on “the gross value received” by the operator. The addendum also stated that if the addendum was in conflict with the printed lease provisions, then the addendum would control and prevail. Once production was obtained on the well, the operator proceeded to deduct post-production costs. The mineral owner sued. The operator argued that the “at the well” language is the only lease language that provides a valuation point, so nothing in the addendum can be considered contradictory to that portion of the printed lease’s royalty provision. BlueStone further argued that it should be permitted to “net back” to the well by deducting all post-production costs. In partially affirming the appeals court judgment, the Supreme Court disagreed with BlueStone’s arguments and held that BlueStone’s deduction of post-production costs was improper because there was, in fact, a conflict and the mineral lease explicitly resolves the conflict in favor of the gross‑proceeds calculation. The Court further noted that the lease’s plain language limited the “free use of gas” clause to operations on the lease and was not intended to expand to off-lease uses that may benefit the lease. The case was remanded to the trial court to determine damages, if any, for off-premises compressor-fuel use. BlueStone Nat. Res. II, LLC v. Randle, et al, No. 19-0459, 2021 Tex . Endeavor Energy Resources, L.P. v. Energen Resources Corp. et al. Texas courts are generally very hesitant to find a provision in an instrument is ambiguous, as it creates uncertainty and promotes future litigation, so the outcome in this case is highly unusual. The lease at issue allowed Endeavor Energy Resources, L.P. to retain its leasehold interest in the parcel only by drilling a new well every 150 days, with the exception that Endeavor could “accumulate unused days in any 150-day term... in order to extend the next allowed 150-day term between the completion of one well and the drilling of a subsequent well.” At issue on appeal was how to calculate the number of “unused days.” Energen and Quinn argued that the contested provision unambiguously allowed unused days
earned in any term to be carried forward only once to the next 150-day term. The trial court agreed, and the court of appeals affirmed. The Supreme Court reversed, holding that the disputed continuous drilling clause was ambiguous and thus unable to be enforced and could not serve as a special limitation automatically terminating a lease. The court rendered judgment for Endeavor on the question of title and remanded the case to the trial court for further proceedings. Endeavor Energy Res., L.P. v. Energen Res. Corp., No. 18-1187, 2020 WL 7413727 (Tex. Dec. 18, 2020)
Sundown Energy LP, et al. v. HJSA No. 3, Ltd. P’ship
A unanimous Texas Supreme Court affirmed the trial court’s grant of partial summary judgment, holding that the definition of “drilling operations” contained in the contract applied to the continuous drilling program provision. With an over $40 million investment at stake, the parties disputed the interpretation of the lease’s continuous development obligation. The lease provided that to maintain the full lease after the end of the primary term, the lessee had to engage in continuous development operations every 120 days, with the clock starting with the completion or abandonment of one well and running until “drilling operations” are commenced on an “ensuing well.” Sundown contended that “drilling operations” is defined by the lease to include drilling, reworking, or other operations on an existing well. Further, Sundown contended that “ensuing well” does not mean a “new well,” but rather the next well on which it conducts “drilling
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