2017 Q2

National Association of Division Order Analysts April / May / June 2017

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NADOA 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 G R O W T H T H R O U G H E D U C T I O N

Volume MMXVII • No 2

www.NADOA.org

Contents Feature

NADOA 2017 Officers President Sandi Rupprecht

Articles

In This Legal Watch – California. .............................................8 Legislative Watch – Oklahoma......................................8 Legal Update – Wyoming...............................................9 Legal Updates Texas Carrizo Oil & Gas, Inc. v. Barrow-Shaver. .............10 Webb et al v. Martinez ...........................................12 Pennsylvania Ely v. Cabot Oil & Gas Corp...................................13 Pennsylvania Adopts New Fracking Rules ...................14 NADOA 44th Annual Institute....................................15 Legacy Royalties Pasture Party.....................................31 President’s Corner. ........................................................1 2018 NADOA Board election........................................2 Decimal Points..............................................................3 Membership Recognition Nominations..........................4 Certification..................................................................6 Webinar Update..........................................................27 Interaction...................................................................29 New Members..............................................................33 Counterpart Connection..............................................36 2017 NADOA Board/Committee Chairs......................40 Calendar of Events. .....................................................41 Issue

1st Vice President Cheryl Hampton 2nd Vice Presiden t Jason Lucas Treasurer Michele Lawton

Corresponding Secretary Luanne Johnson, CDOA Recording Secretary Stephanie Moore, CDOA

The NADOA News Magazine is a quarterly publication of the National Association of Division

Order Analysts PO Box 44009 Denver CO 80201

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 Associate Editor Cheryl Hampton champton@limerockresources.com

On the Cover: Bluebonnet Photo Courtesy of Austin Convention & Visitors Bureau

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

Sandi Rupprecht 2017 NADOA President

Welcome to the second Edition of our digital newsmagazine. While some of you may feel strange not getting an actual hard copy magazine, we received a tremendous number of supportive comments from the membership. Please continue to let us know how we are doing as you adapt to the new format. If you have articles, photos of events or just fun things that you do with fellow NADOA members, send them to Rona Erickson to see if they can be added to issues in the future. Digital means we do not have page number limitations on what we can afford to print. I would like to say a special Thank You to Rona Erickson for her tireless efforts to provide a quality magazine every quarter. All her work proofing articles, working with the layout artist, proofing again, and getting the finished product link to be distributed is still and has been a tremendous time commitment to NADOA. Next time you see Rona, please thank her for her years of service to NADOA. Also, thank you to everyone who is volunteering this year either as an elected officer or in a volunteer capacity. Your hard work and especially your time is very much appreciated. NADOA could not and would not exist without our volunteers. 2017 is a year of celebration. Institute is back in Texas and NADOA is celebrating 30 years of our CDOA program. Our CDOA Committee members are planning some special recognitions for all CDOAs present at the Institute. We hope as many CDOAs as possible will make every effort to attend Institute to be a part of the anniversary celebration. If you are interested in taking or thinking of taking the CDOA test, be sure to check out the Wednesday CDOA preparation class. We are planning to have a separate all-day Section 3 review that will be open to Institute attendees as well as single day attendees (for a fee) to prepare for the exam on Saturday, September 9. If you are new to Division Orders, you might be interested in learning about the Registered Division Order Analyst Certificate program we are planning to design and implement in the future. We can use your input and the input of CDOAs and veteran NADOA members. Preparation for the 2016 Institute on September 6-8, 2017 at the Lost Pines Resort in Bastrop, Texas is in full swing. The Board and Committees and the Institute Committee meet June 5-6 at Lost Pines to start our countdown preparations for Institute. Registration has officially opened. Be sure to register now to take advantage of the Early Bird discount pricing of $595 for members. The price goes up July 1, 2017. The program of speakers and topics is almost complete. Check out the NADOA website regularly for details as we add updates. Once again, we will host Wednesday classes. There is no additional charge to attend these classes. Extending your stay for one night to attend Wednesday’s education venue is well worth the time and expense. The Wednesday topics are:

• A CDOA expanded review class by Yoli Bazan (8:30-11:30AM)

• Escheat and Unclaimed Property Workshop sponsored by Keane (8:30-11:30AM)

• Division Order Calculations Class presented by Donna King & NADOA Members (1:30-4:00PM)

• Texas Trusts, Wills and Probate (1:30-4:00PM) Turn up the volume on your speakers for this video message from Sandi https://vimeo.com/216928973

This year we are hosting a combined President’s Reception and Welcome Reception on Wednesday evening. Come and meet the Officers, Board committee members and Institute volunteers to see how you can make an impact on the future of NADOA through volunteering. We will have a couple of local vendors displaying their wares at the reception. A local quilt shop and Chris Parachini, the local gemologist, will be showing their creations which can be purchased. Chris makes the most beautiful jewelry and has some great tales to tell as well. You won’t want to miss visiting with him. We are looking for one or two more local artists to share their creations at the reception. Bring your credit cards and purchase beautiful gems, artwork or order a quilt! Thursday evening’s “Night Under the Texas Stars” is still in the planning and execution stage. Stay tuned to the Institute Edition of our digital newsmagazine and our social media links for more information. We will be updating our Facebook, Twitter, Instagram, and LinkedIn accounts often to keep you informed. Be sure to join our pages and be the first to know the latest NADOA news.

I hope to meet many of you this year in Bastrop, Texas at the 44th NADOA Annual Institute:

“Back to Our Roots…Deep in the Heart of Texas”

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2018 NADOA Board Positions

The Nominating Committee is actively seeking candidates. Here is your chance to throw your hat in the ring if you are interested in serving on the NADOA Board. The following positions are open for election in 2018:

Second Vice President Treasurer Corresponding Secretary Recording Secretary

If you are considering a run for one of these offices or would like more information on what is involved, please contact Brenda Pirozzolo at Brenda.Pirozzolo@CGI.com . Don’t delay; the electronic ballots will be sent by August 6, 2017 to those members eligible to vote and the election results will be announced at the 44th Annual Institute in September.

Note that the NADOA Directors are appointed by the local associations. If you are interested in serving as an NADOA Director in 2018, please contact your local association board for details.

Nominating Committee Brenda Pirozzolo, Chair Darryn McGee

Ida Lemaster Susan Bradley Judy Moreland Debbie McKee Wendy Hopkins

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NADOA

Decimal Points

Digital details: The online magazine has some exciting features that were not possible with the printed version. Click on any article title on the Table of Contents page to go directly to the article. Hyperlinks are “highlighted” on each page. Click on a hyperlink to go directly to the website or contact the person. Another new feature to be sure to check out is the Vimeo video link in the President’s Corner. We are always happy to publish photos of NADOA events received from members. When submitting pictures for publication, please remember to send high resolution pictures (300 dpi or better). Most pictures taken with phone cameras are lower resolution and may appear blurry or pixilated; any photos below 200 dpi may not be useable.

2017 NADOA Article Deadlines

Special Institute Edition...........June 2, 2017 Third Quarter....................August 11, 2017 Fourth Quarter.............. November 3, 2017

Your feedback is welcomed and we would like to know your comments and/or suggestions for improving the online magazine experience. Contact me at ronae@kfoc. net or Cheryl Hampton at champton@limerockresources. 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.

Regional Reporters ABADOA

Steptoe & Johnson PLLC

dan.swiger@steptoe-johnson.com

CAPDOA

Chelsea Wright

cwright@linnenergy.com

DADOA

Sharon Siemer, CDOA

sharon.siemer@anadarko.com

DALWORTH

Lewis Box, CDOA

lewis_box@xtoenergy.com

HADOA

Stephanie Moore, CDOA

smoore@newfield.com

MAADOA

Angie Coady, CDOA

acoady@vessoil.com

PBADOA

Shawn Thompson

shawn.thompson@pxd.com

SADOA

Rebecca Helt, CDOA

rebecca.helt@wpxenergy.com

Arkansas

Jackie Clotfelter, CDOA

jclotfelter@hannaoilandgas.com

North Dakota

Kimberly A Backman

kbackman@crowleyfleck.com

New Mexico

Zachary P. Oliva

zoliva@kolawllp.com

Louisiana

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MEMBERSHIP RECOGNITION AWARDS Each year NADOA honors members of our organization through the Membership Recognition Awards. The awards are given to members who are nominated by their fellow NADOA members in three categories: Interaction, Education and Lifetime Achievement.

 The Interaction Award is given to a member or organization which has shown leadership in promoting our profession to the community.

 The Education Award is given to a member who has gone above and beyond to promote education by giving of their time and talents to the betterment of our profession.  The Lifetime Achievement Award is given to a member who has shown outstanding leadership in the division order profession through contributions to the industry during his/her career. In addition to honoring members, NADOA also presents a Corporate Award, which is presented to the group/company that has contributed significantly to NADOA’s growth and development, the Division Order profession and/or the industry during the past year. In 2015, NADOA established The Russell Schetroma Memorial Speaker’s Award, which is given to an individual who has contributed to NADOA’s growth and development by speaking, educating and sharing knowledge on numerous occasions to the NADOA Membership, the Division Order profession and/or the industry during the past year. Please read over the categories on the nomination form and if you know a NADOA member who you feel fits one of these qualifications, please use the form to nominate that person. Be sure to fill out the section detailing the person’s, or if nominating a company, the company’s contributions and services. All nominations are due no later than May 31, 2017. Once the nominations are received, the Membership Recognition committee will review the nominations and determine the final candidates for submission to the NADOA Board for a final vote.

Awards will be given to the recipients at the 2017 Annual Institute in Austin, Texas, in September.

If you have any questions please contact Christie Taylor at 405-935-4864 or by email at christie.taylor@chk.com .

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2017 Nomination Form for NADOA Membership Recognition Awards

I would like to nominate ___________________________________________ for the award(s) marked below:

_____ Interaction Award: Presented to the NADOA member or affiliated organization who has demonstrated leadership in the promotion of the profession to the industry and the community. _____ Education Award: Presented to the NADOA member who has achieved a level of unusual distinction in NADOA’s education activities, as demonstrated by their contribution of time and service to the betterment of Division Order professionals. _____ Lifetime Achievement Award: 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. _____ Russell Schetroma Memorial Speaker’s Award: Presented to an individual who has contributed to NADOA’s growth and development by speaking, educating and sharing knowledge on numerous occasions to the NADOA Membership, the Division Order profession and/or the industry during the past year. _____ Corporate Award: Presented to the group/company that has contributed the most to NADOA’s growth and development, the Division Order profession, and/or the industry during the past year. 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). ________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________

Nominator: ____________________________________________________ (Please Print)

____________________________________________________ (Signature) ____________________________________________________ (Daytime Phone)

Send nominations to: Member Recognition Awards Committee, c/o Christie Taylor, Chesapeake Energy, P.O. Box 18496, Oklahoma City, Oklahoma 73154 or email to christie.taylor@chk.com . Nominations will be accepted through May 31, 2017

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NADOA

Certification Spring is a rainy and stormy season and it has been no different for those on the Certification Committee! We’re up to our hip waders in requests to restore credits that the system deleted! We sincerely apologize for the inconvenience the system problems have caused and we really appreciate everyone’s patience while we work to get accounts straightened out. The storm has passed now, so please check your accounts today. Remember, the Certification Committee has a download of credits from the old system that should cover your current certification period through 6/30/2016 if anything needs to be added back. If you encounter any further system problems, please email me at Brenda.Dickey@bp.com . Eli Murray is your contact for pre-approval of credits for local association events, in-house training, formal education, etc. Include in your request for pre-approval the following information: name of event, date and location of event, a detailed schedule (including break times and lunch), name of speaker and bio (if available) and a brief summary of the topic. If you have a white paper or slide presentation to provide, those are most

welcome. Once your event is approved, Eli will add it to the drop-down list in the system and communicate back to you. Email emurray@rsppermian.com with any questions. The Certification Committee has also been working hard to review the Voluntary Certification Program Policy and Procedures. We plan to make updates to reflect technology changes and current practices, as well as clarify anything that is unclear or ambiguous. Our goal is to have any proposed changes ready to present to the NADOA Board in the June meeting. Many of you have asked me about retirement status. The Policy and Procedures document addresses retirement status in Section IV D, but we are working out the fine points necessary to administer it. I plan to share more on this topic in our next news magazine.

Thank you for the opportunity to serve as your Certification Committee Chair.

Brenda Dickey, CDOA

2017 Certification Committee

Chair

Brenda Dickey, CDOA

Application and Publications

Stephanie Franklin, CDOA

Recertification Credits

Eli Murray, CDOA

Policies

Heidi Davis, CDOA

Recertification Applications

Darryn McGee, CDOA

Review Manuals/Forms

Lewis Box, CDOA

Testing

Sherry Werth, CDOA

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CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “…applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published:

NADOA Certification Committee P O Box 44009 Denver CO 80201

If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail.

CANDIDATES FOR CERTIFICATION Stacey Hanna Gregg – Houston, TX Carolyn Raye Hoover – Dayton, TX Kaitlin Joleen LaFlamme – Denver, CO

Kristy Michele Peters – Houston, TX Diane Dolan Walters – Spring, TX

CDOA ~ Section 3 Review * Presented by Marsha Breazeale, CDOA, CPLTA and Judy Moreland, CDOA, CPLTA 8 CDOA POINTS APPROVED Join us at Lost Pines Hyatt Resort and Spa in Bastrop, Texas for a day of review $125.00 includes Review, Box Lunch & Goodie Bag ~OR~ $85.00 Discount Price for staying at Lost Pines Hotel Rooms at Own Expense * This event is sponsored by the NADOA Education Committee and is separate from the NADOA Institute ** Must have a MINIMUM of 20 Registrants or class will be cancelled Date: Thursday, September 7, 2017 Time: 8:00 am – 5:3O PM Location: Lost Pines Hyatt, Bastrop, TX

Please see NADOA.ORG website for registration information Please contact administrator@nadoa.org for questions regarding this event Testing will be offered on Friday, September 8 or Saturday, September 9 at Lost Pines Hyatt, Bastrop, TX

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Legal

Watch

stimulation techniques as well as prohibit drilling of new oil and gas wells and phase out existing wells. This would eliminate all local production of oil and gas resources in Monterey County. The lawsuit contends that Measure Z is preempted by federal and state laws and the County does not have legal authority to prohibit or regulate the ‘downhole activity’ of oil and gas production. View the full filing here: NARO-CA v. Monterey County Copy of Complaint 3-13-17.pdf

In a March 15, 2017 press release, NARO California revealed that a group of Monterey County mineral rights and royalty owners and the National Association of Royalty Owners California Chapter had jointly filed a lawsuit regarding Measure Z against the County of Monterey. Passed by voters in November 2016, the initiative entitled “Protect our Water: Ban Fracking and Limit Risky Oil Operations Initiative” (Measure Z) became effective on December 23, 2016. Measure Z would ban hydraulic fracturing and other well

Legislative

Watch

Oklahoma

There are two bills currently under review that affect horizontal drilling. SB 669, the “Horizontal Well Development Act” and SB 284, the “Oklahoma Energy Jobs Act of 2017” Current state law allows horizontal drilling of longer than a mile only in shale formations. These bills would expand horizontal drilling to non-shale formations.

The Oklahoma Energy Producers Alliance is lobbying to include protections for vertical producers in the legislation. At issue also is the gross production tax rate. Since July 2015, Oklahoma’s gross production taxes are assessed at 2 percent for three years on new wells before the rates rise to 7 percent. Alliance members mostly operate older vertical wells that are taxed at the full 7 percent rate.

Legal

Update

Wyoming Supreme Court reverses Anti-Washout decision of District Court

In Questar Exploration and Production Company et al. v. Rocky Mountain Resources, LLC, 2017 WY 10, the Wyoming Supreme Court issued a decision on February 1, 2017 that reversed and remanded the decision of the District Court, which had

held that an overriding royalty burdening a State of Wyoming Lease applied to a subsequent lease granted by a public drawing.

Two State of Wyoming Oil and Gas Leases that

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were issued in 1951 were burdened by overriding royalty interests owned by a predecessor in interest to Rocky Mountain Resources, LLC (RMR). One of the provisions in the assignment creating the RMR override (a standard State Land Board assignment form) stated “grants and reservations herein contained extending to any renewal lease, substitute lease or new lease issued in lieu thereof with full effect.” The 1951 leases terminated in September of 1979. On November 15, 1979, as part of a public drawing, a State of Wyoming lease was granted to Dr. Robert Ribbe. The Ribbe Lease had higher annual rental payments than the 1951 leases and also did not include a mandatory drilling obligation as was found in the prior leases. The District Court held that the renewal lease language on the

RMR override assignment was an “anti-washout clause”, which resulted in application of the RMR override to the subsequent 1979 lease. A judgment against QEP Energy Company and Wexpro Company in excess of $30,000,000.00 was issued by the District Court. Reversing the District Court’s decision, the Wyoming Supreme Court held that the overriding royalty did not attach to the Ribbe Lease because the Ribbe Lease was issued with different terms than those contained in the 1951 leases and was issued to a party who was not involved with the prior leases. Therefore, the Ribbe Lease was not a renewal lease, substitute lease or new lease issued in lieu of the 1951 leases and was not burdened by the RMR override.

Legal

Updates These materials reflect only the personal views of the author and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the author and their law firm cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the author or their law firm. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed. Can Consent of an Assignment be Withheld Arbitrarily?

In Carrizo Oil & Gas, Inc. v. Barrow-Shaver Res. Co., No. 12-15-00083-CV, 2017 App. LEXIS 821 (Tex. Civ. App. –Tyler January 31, 2017) the Court of Appeals concluded that if a consent-to-assignment provision fails to include a reasonableness clause, the consenting party has an unqualified right to withhold consent. Texas law does not require reasonableness or good cause to withhold consent.

The dispute in Carrizo Oil & Gas, Inc. arose from the interpretation of a consent-to- assignment provision in a farmout agreement between Carrizo Oil & Gas, Inc. (“COG”) and Barrow-Shaver Resources Company (“BSR”). After initial discussions and negotiations over a farmout agreement on a lease owned by COG, BSR sent a draft of their agreement to COG, which did not contain a consent-to-assignment provision. COG countered with an agreement

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that contained the following consent-to- assignment provision:

COG would consent to the assignment, COG demanded BSR pay $5,000,000.00 for the lease. BSR declined to pay COG $5,000,000.00. Without COG’s consent to the assignment of the farmout, Raptor withdrew its offer to BSR. BSR then filed suit against COG for breach of contract, fraud and tortious interference with a contract. COG argued that the negotiations and previous drafts of the farmout agreement informed the trial court that the reasonableness clause for the type of consent it would give had been removed and therefore the farmout agreement was unambiguous on the issue of when consent could be withheld. However, the trial court ruled that, based on the parol evidence rule, the court would not admit to trial evidence of the parties’ negotiations or the previous four drafts of the farmout agreement. The trial court then sided with BSR and held that because the farmout agreement was silent as to the type of consent COG was required to give, the farmout agreement was ambiguous, and therefore, a jury would need to act as a fact finder on the issue of the meaning of the consent-to-assignment provision. The jury found COG liable. On appeal, COG contended that the trial court erred by excluding evidence of the parties’ negotiations showing the deletion of the phrase “which consent shall not be unreasonably withheld” and by failing to construe the consent- to-assignment provision as providing COG with an unqualified right to refuse consent to BSR. On the other hand, BSR argued that, because there was no stated qualifier regarding the consent-to-assignment provision, the agreement was silent as to the type of consent COG would give. In furtherance of that theory, BSR introduced evidence that it was an industry- accepted practice that consent could not be withheld absent a reasonable concern about the

“The rights provided to BSR under this Letter Agreement may not be assigned, subleased or otherwise transferred in whole or in part, without the express written consent of Carrizo which consent shall not be unreasonably withheld.”

BSR countered with a third draft that contained the exact same consent-to-assignment provision provided in COG’s counterproposal. COG then responded with a fourth and final draft in which the “shall not be unreasonably withheld” language in the consent-to-assignment provision was deleted. Although BSR vehemently objected to this change in the provision, COG insisted that the reasonableness language be deleted from the consent-to-assignment provision of the farmout agreement. The Vice-President of Land for BSR testified at trial that on three separate occasions before the agreement was signed, both in person and over the telephone, the Land Manager from COG assured him that COG would give BSR consent to assign the farmout. Finally, on March 30, 2012, BSR signed the farmout agreement with the following consent-to-assignment provision:

“The rights provided to BSR under this Letter Agreement may not be assigned, subleased or otherwise transferred in whole or in part, without the express written consent of Carrizo.”

In May 2012, Raptor Petroleum II, LLC (“Raptor”) approached BSR about an assignment of the farmout with COG. After negotiating the terms, including payment of $27,690,466.86, BSR contacted COG for its consent to the assignment of the farmout to Raptor. Before

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potential assignee’s capabilities. See Energen Res. MAQ, Inc. v. Dalbosco, 23 S.W.3d 551, 557 (Tex. App. – Houston [1st Dist.] 2000, pet. denied). The Court held that the negotiations of a contract can matter in determining whether a contract is silent on a material term. See Houston Expl. Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 469-70 (Tex. 2011). Here, evidence of the negotiations and the previous drafts between the parties showed that the consent-to-assignment provision was not silent as to the type of consent. Therefore, the Court held that COG’s evidence of the negotiations and preliminary drafts of the agreement was not barred from admissibility by the parol evidence rule. Finally, the Court noted that while some jurisdictions impose an obligation of good faith and fair dealing in contract disputes, Texas does not. See English v. Fischer, 660 S.W.2d 521, 522 (Tex. 1983). Under Texas law, a lessor may withhold consent arbitrarily if the consent-to- assignment provision fails to set a standard by which to measure consent. Benjamin Robertson, Katy Pier Moore, & Corey F. Wehmeyer, Consent to Assignment Provisions in Texas Oil and Gas Leases: Drafting Solutions to Negotiation Impasse, 48 Tex. Tech L.R. 335, 339 (2016). Because the parties explicitly negotiated the removal of the “shall not be unreasonably withheld” language from the agreement, COG had an unqualified right to refuse BSR’s proposed assignment. Therefore, the trial court erred in finding COG liable. Carrizo Oil & Gas, Inc. highlights the importance of the “shall not be unreasonably withheld” language in all contracts. Without the inclusion of the language, a party may withhold consent arbitrarily.

About the Authors:

Eli Kiefaber is a partner with Kiefaber & Oliva LLP. Eli focuses his practice on oil and gas matters, including acquisition and divestiture of oil and gas assets, title opinions, joint operating agreements, federal leases, pooling and unitization issues. Eli is licensed to practice law in

Texas, Oklahoma, Colorado and Ohio, is a regular speaker on issues relating to the development of unconventional shale plays and has given a variety of presentations regarding legal issues relating to oil and gas development. Eli earned his B.A from Kenyon College and his J.D., with honors, from Marquette University Law School.

Zachary Oliva is a partner with Kiefaber & Oliva LLP. Zack focuses his practice on energy and corporate law. He regularly assists clients in the drafting of oil and gas title opinions, purchase and sale agreements and contract interpretation. Additionally, he assists

clients with the negotiation, drafting and review of business formations, contracts and service agreements. Zack earned his B.A. from The Ohio State University and his J.D. from Capital University Law School. He is licensed to practice in New Mexico, Ohio and Texas.

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What Does Your Reservation Clause Mean? By: Martin Gibson and Kerstie Moran

Webb et al. v. Martinez (Tex. App. San Antonio) - On December 14, 2016, San Antonio’s Fourth Court of Appeals affirmed the trial court’s take-nothing summary judgment regarding a property dispute in favor of Martinez. Webb had owned the entire surface and 75% of the mineral estate. The remaining 25% of the mineral estate was owned by a third party. Webb agreed to sell the entire property to Martinez through a contract of sale. The 1998 deed included the following reservation: SAVE AND EXCEPT and there is hereby reserved unto [Webb], [her] heirs and assigns, 75% of all of the oil, gas, and other minerals presently owned by [Webb], in and under and that may be produced from the herein described property. The deed was also “subject to . . . reservations of record.” The parties dispute what percentage of the mineral estate was reserved by the reservation. The dispute arose in 2010 when Chesapeake leased from Webb and contacted Martinez about leasing. Webb argues the 1998 deed reserves 100% of their 75% interest whereas, Martinez argues the deed reserves only 75% of the 75% interest Webb owned in 1998. Webb contends the reservation clause contained a scrivener’s error and mutual mistake regarding the wording of the reservation. Webb argues the deed “should have said 75 percent of all oil and gas and other minerals on the tract or 100 percent of all oil and gas or other minerals presently owned.” In response, Martinez alleges Webb’s claims were time-barred, prompting Webb to amend her petition by instead contending that the reservation unambiguously reserved 100% of her 75% interest. In support of this argument, Webb claims the phrases “subject to . . . reservations of record” and “in and under and that may be produced from the herein described property” clarify the reservation to be 100% of Webb’s 75% interest. The Court of Appeals rejected this argument by explaining that the phrase “‘in and under and that may be produced from the herein described property,’ describes the location of the mineral estate by reference to the description of the surface estate.” According to Webb,

the reservations of record to which the conveyance was subject, included Webb’s 75% interest and a third-party’s 25% interest. The Court states that such reservations establish the “‘oil, gas, and other minerals presently owned’ by [Webb] when the deed was executed was a 75% interest” and that “the plain language of the 1998 deed unambiguously reserves 75% of that interest.” As such, the Court found that the reservation clause unambiguously reserves 75% of Webb’s 75% interest, thereby granting Martinez a 25% interest in Webb’s mineral estate interest. In addition, the Court agrees with Martinez’s assertion that Webb’s quiet-title and deed-reformation claims are barred by the applicable limitations statute. The Court explains that both “[q]uiet-title and deed-reformation claims are subject to a four-year statute of limitations . . . [whereby] [the] cause of action for a quiet-title claim accrues upon the execution of a facially valid instrument ‘purport[ing] to convey any interest in or make any charge upon the land of a true owner’ and a cause of action for a deed-reformation claim based on mutual mistake accrues when the mistake first becomes apparent to the parties.” The Court acknowledged “the discovery rule does not apply to a cause of action supporting such claims because the parties executing a deed have notice of the mistake.” Since Webb’s claims are based on her execution of a facially valid deed, Webb’s cause of action accrued on October 8, 1998, the date on which the deed was executed. It is clear that because Webb did not file an original petition until August 5, 2013, the four-year limitations period had expired. Therefore, in regards to the quiet title and reformation claims, the Court rendered judgment as a matter of law in favor of Martinez. This decision further emphasizes the importance of properly phrasing a reservation clause, as to avoid inadvertently granting an interest in a mineral estate. The Webb Court demonstrates the way in which courts consistently interpret grantor’s intent based on the plain language of the deed.

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.

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About the Authors:

Certified in Oil, Gas and Mineral Law by the Texas Board of Legal Specialization and has deep experience in equity and debt financing of oil and gas related entities.

Martin Gibson | 512-305-4743 | mgibson@lockelord.com

Kerstie Moran | 713-226-1615 | kerstie.moran@lockelord.com

Martin Gibson is Of Counsel in Locke Lord’s Austin office where his practice concentrates on energy law, with a particular focus on the exploration and

Kerstie Moran is an Associate in Locke Lord’s Houston office where she focuses her practice on energy law.

production activities of independent oil and gas companies and individuals, both domestically and internationally. He is Board

Verdict Set Aside in High Profile Pennsylvania Energy Case

On March 31, 2017, the United States District Court for the Middle District of Pennsylvania issued its much anticipated opinion in Ely v. Cabot Oil & Gas Corp., No. 3:09-CV-2284 (M.D. Pa. Mar. 31, 2017), a case that garnered national attention last March. The court set aside the $4.24 million jury verdict against Cabot Oil & Gas Corporation (“Cabot”), which “bore no relationship to the facts of the case, the plaintiffs’ own testimony, or the Court’s instructions on the law.” In doing so, the court agreed with Cabot that “the weaknesses in the plaintiffs’ case and proof, coupled with serious and troubling irregularities in the testimony and presentation of the plaintiffs’ case - including repeated and regrettable missteps by counsel in the jury’s presence - combined so thoroughly to undermine faith in the jury’s verdict that it must be vacated and a new trial ordered.” The plaintiffs’ initial claims for breach of contract, fraudulent inducement, private nuisance, negligence, negligence per se, medical monitoring, and alleged violations of a variety of Pennsylvania environmental laws, were gradually winnowed during the course of the six-year litigation. At the conclusion of the plaintiffs’ case-in-chief, the court granted Cabot’s motion for entry of judgment in its favor on the plaintiffs’ negligence claim because the plaintiffs failed to provide sufficient evidence, particularly in regard to expert testimony. At the conclusion of the nearly three-week jury trial, the only remaining claim before the jury was the plaintiffs’ allegation that

Cabot’s drilling activity was negligent and interfered with and damaged the plaintiffs’ access to water and their enjoyment of their property. However, rather than providing evidence to support their nuisance claim, the plaintiffs continued to provide evidence unrelated to the sole remaining claim, which “had the effect of repeatedly inviting the jury to engage in unwarranted speculation that was plainly prejudicial to the defense.” The plaintiffs’ testimony that their water problems began or worsened after Cabot began drilling was overwhelmed by other testimony and evidence. In addition, the court characterized the testimony offered by the plaintiffs’ expert witnesses as being speculative and based upon weak factual support. In contrast, Cabot’s experts offered uncontradicted scientific evidence that undermined the plaintiffs’ case. The failure of plaintiffs’ experts to establish cause and effect left the jury to sympathy and speculation. The court noted that “it is impossible to justify such an extraordinarily high amount based on the limited evidence that was offered in support of any damages awarded at all; it was by any measure excessive.” As noted by the court, plaintiffs’ counsel failed to “reconcile the case as they imagined it to be with the actual case as borne out by the law and the facts.” Counsel for the plaintiffs also engaged in improper conduct throughout the trial despite the court’s repeated warnings that she was in danger of undermining any award that her

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clients might receive. The court’s warnings to plaintiffs’ counsel “were not heeded, and the seeds sown by this trial conduct now bear a bitter fruit for the plaintiffs.” The parties were ordered to engage in a settlement conference and provide a joint status report on or before June 5, 2017.

Pennsylvania Adopts New Hydraulic

Fracturing Rules Effective October 8, 2016, the new regulations were developed to comply with the state’s 2012 Oil and Gas Act according to The Pennsylvania Department of Environmental Protection (DEP). Under the new rules, DEP is allowed to require additional protective measures for drilling that will take place near school property and playgrounds, parks, forests and other public resources. Well operators must demonstrate that well site locations within 100 feet from a watercourse or body of water or wetland larger than one acre will be protected. Restoration or replacement to Safe Drinking Water Act standards is required if a water supply is degraded or damaged through fracking. Prior to hydraulic fracturing, operators will be required to identify abandoned, orphan, active and inactive wells within 1,000 feet of a vertical and horizontal wellbore. The Marcellus Shale Coalition has filed a lawsuit asking Commonwealth Court to halt implementation of several provisions of the new rules. The DEP is also facing a legal challenge brought by the Pennsylvania Independent Oil and Gas Association in regard to the public resource protections in the rules.

About the Authors:

W. Henry Lawrence Member, Steptoe & Johnson PLLC Hank Lawrence focuses his practice on energy and environmental litigation. He represents clients before federal, state, and appellate courts and administrative agencies

in civil, criminal, and penalty proceedings. In addition, he provides client counseling and advice in permitting, compliance, and transactional matters involving energy and environmental statutes and regulations. Mr. Lawrence is Head of the firm’s Litigation Department.

Amber M. Moore Associate, Steptoe & Johnson PLLC Amber Moore practices in the areas of energy and general litigation. Ms. Moore has experience in defending

clients in land use, professional liability, medical malpractice, and construction litigation matters. She has also assisted clients with obtaining mineral leasing rights.

Lauren K. Turner Associate, Steptoe & Johnson PLLC Lauren Turner focuses her practice in the area of energy litigation and represents the interests of energy companies, particularly from the oil and natural gas industry, in state and

federal court. In addition to trial experience in energy- related litigation and condemnation, she assists oil and natural gas producers with legal issues that arise in all phases of exploration and production.

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NADOA

Institute NADOA 44th Annual Institute September 6-8, 2017 Back to our Roots . . . Deep in the Heart of Texas

Pack your bags and follow the trail that leads you back home. Home is where your heart is, where you learned to forge your way in life, your beginning, your comfort, where you first sought your identity. When life throws you a curve ball, it helps to remember who you are, where you came from and how it made you strong. Let’s find our roots in a place steeped with tradition and acceptance. Come gather as friends and family and remember why we love what we do and why what we do is so important. Deep in the heart of Texas, just 18 miles from Austin in Bastrop, join your fellow Division Order Analysts in a

wonderful few days of education, games, camaraderie and celebration of all of our accomplishments over the years. The final information for our educational program and special events will be coming soon in the Special Institute Edition Magazine. You can get the most up to date infor- mation now through Instagram, LinkedIn, Facebook, as well as NADOA.org. We can’t wait to catch up with you in September.

Cheryl Hampton & Julie Willis, Institute Co-Chairs

Registration is now available for: NADOA’s 44th Institute at the beautiful Lost Pines Resort in Bastrop, Texas! “Back to our Roots...Deep in the Heart of Texas” ” September 6 - 8, 2017 Member - $595.00 Early Bird Special through June 30 (after June 30 - $625.00 ) Non-Member - $725.00 (Remember NADOA Membership is only $75 so consider joining and SAVE ) Register here: Institute Registration OR on our website: http://www.nadoa.org Room rate for Institute attendees: $195/night plus taxes Hotel Reservations may be made by going to: Hotel Reservations or by clicking the link found on NADOA’s website at http://www.nadoa.org All hotel accommodations will be the responsibility of the registrant. Hotel Reservation Deadline: August 11, 2017

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Choose THE PATHWAY TO SUCCESS WITH TERRA FIRMA

GREETERS NEEDED!

If you are planning on attending NADOA’S 44TH Annual Institute at the lovely Lost Pines Resort in Bastrop, Texas September 6 – 8, we are looking for volunteers to be greeters during registration on Wednesday, September 6. Being a greeter is a great way to help your organization and meet other NADOA members. It is always a lot of fun!! Please contact Betty Davidson bdavidson@cima-energy.com or 713-739-6622 or contact Brenda Pirozzolo at brenda.pirozzolo@cgi.com or 972-354-8114.

At Terra Firma Ventures we pride ourselves in providing responsive, service-focused land expertise. Our more than 30+ years of experience providing due diligence for major A & D and data integrity projects allows us to expertly tailor services to specific client needs. To learn more about how we can help you pave the way to success, contact us for a confidential consultation.

• Project Management • Due Diligence • Process Design • Land Administration – Functional Assessments & Services • A & D Transaction Specialists • Data Integrity & Conversion • Transaction/Transition Database

INSTITUTE REGISTRATION By: Debbie McKee, Co-Chair

If you would like to help work Registration this year at Lost Pines in Bastrop, TX on Wednesday, September 6, 2017, we will be open from 1 to 6 and we are looking for volunteers. Please contact me by telephone or email to get on the list. My telephone number is 405-570- 9702 and my email is dmckee52@gmail.com . Helping with registration is a really good opportunity to meet new people and get involved with NADOA at the same time. Please be sure to pay close attention to your Registration forms when you are signing up to go to Institute. If you are bringing a guest, we will need their name for a lanyard and there is a blank space provided on the registration form for this information. As always, anyone arriving without their lanyard for an Institute event will not be permitted to enter.

U.S. Onshore, Canada & U.S. Gulf of Mexico

Nancy J. Kerby & Christine Kenworthy Principals 700 Milam Street, Suite 1300, Houston, TX 77002 1 (713) 880-9189 terrafirmaventures.com

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NADOA 2017 ANNUAL EDUCATIONAL INSTITUTE Lost Pines - Austin, Texas September 6 - 8, 2017

SPONSOR DONATION FORM

Thank you for your sponsorship. Your donations help with the cost of our speakers, hospitality functions, conference publications, including a compilation of our speakers’ presentations, as well as to cover general fund- administrative costs. All contributions will be recognized. This financial support helps reduce the costs to all attendees and allows NADOA to present a professional, quality educational event . If you would like to apply your sponsorship to a specific category, you may indicate that preference below.