Therefore, parties would use the term 1/8 as a placeholder for future royalties generally— without anyone understanding that reference to set an arithmetical value.” The Court disagreed with the court of appeals’ conclusion that presumed since no oil and gas lease was in effect at the time of the 1924 deed, the estate misconception theory did not apply. In reaffirming Hysaw , the Court stated: “When courts confront a double fraction involving 1/8 in an instrument, the logic of our analysis in Hysaw requires that we begin with a presumption that the mere use of such a double fraction was purposeful and that 1/8 reflects the entire mineral estate, not just 1/8 of it. … Our analysis in Hysaw thus warrants the use of a rebuttable presumption that the term 1/8 in a double fraction in mineral instruments of this era refers to the entire mineral estate. Because there is “little explanation” for using a double fraction for any other purpose, this presumption reflects historical usage and common sense.” The Court made clear that this presumption may be rebutted by other language in the
instrument evidencing a different intent. But there need not be other language in the instrument supporting the presumption (as there was in Hysaw) for the presumption to apply. “The use of a double fraction in this deed, combined with the lack of anything that could rebut the presumption, is precisely why we can conclude as a matter of law that this deed did not use 1/8 in its arithmetical sense but instead reserved to the Mulkey grantors a ½ interest in the mineral estate.” The Court then concluded that, even if the deed did not clearly reserve ½ of the minerals, the record conclusively establishes that the Mulkeys acquired the other 7/16 mineral interest through the “presumed-grant doctrine.” The presumed grant doctrine, ‘also referred to as title by circumstantial evidence, has been described as a common law form of adverse possession.’ The Court noted the presumed-grant doctrine required a proponent to establish three elements: (1) A long-asserted and open claim, adverse to that of the apparent owner; (2) nonclaim by the apparent owner; and (3) acquiescence by the apparent owner in the adverse claim. The Court disagreed with the court of appeals that there is a fourth element, a gap in the chain of title. The record showed that, for nearly ninety years after the execution of the original deed, the parties continued without exception to engage in transactions and to make representations about their ownership interests consistent with the understanding that each original side had a ½ interest in the minerals. The Court concluded that this historical evidence “conclusively satisfies the presumed-grant doctrine’s requirements.” “The filing of this lawsuit in 2013 cannot negate nearly a century of overwhelming evidence that the White parties never previously made such a claim in all those years.”
_____________________ (2) Id. at 90
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THE SUPPLEMENTAL TITLE OPINION – IS IT STILL NECESSARY? Part One
By Terry E. Hogwood, Attorney
(NOTE: Parts of this article are lifted from an earlier article entitled THE MYTH OF THE CURED TITLE OPINION supplemented by THAT TITLE REQUIREMENT IS SATISFIED! REALLY? written by the author. Quotes and attribution to that article have been eliminated in this article at the author’s election.) Today, there is a troubling trend in the title examination process in the oil and gas industry not to secure a supplemental title opinion for various reasons (time, cost etc.) once an original title opinion has been rendered. The author has elected to use a simple format setting forth the usual preliminary steps taken in the drilling process, including the title approval process, to analyze and discuss various aspects of the supplemental title opinion. As an introduction to the topic of supplemental title opinions, the following brief, partial case analysis is a real-life example of not only obtaining a supplemental title opinion but also ensuring that both the original title opinion and supplemental title opinion(s) accurately identify the correct legal problem(s) and that the curative materials submitted in satisfaction of each title requirement actually “cure” the title issue being addressed. The case ( Concho Resources, Inc. v. Ellison , 627 S.W.3d 226 (Tex. 2021)) has shown how important a title opinion (especially a supplemental title opinion) can potentially be in a Texas trespass to try title case. In this case, every title examiner in at least five separate title opinions (original and supplemental) opined on a pressing and very real title problem with the description of the lands in an oil and gas lease purporting to cover and pertain to the lands under examination.
correctly identified the source deed that divided a larger tract into two (2) tracts, including the subject tract under examination. This source deed conveyed and correctly described the tract not under examination as being “All of Section 1, Block 6 H&TC Ry Co. Survey located North and West of the public road which now runs across the corner of said survey containing 147 acres more or less.” Actually, upon a proper survey, this tract would have been found to contain 301 acres. The tract under examination was the “493” acre tract remaining after the described tract was conveyed. The owner of the remaining “493” acres (assuming the tract originally contained 640 acres AND that the 147 acre was an accurate acreage count (it was not!)) thereafter leased that tract utilizing the following description:
“South part of Sec. 1, Block 6, H&TC RR Co (A-312) 493 acres”
The foregoing description is from the actual un- recorded lease. The examining attorney opined in the original title opinion, a copy of which is in the possession of the author: “As a technical matter this description is incorrect.” It is interesting to note that the author of this opinion used the following description to identify the lands under examination: “…covering the South 493 acres of Section 1, Block 6, H&TC Ry. Co. Survey, Abstract 312, Irion County, Texas, containing 493 acres, more or less.” There was no 493 acre tract. Quite the understatement by the examining attorney since neither description contained: (i) a beginning point; (ii) calls for direction and distance; (iii) an ending point or (iv) a deed reference to a correct property description. The actual lease description only contained an acreage call (493
The original title opinion for drilling purposes
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acres). Without going into any detail about the case, the description was more than “technically incorrect” – it was and is, in the opinion of the author, void due to violation of the Texas Statute of Frauds. There never was an actual 493 acre tract properly described and available for lease. The examining attorney made no requirement to cure the description problem “…because captioned land has been described in numerous instruments and estates in the aforementioned manner and occupied with a common understanding of where the property boundaries are located for almost 80 years…” Thus, the description of the “493 acre tract”, per the title examiner, was at least technically incorrect. In the author’s opinion, this description was VOID. How was this description problem to be cured for supplemental title opinion purposes? What was the proper title requirement? HINT: No curative requirement was ever made in any of the additional division order/supplemental title opinions covering the examined lands. When different examining attorneys in the additional supplemental opinions addressed this description issue as raised in the original title opinion, they did so without title requirement/title curative materials to review. The third (supplemental) title opinion issued for the “493 acre tract” contained a potentially incorrect title conclusion. First, the examining attorney expressly stated that he did not have a copy of the actual lease nor did he examine same. How can the obvious title problem with the lease description be addressed without first examining the actual lease? The examining attorney then held the requirement dealing with the lease description problem was “Deemed Satisfied.” No question was ever raised in any subsequent title opinion concerning the potential violation of the Texas Statute of Frauds and the very real possibility that the lease was void based on the Statute of Frauds violation. More importantly, who “deemed” the requirement satisfied? Or, more correctly, who waived the title requirement since no title curative materials were ever called for or submitted? That is, did the client company waive the requirement? Unknown. The last two title opinions reviewed by the author
continued the “Deemed Satisfied” conclusion regarding the lease description with the last title opinion questioning what “Deemed Satisfied” meant in the context of validating the lease description. One principle this case and other cases dealing with oil and gas production illustrate is that, prior to drilling one or more wells on leased/pooled acreage, the diligent operator always secures an original title opinion for the proposed well location. What is much more uncertain is, where one or more title problems are identified in the title opinion and curative actions are recommended, whether the operator addressed the title problem(s) via a supplemental title opinion or ignored the title problem (waived the title requirement internally) and did not secure a supplemental title opinion. This article will address, among other issues: (i) as between the title attorney and client, who waives a title requirement or deems the title requirement satisfied (whatever that means); (ii) why a supplemental title opinion is a necessary title document that must be secured to enable the client company to know and understand the quality of its title with satisfied/un-satisfied/waived title requirements; (iii) what types of curative materials can satisfy a title requirement but cause the examining attorney to have to advise the client company that, at best, it has defensible title to the lands under examination and (iv) how an un- marketable title can be made marketable. Key to obtaining a clear title to drill (marketable title if possible; defensible title for sure) is to have, if possible, the proper title requirement made in the original/supplemental title opinion to “cure” outstanding title problems. As Ellison demonstrates, even more important is the need to furnish to the client company appropriate curative materials so that the examining attorney, in one or more supplemental title opinions, can address the title issues and deem them: (i) satisfied or (ii) not satisfied. The examining attorney then, depending on the individual facts arising out of each chain of title, can: (i) make additional requirements; ii) advise the client, if the client wishes to waive the title requirement that, at best, it will be drilling
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on a defensible title or, worse case, have a full of partial title failure or (iii) if potentially winnable, recommend filing a trespass to try title lawsuit in an attempt to cure the outstanding title requirement(s). This article will identify and set out three (3) steps that might be encountered in the drilling of a vertical or horizontal well in Texas. It is within the context of these three (3) steps that the absolute necessity for obtaining a supplemental title opinion showing not only that all title requirements have been satisfied but also that the curative documents themselves do not cause the title to be less than marketable will be explored. The three (3) steps are:
utilizing a metes and bounds description. Blackacre appears to be fenced by a three strand barb-wire fence. It is unknown if the fenced area matches the metes and bounds description or if a survey of the lands would reflect that more/less of the leased acreage is actually fenced. O contracts for the drilling of the well. Only one thing left for O to do; obtain the original title opinion for drilling purposes. O does not know that the lands under fence comprise only 540 acres, not the 640 acres as called for in the patent and subsequent documents. One hundred acres of Blackacre lies outside of the fenced area.
Step One – Taking of the lease and the
Step Two
decision to drill
O obtains a run sheet (abstract of title) prepared by a landman purportedly setting forth all documents of record for Blackacre from sovereignty of the soil down to specific closing date. This run sheet is examined by the title attorney and a title opinion covering and pertaining to Blackacre is issued by the examining attorney. The title opinion shows a regular chain of title from sovereignty and calls for a survey of the lands under lease to see if the description conforms to the fence line as well an affidavit of use and occupancy from a disinterested person for the last thirty (30) years. This affidavit of use and occupancy is to address, among other items of interest, the existence of any fences, possession of the entire 640 acres and any potential adverse possession of Blackacre by third parties.
Step Two – Obtaining the original title
opinion
Step Three – Addressing outstanding title requirements
IF YOU GET NOTHING ELSE OUT OF THIS PAPER , remember that the Ownership Schedule set forth in an original or supplemental title opinion may not be relied on until all title requirements have been satisfied per the rendering attorney. Stated another way, if one or more title requirements is/are not satisfied, the Ownership Schedule may not be relied on. Further, if any title requirement remains unsatisfied (waived), unless the title attorney actually waived the satisfaction of same, the risk of title loss is on the client. Marketable title and the resultant ownership of the mineral estate (and surface estate, if addressed) is conditioned upon the satisfaction of all title requirements as called for in the pertinent Requirements Section of the original/supplemental title opinion.
Issue 1 : What is a title opinion?
There are two distinct and separately issued title opinions which are routinely utilized in the oil and gas industry. They are: (i) the Original Title Opinion issued for drilling purposes, being the first title opinion issued for Blackacre to confirm for O that all mineral owners appear to be leased (subject to the satisfaction of the enumerated title requirements) and (ii) The Supplemental Title Opinion, typically issued either for the updating of the mineral title ownership based on the curative materials furnished in connection with the Original Title Opinion and/or issued for division order
Step One
O, the operator, decides to acquire a lease on Blackacre and does so successfully (assuming O leased all of the current outstanding mineral interests in Blackacre). The lease calls for 640 acres
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