Contributors:
J. Kevin West, Member kevin.west@steptoe-johnson.com
Andreah S. Frenn, Associate andreah.frenn@steptoe-johnson.com
Dallas F. Kratzer III, Of Counsel
Dallas Kratzer is a litigator whose practice focuses on business litigation as well as labor and employment law. Phone: (614) 458-9827 Email: dallas.kratzer@steptoe-johnson.com
Drilling on Non-Contiguous Acreage Found to Trigger Offset Well Provision
Texas
December 29, 2020 — In Martin v. Rosetta Res. Operating, LP , 2020 Tex. App. LEXIS 7952, 2020 WL 5887566, the Texas Thirteenth Court of Appeals held that a lessee’s obligation to protect undrilled acreage from drainage and to spud an offset well were triggered by the plain terms of the lease. The Martin court construed an “unambiguous” mineral lease as a matter of law, and noted that it must enforce the intention of the parties as expressed in the four corners of the lease. In its written decision, the court challenged the parties’ construction of a lessee’s obligations in a pooled unit and enforced what it considered to be the plain language of the lease terms. The Martins are landowners in Live Oak County, Texas and entered into mineral leases (the “Martin Leases”) with Mesquite Production, Inc. (“Mesquite”) in 2001 and 2006. The leases each contained the following “Addendum 18”: Notwithstanding anything contained herein to the contrary, it is further agreed that in the event a well is drilled on or in a unit containing part of this acreage or is drilled on acreage adjoining this Lease , the Lessor [sic], or its agent(s) shall protect the Lessee’s [sic] undrilled acreage
from drainage and in the opinions of reasonable and prudent operations , drainage is occurring on the un-drilled acreage, even though the draining well is located over three hundred thirty (330) feet from the undrilled acreage , the Lessee shall spud an offset well on said un drilled acreage or on a unit containing said acreage within twelve (12) months from the date the drainage began or release the acreage which is un-drilled or is not a part of a unit which is held by production (emphasis added). Mesquite then assigned the Martin Leases to Rosetta Resources Operating, LP (“Rosetta”). In 2008, Rosetta, Newfield Exploration Co. and Dynamic Production, Inc. (collectively “Newfield”) established a pooled unit (the “Martin Unit”) which included some of the Martin Leases, among other leases. That same year, Newfield drilled the GU-1 Well in an area of the Martin Unit which is also covered by the Martin Leases. In 2009, Newfield established another pooled unit called the Simmons Unit, which is separated from the Martin Leases by two twenty-acre tracts. Newfield drilled the Simmons-1 Well on the Simmons Unit, 1.5 miles away from the GU-1 Well.
12
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
Made with FlippingBook - professional solution for displaying marketing and sales documents online