commingling party/adversely affected party to prove damages need only be sufficient to allow a jury to calculate the amount of damages with reasonable certainty . Ortiz Oil Co. v. Luttes , 141 S.W.2d 1050 (Tex.Civ.App. – 1940) - See discussion of reasonable certainty below.
was interesting to say the least.
“Moreover the record reflects that plaintiffs’ damages may not be fixed with any accuracy. Defendant’s geologist, witness Warnock, who testified as to the size and contents of the field based on available data candidly informed the court he could not state the margin of error in his testimony. Insofar as his testimony is concerned the error could be 100%, 200% or any other figure. Defendant’s engineer witness Whitson’s testimony was no more certain than that of Warnock. And plaintiffs’ remedy at law is inadequate if damages may not be determined with some precision. ...” West v. Humble Oil & Refining Co , 496 S.W.2d 212, 215 (Tex.Civ. App. - 1973) Since the proof of damages tendered by Humble was, in the opinion of the court, suspect as to its accuracy, the court held that, lacking a clear, adequate remedy at law, the Wests were entitled to relief by injunction and remanded the case back to the trial court with instructions to enter a permanent injunction prohibiting Humble from injecting gas until all native gas in the reservoir had been produced.
The West Trilogy Cases
Although Texas law on the matter of oil and gas commingling did not originate with the West Trilogy Cases, today the rules of law coming out of said cases are the basis for all Texas cases dealing with the commingling of oil and gas. To completely understand the ruling in the Supreme Court case, it is helpful to review the holdings of the appeals court prior to the Supreme Court opinion and the appeals court ruling after the Supreme Court opinion.
West v. Humble Oil & Refining Co , 496 S.W.2d 212
(Tex.Civ.App. - 1973)
The initial court of civil appeals case involved the entry by Humble onto the West oil and gas lease in which it was the lessee as well as owner of the gas storage rights. Gas storage rights are an incident of surface ownership and not mineral ownership. Springer Ranch, Ltd. v. Jones , 421 S.W.3d 273 (Tex.App. - 2013). Humble began injecting gas into the yet to be depleted gas reservoir for storage purposes. The Wests sued for an injunction prohibiting Humble from using the reservoir for gas storage until all native gas located in the reservoir had been produced. Alternatively, the Wests asked the court, if an injunction was not to be granted, to order Humble to pay royalties in accordance with the lease whether the gas produced was native gas or stored gas. Humble argued that 89% of the native gas had already been produced. It further stated that if all native gas was produced prior to storage activities, that the reservoir would be damaged for gas storage purposes and thus not usable. Humble offered to pay to the Wests royalties on gas until the volume of gas it paid royalties on equaled the volume of gas still remaining in place. The trial court denied the Wests’ request for a permanent injunction but did order Humble to account to the Wests for their royalty share of all gas produced from tracts in which they owned royalty interests, whether native or stored gas. The testimony on reserve calculations
Humble Oil & Refining Co. v. West , 508 S.W.2d 812
(Tex. – 1974)
The case reached the Texas Supreme Court for review. In light of the appeals court holding on the issue of damages and the apparent lack of specificity and accuracy on native gas reserve calculations, the Supreme Count looked at the law of confusion of goods in Texas (commingling). It set forth the following general rules regarding commingling: 1. The confusion of goods theory only applies where the commingled goods of two or more parties are joined (confused) such that the property of each of the parties cannot be determined. 2. If the commingled goods are similar in value and nature then each party takes its share of the commingled mass. In this case, the in-place native gas and stored gas were clearly commingled in the reservoir. The problem was determining what percentage of the thereafter produced gas was native gas and what percentage was stored gas.
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G r o w t h T h r o u g h E d u c a t i o n - J u l y / A u g u s t / S e p t e m b e r 2 0 2 0
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