the Railroad Commission of Texas . . . for any field on this lease provides for a spacing or proration establishing different units of acreage per well, then such established different units shall be held under this lease by such production, in lieu of the . . . 640- acre units above mentioned . . . .” Id. , at 2-3. Here, the applicable field rules provided for “different” sized units than the 640 acre units contemplated by the leases. Specifically, the relevant field rule provided that no well shall be drilled closer than 467 feet to any property line, lease line or subdivision line, and no well shall be drilled closer than 1,200 feet to any well in the same reservoir on the same lease or pooled unit. Id. , at 7. Although the spacing requirement did not expressly set a number of acres per well, Statewide Rule 38, 16 Tex. Admin. Code § 3.38, requires that the standard drilling unit for a gas field with a spacing rule of 467-1200, like the one here, then the minimum acreage requirement is 40 acres per well for both oil and gas wells. Id. , at 9. ConocoPhillips’s continuous drilling program ended on June 21, 2012, and ConocoPhillips claimed 640 acres for each gas well, not the 40 acres as provided in the field rules, was retained under the retained acreage clause. Id. , at 3. The Court disagreed with ConocoPhillips and concluded that ConocoPhillips was entitled to retain only 40 acres per well, as provided by the field rules, despite 40 acres being far less than the 640 acres per well as contemplated by the lease. Id. , at 14. As a result, ConocoPhillips was required to release an additional 15,351 acres to Vaquillas that was not retained by the retained acreage clause. Id. , at 11. Second, in XOG Operating, LLC v. Chesapeake Exploration L.P. , 07-13-00439-CV, Tex. App. LEXIS 9411 (September 2, 2015), the Amarillo Court of Appeals reached a different conclusion and determined that the retained acreage clause permitted Chesapeake to retain more acreage than the parties contemplated. On June 1, 2003, Xeric Oil & Gas Corporation and Geronimo Holding Corporation assigned their interest in four oil and gas leases containing 1,625 acres to EOG Resources, Inc. Id. , at 2. The assignment provided for a primary term of two years and incorporated retained acreage clauses, which, in part, provided: “Upon expiration of … of this Assignment . . . all rights created hereunder shall terminate … and …
revert to Assignor, save and except that portion of said lease included within the proration or pooled unit of each well drilled under this Assignment . . . The term, ‘proration unit’ . . . shall mean the area within the surface boundaries of the proration unit then established or prescribed by field rules . . . for the reservoir in which each well is completed. In the absence of such field rules . . . each proration unit shall be . . . 320 acres of land . . . surroundings [sic] a well . . . .” (Emphasis omitted). Id. , at 2, 3. During the primary term, Chesapeake (EOG’s successor) drilled six gas wells, five wells in the Allison-Britt Field, and one well in the Stiles Ranch Field. Id. at 3. The assignments terminated on May 30, 2005, and all rights under the leases reverted to XOG, “save and except that portion of said lease[s] included within the proration or pooled unit of each well drilled.” Id. , at 13, 14. The field rules for the Allison-Britt Field stated that the maximum area of a “prescribed proration unit” was 320 acres. Id. , at 4. The field rules further provided that any unit containing less than 320 acres is defined as a “fractional proration unit.” Id. There were no field rules or special orders applicable to the Stiles Ranch Field, and by contractual definition, the acreage retained by a given well within that field was 320 acres. Id. , at 16. Under those rules, Chesapeake would have been permitted to designate 1,920 acres to its six wells. However, Chesapeake did not designate proration units of 320 acres for its wells, but fractional proration units, totaling 802 acres for its six wells. Chesapeake argued that the retained acreage clause permitted it to retain 320 acres for each of its wells despite that it designated fractional proration units containing less acreage. The Court agreed and explained that absent an express contractual agreement providing otherwise, a proration unit is defined as “the acreage assigned to a well for the purpose of assigning allowables and allocating production to the well” for regulatory purposes. Id. , at 11. The Court determined that the retained acreage clause was clear that the parties specifically agreed to define a proration unit as the area within the boundaries of a proration unit “established or prescribed by field rules” or, in the absence of field rules then 320 acres. Id. , at 11. Consistent with that interpretation, the Court concluded that the parties expressly agreed the
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