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I get calls every week from folks who have received a letter in the mail offering to purchase their Texas mineral interests. I tell all my clients (and anyone else who will listen) never to sell their mineral interests. There are a number of reasons why:

  1. About 99.9% of the companies who claim to buy mineral interests are scams. What often happens is that they send you a solicitation letter which makes an incredibly high monetary offer for your mineral interests. They ask you to sign a deed, which is either enclosed with the letter or that they send you if you contact them, and request that you send the signed and notarized deed back to them. They then file the deed in the deed records. Then, they contact you and say there were certain ambiguous “problems” with your title to your minerals, or the market for mineral interests has changed, or some other nonsense. They then tell you they will pay you, not what they offered in the letter, but a tiny fraction of what they offered. If you don’t take it, you are stuck with the deed filed in the deed records that shows you sold your mineral interest to them. In many cases, I’ve had clients have to sue the company to force them to cancel the deed. Even if the company cannot be found or has gone out of business, you will still probably have to file a lawsuit to get a court order cancelling the filed deed. Given the expense of litigation, this can be a huge burden.
  2. One way to tell if a company is a legitimate concern or not is to tell them that you might be interested in selling your minerals but your requirements are: 1) they need to send you a written      contract of sale with a specific price and an earnest money deposit; 2) the deed will be prepared by your attorney; 3) the transaction will be closed in a title company or through your attorney; and 4) they will be required to deposit the balance of the purchase price in good funds with the title company before they receive the deed. Most of these companies will tell you that is an unnecessary expense, or “they don’t do it that way”. This is a huge red flag. However, in my experience, even some of the scam artists will agree to this, but once you have paid your attorney to draft the deed and it’s time for them to put the purchase price in escrow, they will disappear or pull out.
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Nuisance claims are a bit of a muddled area of Texas law. As Justice Boyd stated in the opinion: “This is a nuisance case, but that does not tell you much. As a legal concept, the word nuisance ‘has meant all things to all people.’ ” Because of the confusion, in a recent case the Texas Supreme Court articulated the standard for a landowner who wants to assert a noise-nuisance claim in Texas. The case is Crosstex North Texas Pipeline L.P. v. Andrew and Shannon Gardiner. In its opinion, the Texas Supreme Court noted that a nuisance is a particular legal injury that occurs where a landowner’s use or enjoyment of their land is interfered with by another party. The party could be a neighbor or an easement holder using the land. Nuisances often take the form of noise, vibrations, overpowering smells and other conditions that impede or inhibit a person from enjoying their property.

In this case, Crosstex North Texas Pipeline obtained an easement from the Gardiners and then built and operated a gas compressor station on the easement on a neighboring property. The compressor station included four diesel engines that were each “bigger than mobile homes.” Witnesses described the sound as similar to a jet engine. At least one of the engines runs continuously all day and night. Crosstex implemented a variety of other sound reduction and mitigation measures to stop the travel of sound, such as building walls around the compressor and planting vegetation around the compressor. However, the Gardiners claimed that the sound level was still unacceptable and that it interfered with the use and enjoyment of their property. The Gardiners sued on a noise nuisance claim. The jury awarded them $2,000,000 for dimunition in value of their ranch because of the compressor station.

The Court confirmed that Texas precedent characterizes a nuisance, not as an invasion of an interest but as a condition that substantially interferes with the use and enjoyment of land by causing

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When it comes to U.S. energy policy, federal government regulations unquestionably limit competition and innovation, and the people who suffer for it are the consumers and taxpayers. While the availability of new and abundant energy sources, such as natural gas, has caused a shift in the energy industry from coal to more economical fuel sources, federal regulations have also helped cause the cutbacks in the coal industry.

Federal regulations place a serious burden on the coal industry. For instance, the Mercury Air & Toxics Standards regulation caused some thirty percent of the U.S. coal production retirement in 2015 according to The Heritage Foundation. Compliance with the regulations would have cost approximately ten billion dollars a year, so the most economical alternative was to simply retire coal production rather than to comply with the federal regulations. Other federal regulations are aimed at the oil and gas industry.

So, it is important to ask: are the federal regulations really doing anything to help the environment? Some would say no. Other regulations exist that would achieve the same amount of environmental value, so what is the point of adding more regulation if it is only going to stamp out players in the energy sector and generates only a negligible environmental effect? Perhaps it’s just politics – and that might just be bad for average Americans.

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On November 7, 2017, Texas voters approved SJR 60. You can review the text of the new law here. This law includes several amendments to Article XIV, Section 50 of the Texas Constitution that concern home equity loans. Highlights of the amendments include but are not limited to:cabin-2-1503914

  1. changing the percentage limitation on fees charged to the borrower from 3% to 2%;
  2. removing the prohibition against encumbering homestead property which is being taxed at agricultural valuation;
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Texas mineral owners contact me from time to time and ask why an oil company is drilling on their land when they haven’t signed an oil and gas lease. The answer to these questions lies in the Texas law regarding co-tenants. An interesting opinion was recently issued in the case of Radcliffe v. Tidal Petroleum, Inc. that addresses Texas co-tenancy law and how it relates to oil and gas leases.

Law of Co-Tenants

With respect to oil, gas, and minerals, the law of co-tenancy in Texas strongly favors exploitation and extraction of the natural resources. As a result, it has long been the law that a co-tenant has the right to extract minerals from property owned jointly by one or more co-tenants without first obtaining the consent of all co-tenants. The rule goes back to a case decided in 1912 and affirmed by the Texas Supreme Court in 1917.  The oft-quoted rationale is this:

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The staff of the Texas Railroad Commission is proposing amendments to the pipeline safety rules for oil and gas and other pipelines in Texas. These amendments will affect rules 18.1, 18.4 and 18.11. The amendments remove a reference to “intrastate” pipelines to make clear that the Commission now has safety jurisdiction over interstate (between states) as well as intrastate (within the state of Texas) pipelines. Additional amendments to bring the rules into compliance with federal law are new requirements that required excavator who damages a pipeline to notify the pipeline operator at the “earliest practical moment” but not later than one hour after the damage, and a requirement that the excavator must report any release of product from a damage pipeline by calling 911. The full text of the amendments can be viewed here.

The amendments are expected to appear in the Texas Register on November 24, 2017 and there will be a two week public comment period.

The Commission has been especially attentive to pipeline safety in Texas, given the highly publicized pipeline breaks in Texas and other states over the past few years.

 

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The Texas Supreme Court recently addressed whether a lender is required to forfeit payment and interest payments made by a borrower when the lender has violated the terms of a home equity loan, and whether this a remedy is a matter of right available under the Texas Constitution or through a breach of contract action.

In the case of Garofolo v. Ocwen Loan Servicing LLC, Ms. Garofolo took out a home equity loan, and repaid the amount she borrowed plus interest in less than five years. Upon repayment, her loan holder, Ocwen Loan Servicing, recorded a release of the lien with Travis County, but failed to provide her with a copy of this release in recordable form, which was required of the lender under the home equity loan agreement.

After Ms. Garofolo notified her lender that they had not provided her with a copy of the lien release, and the lender failed to provide the document for sixty days, Ms. Garofolo sued the lender  seeking forfeiture of all the principal and interest she paid on her home equity loan, claiming this was a constitutional right afforded to her either under the Texas Constitution or because the lender had violated the loan agreement.

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Given the increase in production of natural gas in Texas, some residents end up living close to a gas compressor stations. These stations are necessary to pump natural gas under pressure over long distances, but they can be large, noisy and produce offensive odors. Some Texans who live close to these stations have sued the oil and gas producers claiming nuisance or trespass.

In Texas, the elements of a trespass cause of action are: (1) the claimant has a lawful right to possess the property, (2) the defendant physically enters the property, (3) the entry was intentional and voluntary, and (4) the defendant‟s trespass causes an injury to the claimant‟s right of possession.  The Texas Supreme Court has noted a trespass of aerial space above the complainant‟s property may be committed by causing something to physically enter or crossover the land, such as the discharge of pollutants, soot, or carbon.

A cause of action for nuisance requires evidence of  a regularly recurring condition that “substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to a person of ordinary sensibilities.”

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Collecting royalties from oil and gas production is one of the ways that a Texas landowner can generate revenue from their real estate.  Texas property owners who own their minerals can sign an oil and gas lease so that oil and gas can be produced from the land, in exchange for regular monetary payments, or royalties. However, oil and gas reservoirs are not often confined to just a single individual’s property, but instead  often stretch across multiple surface boundaries. When disputes arise over royalty payments, there is a sometimes an issue as to whether a lawsuit can be brought by just one individual landowner, or if neighboring owners who are also collecting royalties from the same oil and gas producer must necessarily be a part of the lawsuit as well. The Texas Supreme Court considered this very issue in the case of Crawford v. XTO Energy which was been appealed from the Amarillo Court of Appeals.

Why Must All Necessary Parties Be Joined in a Lawsuit?


The problem with not joining all necessary parties to a lawsuit is that a defendant could be exposed to conflicting judgements. For instance, if landowner A sues oil and gas producer X, and there is a specific outcome, and later adjacent landowner B sues oil and gas producer X, but there is a different second outcome, and the two outcomes may be inconsistent. Failure to join all necessary parties in a lawsuit can also be judicially wasteful since the court has to revisit the same issues in more than one case.

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As we discussed recently regarding the Texas Supreme Court case of Hysaw v. Dawkins, 483 SW 3d 1 (2016), old deeds, oil and gas leases, and other documents containing “1/8th royalty” clauses continue to be the source of confusion among the public, lawyers, and sometimes courts.

For decades, the standard oil royalty in Texas was one-eighth of the total royalty. The standard was so prevalent that the words “one-eighth” or “one-eighth royalty” came to be synonymous with — and a proxy for — “the total royalty interest.” In the Hysaw case, decided in 2016, the Texas Supreme Court held that the words “1/8 royalty” was used in this historical manner to mean the “total of the royalty.”

The San Antonio Court of Appeals reached a similar result in the case of Kardell v. Acker, 492 S.W.3d 837 (Tex. App.-San Antonio 2016).