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Published on: October 15, 2021

The Texas Central Railroad Saga Continues

The Texas Supreme Court has recently agreed to hear an appeal in a case involving the Texas Central Railroad. Oral argument is scheduled for January 11, 2022.

The case is Miles v. Tex. Central R.R. & Infrastructure, Inc., 2020 WL 2213962 (Tex. App.—Corpus Christi–Edinburg 2020), pet. granted, (Oct. 15, 2021) [20-0393]. As you may recall, Texas Central wants to build high speed passenger rail service between Dallas and Houston. To do that, while some land may be purchased voluntarily, it will probably need to use eminent domain to obtain most of the land needed for the railroad.

The Plaintiff, Miles, claims that Texas Central has not shown a reasonable probability of project completion, as required by Texas Rice Land Partners, LTD. v. Denbury Green Pipeline-Texas, LLC, 363 S.W.3d 192, 198, 202 (Tex. 2012). Miles asserts that the Denbury decision requires entities show a reasonable probability that a project will be completed before obtaining eminent domain power.Miles contends that Texas Central has not met this standard, and so it does not have eminent domain authority. For example, Miles points out that Texas Central has not yet laid any track or done anything else that could be called operating a railroad. In fact, the Texas Central website admits they have not even bought any land yet, but instead “have control over” about 600 acres of land” (probably through options to purchase).

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Published on: July 9, 2021

Successful Settlement and Payment of Royalties for Texas Mineral Owners

By Aimee Hess

The U.S. District Court for the Southern District of Texas recently approved a settlement in the case of Regmund v. Talisman Energy U.S., Inc. You can review pleadings in the case here. Three royalty owners filed the class action lawsuit in 2016 alleging that Talisman Energy was under-reporting royalties and was improperly calculating royalties from 2013 to 2016. Talisman was acquired by Repsol S.A. in 2015. The suit claimed that the oil company paid royalties based on estimated sales of oil and gas rather than the actual volume of oil and gas produced and sold.

Talisman and later Repsol had become active in the last few years in the Eagle Ford Shale play area.

In the settlement documents, Repsol denies any wrongdoing. However, it certainly says a lot that they have agreed to repay all $24 million in royalties that the Plaintiffs claim are due.in addition, if Talisman or Repsol were under-reporting royalties to the Texas Railroad Commission, they certainly are going to be in hot water with that agency.

Published on: February 19, 2021

Solar Panels May Increase Global Warming

By Aimee Hess

From what I read, it appears that there are many people, including politicians in our federal government, who believe that electricity produced by solar panels should be a substitute for oil and gas production. However, there are a number of aspects of energy produced from solar panels that don’t appear to be considered:

studies have indicated that solar panels may actually increase global warming. The reason is that solar panels only convert around 15% of the sunlight that hits them into electricity. The rest is given off into the environment as heat. For small installations of solar panels, that may not be a big deal. But large-scale installations, the kind that would be needed to produce large amounts of electricity, would emit a large quantity of heat, thus potentially raising global temperature. You can read about one study published in 2018 in the journal Science here. Another study that reaches the same conclusion was published in 2016 in the journal Nature and can be reviewed here.
many of the parts used to build solar panels and the batteries in which the electricity produced by solar panels is stored come from China exclusively. To the extent energy production in the future relies on solar energy, we are going to be at the mercy of China unless we can come up with domestically produced alternatives.

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Published on: July 31, 2020

Do Covid Virus Executive Orders Trump the Constitution?

By Aimee Hess

The Texas Supreme Court recently heard a petition for mandamus requesting relief from some of Governor Abbott‘s executive orders that suspended the right of “nonessential” business owners to make a living. The petition was denied for lack of jurisdiction. However, the concurring opinion by Justice John Phillip Devine (that you can read here) sets out a remarkable and eloquent defense of constitutional principals in the context of crises. In his opinion, Justice Devine writes that, while he concurs with the dismissal for lack of jurisdiction, he felt compelled to address the constitutional issues presented by executive orders. To quote Justice Devine:

“…Texans have experienced a suspension of their rights. Suspension of law is serious business. It involves a decision that, at the very least, itself needs a constitutional blessing. In fact, the Texas Constitution speaks to this very issue. In the first article, it states: “No power of suspending laws in this State shall be exercised except by the Legislature.” This provision means what it says. The judiciary may not suspend laws. Nor may the executive. Only the Legislature. … As Relators point out, in Brown Cracker & Candy Co. v. City of Dallas, this Court long ago held that article I, section 28 (of the Texas Constitution) does not permit the Legislature to “delegate to a municipal corporation or to anyone else, authority to suspend a statute law of the State.

Despite this clear constitutional exhortation, we review orders from the Governor that purport to be made under the Texas Disaster Act of 1975, which says that the “governor may suspend provisions of any regulatory statute prescribing the procedures for conduct of state business . . . .” I find it difficult to square this statute, and the orders made under it, with the Texas Constitution.

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Published on: March 27, 2020

Think Twice Before You Buy Gas from Shell?

By Aimee Hess

I’d like to pass on an open letter to President Trump from Kirk Edwards, an Odessa based independent oil & gas producer. This was published March 24, 2020 in OA Online.

It certainly contains some food for thought. I do not, and have never, represented an oil company. However, it is important to look at these issues in an unbiased way, free of an ideological lens. Therefore, please remember: oil company profits pay salaries for hundreds of thousands of workers, not just the top officers, as well as royalties to millions of royalty owners and dividends to millions of shareholders, the majority of whom are just individuals.

“The recent actions by Saudi Arabia to flood the world oil markets at extremely low prices is bringing the American oil and gas industry to a screeching halt. Ironically, some 1,000,000, that’s right, one million barrels per day of oil is being imported into the United States right now from Saudi Arabia. The largest refinery in Texas, and 5th largest in the world, located in Port Arthur, Texas is now owned by Saudi Arabia. Shell sold control of the refinery to the Saudi’s in 2017. Today, 650,000 plus barrels of the 1,000,000 barrels per day imported from Saudi Arabia goes into their 100% Saudi owned Motiva refinery in Port Arthur Texas. https://en.wikipedia.org/wiki/Motiva_Enterprises None of the gasoline produced from this refinery is made from American oil – it is 100% Saudi derived. Saudi Arabia sells this gasoline mainly through its Shell and some through its “76” branded Motiva supplied service stations in South Texas and all across the Gulf and East coasts.

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Published on: February 7, 2020

Can Emails Create a Binding Contract?

By Aimee Hess

The Texas Supreme Court decided an interesting case last week regarding easements. The case was Copano Energy LLC et al. v. Stanley D. Bujnoch, Life Estate, et al. One of the interesting aspects of this case was the part that emails played in the transaction.

The plaintiffs, who were the landowners, owned land in Lavaca and DeWitt counties. The landowners had previously agreed to a 30 foot wide easement to Copano for a 24 inch oil and gas pipeline. That pipeline was installed. In 2012, Copano asked the landowners for second easement to construct a 24 inch pipeline on the landowners’ property. The landman for Copano and an attorney representing the landowners exchanged a number of emails in the course of negotiating the terms of the proposed easement. In one email, the landman agreed to pay the landowners a specific price and agreed to remedy damage to the landowners’ property caused during the construction of the original pipeline. The attorney replied “In reliance on this representation we accept your offer and will tell our client you are authorized to proceed with the survey on their property.” Later emails from Copano transmitted amendments to the original easement and an amended plat. Some of these later emails offered a lower price per foot for the easement. A still later email from the secretary of the landowners’ attorney transmitted revisions to the original easement agreement pertaining to some, but not all, of the landowners’ property to the landman. A still later email from the landman stated that: “I am fine with these changes”. Finally, the project manager for Copano then sent a “compensation proposal letter” to the landowners’ attorney with completely different compensation terms. There was no written acceptance of these terms.

The second pipeline was never built. The plaintiffs claimed that the series of emails, taken as a whole, created an enforceable written contract that satisfied the Texas Statute of Frauds and sued Copano for breach of contract.

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Published on: December 13, 2019

United States Is Net Exporter of Oil

By Aimee Hess

The United States Energy Information Administration (EIA) recently issued a report that in September 2019 the United States exported more crude oil and petroleum products than it imported. This is the first month in the history of recorded data (since 1949) that exports have exceeded imports. Specifically, 8.76 million barrels were exported from the U. S. during that month, surpassing the 8.6 million barrels that were imported. The report also indicated that the EIA expects the U. S. to be a net exporter of crude oil and petroleum products through 2020 as well.

Much of this increase is due to the energetic production in the Texas Permian basin and Eagle Ford Shale. Abundant production has significant national security implications. When we are producing enough of our own oil and gas, we are less dependent on the vagaries of foreign governments, such as OPEC. Some of us are old enough to remember when the OPEC manipulations caused gas shortages in the United States and long lines at service stations.

Published on: December 5, 2019

Texas Landowners Challenge SWEPCO Easement

By Aimee Hess

On December 5, 2019 the Texas Supreme Court is hearing the case of Southwestern Electric Power Co. v. Kenneth Lynch et al., 581 S.W.3d 292, (Tex.Civ.App.- Texarkana, 2018 error granted), which involves the challenge by several Texas landowners in Bowie County to Southwestern Electric Power’s (“SWEPCO”) claim that it can unilaterally enlarge the width of an easement on their property.

These easements were for electric lines and were signed with the original landowners in 1949. The pertinent part of each easement reads as follows:

[A]n easement or right-of-way [is granted to Southwestern Gas & Electric Company] for an electric transmission and distributing line, consisting of variable numbers of wires, and all necessary or desirable appurtenances (including towers or poles made of wood, metal or other materials, telephone and telegraph wires, props and guys), at or near the location and along the general course now located and staked out by the said Company over, across and upon the following described lands . . . .

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Published on: November 30, 2018

USGS Publishes New Assessment of Permian Basin Reserves

By Aimee Hess

Recently, the U.S. Geological Survey published a new assessment of oil and gas reserves in the Permian Basin in Texas and New Mexico. The assessment, that you can read here, reports undiscovered, technically recoverable, continuous mean resources of 46.3 billion barrels of oil and 281 trillion cubic feet of gas in the Wolfcamp shale and Bone Spring Formation of the Delaware Basin in the Permian Basin Province, southeast New Mexico and west Texas. This means these reserves are the largest in the world.

At the end of 2017, total reserves in the United States were estimated to be 40 billion barrels of crude oil and 465 trillion cubic feet of natural gas. This new assessment therefore reflects a doubling of U.S. crude reserves and a 65% increase in gas reserves.

As these reserves are produced, the economy will benefit in several ways. Mineral owners will be paid royalties. New employees will be hired by oil companies. Tax revenues to local, state and the federal government will increase.

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Published on: October 19, 2018

Texas Court Addresses Violation of Implied Duty to Market by Devon

By Aimee Hess

A recent opinion by the Fifth Circuit Court of Appeals addressed a claim by royalty owners that Devon Energy Production Company LP violated its implied duty to market arising from their oil and gas leases with Devon in the Barnett Shale area. That case is Seeligson et al v. Devon Energy Production Company LP (Case 17-10320 October 16, 2018 Unpublished).

The royalty owners/lessors were attempting to obtain class-action certification. As part of their evidence, they showed that Devon sold the gas produced from their wells to a Devon affiliate for a price of 82.5% of the published industry index value of the residue gas and natural gas liquids. The evidence also showed that payment was never made by Devon to its affiliate. In addition, the affiliate “charged” Devon 17.5% of the value of the gas as a processing fee which was claimed to be substantially higher than the current market rate for processing gas. Again, no money actually changed hands between Devon and its affiliate. The royalty owners claimed that this was a sham transaction that resulted in their receiving lower royalty payments than they would have had Devon paid the market price for the gas produced from their wells.

The District Court certified the Plaintiffs’ claims as a class action and Devon appealed. The Fifth Circuit held that the class certification was not an abuse of discretion by the District Court, but that the District Court had failed to consider the effect of potential statute of limitation defenses by Devon on the class certification. As a result, the case was sent back to the District Court to examine the effect of these to defenses on class certification.

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