occurs in the gathering pipelines comprising the gas gathering system on the wellsite premises, which burdens the royalty interest with all postproduction costs from that point until the gas is sold to the ultimate purchaser. The grantor’s successor contends that delivery is downstream of the wellsite at the transportation pipeline, if not farther, because (1) a gas gathering pipeline is not a pipeline as that term is used in the deed and (2) use of the term “otherwise” to introduce the alternative delivery point“at the mouth of the well or mine” essentially negates a construction of“the pipe line, if any” as including any pipeline at or near the wellhead. If the deed requires delivery in the transportation pipeline, the mineral interest is free of some but not all postproduction costs. The trial court granted summary judgment that delivery occurs in the transportation pipeline, but the court of appeals reversed and rendered judgment that delivery occurs in the gathering pipeline.
We affirm the court of appeals’ judgment. A gas gathering pipeline is a“pipeline” in common, industry, and regulatory parlance, and the deed does not limit the delivery location to any specific pipeline nor prohibit delivery to a pipeline at or near the well, if any. The court of appeals reached the correct result but misconstrued our opinion in Burlington Resources Oil & Gas Co. v. Texas Crude Energy, LLC1 as 1 573 S.W.3d 198 (Tex. 2019). 3 establishing a rule that delivery“into the pipeline,” or similar phrasing, is always equivalent to an“at the well” delivery or valuation point. Rather, the opinion merely emphasized that all contracts, including mineral conveyances, are construed as a whole to ascertain the parties’ intent from the language they used to express their agreement.
See complete Supreme Court of Texas No. 20-0639 opinion here: opinion
Fitzgerald v. Apache Corporation and Carl v. Hilcorp
Texas
“Lessee shall have free use of oil, gas, wood, and water from said land, except water from Lessors’ wells, for all operation hereunder; and the royalty on oil or gas shall be computed after deducting any so used.” The plaintiffs in Carl argued that the gas royalty clause in their agreement with Hilcorp (which was almost identical to the clause Fitzgerald relied upon) they were owed royalties for off-lease usage: “The royalties to be paid by Lessee are: . . . (b) on gas, including casinghead gas or other gaseous substance, produced from said land and sold or used off the premises or in the manufacture of gasoline or other product therefrom, the market value at the well of one-eighth of the gas so sold or used.” As in Fitzgerald, the Carl plaintiffs claimed the “free use” clause in their contract supported their position:
There were similar sets of facts in these cases. The leases contained both a“market value at the well” and a“free use” clause. In both cases, plaintiffs argued that the royalty clauses in their leases required royalties to be paid on gas used off the premises and the free use clauses only allowed gas to be used on the lease premises and required royalties to be paid for gas used off the premises. Fitzgerald claimed the“market value at the well” clause in her lease contract required Apache to pay for off-lease usage: “The royalties to be paid Lessors are: …(b) on gas, including casinghead gas or other gaseous substance, produced from said land and sold or used off the premises or in the manufacture of gasoline or other product therefrom, the market value at the well of one-eighth (1/8) of the gas sold or used.” Fitzgerald also claimed the“free use” clause in the contract supported her position:
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N at i onal A ssociation of D i v i s i on O rder A nalys t s
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