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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