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Interesting to realize that United States has overtaken Saudi Arabia and Russia to become the world’s largest oil and gas producer and continues to lead in production. On April 7, 2016, the U.S. Energy Information Administration released a report showing the United States remained the world’s largest producer in 2014 despite the decline in oil prices that occurred during the second half of 2014. In that year, the United States produced almost double the amount of oil and gas that was produced by Saudi Arabia. Saudi Arabia produces mostly oil and a small amount of gas while the production in the United States and Russia is balanced, with about half of the production coming from gas, and the other half from oil.

Why The Increase In The US?

The report credits the increase in production of both oil and gas directly to the United States’ ability to exploit tight oil and shale gas formations. Last year the United States produced over 3.1 billion barrels of crude oil, an 18% increase from the 2.7 billion barrels produced in 2013. The increase in hydrocarbon production over the last several years is credited to the increase in horizontal drilling and hydraulic fracturing which allows production from unconventional reserves which were previously uneconomical to produce.

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No question about it: Hurricane Harvey and its aftermath have been horrible. It will be a very long time before things return to anything like “normal” for a lot of people. One of the few things that bring a smile these days is the amount of volunteer effort going on in response to the hurricane. Boaters across Texas hauled out their boats, headed to Houston and have been rescuing people. Churches, businesses and public institutions open their doors to serve as shelters. Nonprofit rural water and electric co-ops all over Texas are sending their crews and equipment to help the local crews in Southeast Texas restore water and power service.

One of the things I was intrigued to learn is that Anheuser-Busch has a history of producing water for disaster situations and Hurricane Harvey is no exception. When disaster strikes the company halts their production at its Cartersville, Georgia brewery and begins canning drinking water instead. So far, they’ve delivered over 410,000 cans of safe drinking water to the Gulf Coast. According to their website, they’ve been doing this since 1988. In 2016, Anheuser-Busch produced and shipped emergency drinking water to the California wildfire area, as well as areas impacted by the Louisiana floods and Hurricane Matthew.

Yes, I realize it’s good PR. But it’s also a really nice thing to do. Texans are tough and we will recover from this. However, it sure is nice to have the help!

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What happens when a Texas family discovers that the home equity loan on their home did not satisfy the constitutional requirements for homestead liens in the Texas Constitution? In the case of Wood v. HSBC Bank, the Wood family took out a home equity loan on their home in 2004. Their loan changed hands a number of times and ended up with HSBC Bank NA. In 2012, the Woods’ notified HSBC that there were defects in the loan that did not comply with the Texas Constitution. HSBC failed to cure the defects. Although it was eight years after closing when the issue was raised, the Woods’ sued HSBC to invalidate the lien on their property securing their loan and for quiet title to the property and forfeiture of all principal and interests payments made on the loan.

The Question For the Texas Supreme Court

The question before the Texas Supreme Court was whether, once the lender declined to cure the defect, was the lien void, or merely voidable. If the lien was void, then the lien was invalid and no statute of limitations applies. On the other hand, if the lien was voidable, then the four-year statute of limitations under Texas Civil Practice and Remedies Code §16.051 applies to the Woods’ case. In other words, because they did not bring suit within four years from the date the loan closed, their claim for quite title and forfeiture of all principal and interests payments made on the loan would be time barred.

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When you ask a Texas oil and gas or real estate attorney to draft a deed for you, one of the first things they will ask you is just what do you want to convey: the surface, the water rights, the mineral interest, only royalties from the mineral interest or some combination of these? The reason is that a properly prepared deed must be specific about what is conveyed, and must use the correct language to do so. Otherwise, you or your heirs could end up in court over the deed’s meaning. Recently, the Texas Court of Appeals decided a case that demonstrates the confusion that occurs when the language in the deed is not clear.

In Reed v. Maltsberger/Storey Ranch, LLC, the court examined a 1942 deed in order to determine whether it meant to convey a mineral interest or simply a royalty interest.The deed said it conveyed “an undivided one-fourth (1/4) interest in and to all of the oil, gas and other minerals in and under and that may be produced from” certain lands in LaSalle County, Texas. The 1942 deed acknowledged that, at the time the deed was signed, the described lands were subject to an existing oil and gas lease:

And said above described lands being now under an oil and gas lease originally executed in favor of L.V. Chenoweth, Trustee and now held by said L.V. Chenoweth, Trustee, it is understood and agreed that this sale is made subject to said lease, but covers and includes one-fourth (1/4) of all the oil royalty and gas rental or royalty due and to be paid under the terms of said lease, insofar as it covers the above described property. (Emphasis added)

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In a case that is probably a recurring nightmare for oil and gas attorneys, the Texas Court of Appeals recently addressed the question of what constitutes a material change to a written agreement involving the purchase of oil and gas leases in the case of Ranger Energy LLC v. Tonya McCabe Trust et al. In 2008, Mark III Energy Holdings purchased eight oil and gas leases from Tomco Energy. Mark III Energy paid for the leases with a $4 million dollar loan from Peoples Bank. However, two of the leases were accidentally left out of the assignment to Mark III Energy from Tomco Energy. The mortgage lien also failed to include the same two leases. In 2011 and 2012, certain trusts purchased overriding royalty interest in these leases. One of the assignments to the trusts also omitted reference to the same two leases.

Mark III Energy defaulted on the loan and Peoples Bank sued. In settlement of that litigation, Mark III conveyed the leases to Peoples Bank in lieu of foreclosure and gave the Bank a modified deed of trust. Later, the Bank discovered that two leases were missing from the mortgage lien and modified deed of trust, so they took it upon themselves to unilaterally file a corrected mortgage and deed of trust which added the missing leases. Neither the Bank nor Mark III Energy signed the revised agreements. Instead the Bank just added the signature pages from the old documents. In 2013, the Bank sold the lien and indebtedness to an affiliate, Ranger Energy, who then proceeded to foreclose on the loan.

Ranger Energy filed suit to extinguish the overriding royalty interest in the eight leases. The litigation centered on the “correction instrument” statute in the Texas Property Code §§ 5.027–.031. Specifically, the Texas Property Code permits “a nonmaterial change that results from a clerical error,” [§5.028(a)], “a nonmaterial change that results from an inadvertent error,” [§ 5.028(a-1)] and in certain cases “a material correction” to a recorded instrument of conveyance. (§5.029). The statute also allows correction of nonmaterial clerical errors by a person who has personal knowledge of the facts relevant to the correction and the kinds of errors that can be corrected include “a legal description prepared in connection with the preparation of the original instrument but inadvertently omitted from the original instrument”.

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The Deep Carbon Observatory at the Carnegie Institution for Science is using “Big Data” to locate deposits of minerals, using techniques similar to those used by Amazon to recommend books based on a buyer’s previous book orders, or by Netflix to recommend new movies to a subscriber based on past movie choices. In a paper published in the American Mineralogist, scientists at the Observatory report the first application to mineralogy of network theory. Network theory has also been used to analyze the spread of disease, the scope of terrorist networks or even Facebook connections. The study reported in the paper was led by Shaunna Morrison of the Deep Carbon Observatory and Robert Hazen, Executive Director of the Observatory.


These scientists are using network theory to analyze data on the vast amount of information on Earth’s more than 5,200 known mineral species together with with data on the surrounding geography, the geological setting, and coexisting minerals, and from this producing patterns of occurrence and distribution of minerals  that might otherwise be hidden. Dr. Morrison stated that “(t)he quest for new mineral deposits is incessant, but until recently mineral discovery has been more a matter of luck than scientific prediction.  All that may change thanks to big data.” According to Dr. Hazen “(n)etwork analysis can provide visual clues to mineralogists regarding where to go and what to look for. This is a brand new idea in the paper and I think it will open up an entirely new direction in mineralogy.”

In terms of oil and gas exploration, petroleum geologists can use this new tool to discover new oil and gas reservoirs. One benefit will be that data analysis will be a lot less expensive than drilling test wells. In addition, fewer dry holes and test wells will be a good thing in terms of environmental impact.

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The Texas Supreme Court recently decided an important real estate case in Town of Lakewood Village v. Bizios. Bizios was lived outside of Lakewood Village, Texas. Bizios was sued by Lakewood Village for not applying for or obtaining building permits when he began building his home. Lakewood Village, which is a general law municipality, asserted that it has the authority to extend its rules and ordinances to its extraterritorial jurisdiction. The extra-territorial jurisdiction (“ETJ”) of any particular city is based on the city’s population. Extra-territorial jurisdiction is the unincorporated area around the city’s corporate boundaries over which a city can exert control for certain activities.

In this case, the Texas Supreme Court determined that home rule cities are permitted to enforce their building codes in their extraterritorial jurisdiction, but general law cities, such as Lakewood Village, cannot.

What is a General Law City?new-homes-construction-1210994

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Texas oil and gas lawyers occasionally find themselves representing non-executive mineral owners. A non-executive mineral or royalty owner is someone who owns oil or gas royalty rights to a particular area of land, but who does not have the right to negotiate or sign a lease for the minerals and who usually does not have the right to receive bonus payments. The executive rights owner is the person who is has the exclusive right to execute oil and gas leases on a particular area of land and to receive bonus. Commonly, these relationships are created by a reservation in a deed, such as when someone sells their surface and mineral rights, including the right to negotiate an oil and gas lease, but reserves a non-participating royalty interest.

Recently, the Texas Supreme Court considered what duties are owed by the owner of an executive interest in minerals to the owners of the non-executive interests in the case of KCM Financial LLC v. Bradshaw. In this case, Bradshaw was the non-executive royalty owner and KCM Financial was the executive.

In this case, two deeds were executed in 1960 that reserved a non-participating royalty interest for Bradshaw of an undivided one-half of any future royalty, but not less than one-sixteenth share of gross production. In 2005, the executive KCM bought the land, and in 2006 KCM leased the land to lessee Range Resources for a one-eighth royalty interest and a 13 million dollar bonus. Nice payday for KCM!

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As many Texans are aware, hydraulic fracturing (“fracing”) uses a lot of water. In fact, one of the important ways in which Texas oil and gas lawyers assist their clients is to make sure that the oil and gas leases they sign contain appropriate protections for the client’s freshwater sources.

ConocoPhillips recently announced the availability of its “Water Visualization Tool” to use in discussing their water use with landowners in the Eagle Ford Shale. This is a 3D modeling tool that contains a model of the subsurface based on data from state and federal public databases, such as the US Geological Survey. With this tool, the oil company can demonstrate to a landowner the location and depth of the reservoir from which it is obtaining water and the spacing between horizontal wells and water sources.water-drop-1427344

The Water Visualization Tool sounds like it will assist in clear communication between oil companies and landowners. However, the more important issue is the need to continue to push to find non-freshwater sources for water used in fracing. For example, ConocoPhillips itself used municipal wastewater from Karnes City, Texas in the fracing of its wells in Karnes County. Other companies have used brackish water or are recycling water to use in fracking.

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Texas oil companies, mineral owners and oil and gas attorneys are all familiar with the Texas Railroad Commission. The Commission regulates oil and gas drilling and production and oil and gas pipelines in Texas. The Commission is pretty diligent in making sure abandoned wells are properly plugged. Unfortunately, on one occasion, they apparently plugged the wrong well!

The well was located on a tract owned and operated by American Coastal Energy. American Coastal Energy filed for bankruptcy. Gulf Energy held a lease on the area containing  the well and reached an agreement with the Commission to take over the well. In exchange, Gulf Energy provided $400,000 to cover the cost of eventually plugging the well if and when Gulf Energy decided to abandon the well. The Commission agreed to postpone plugging the well.

The Commission hired Superior Energy Services, LLC to plug other abandoned wells in the same tract as the Gulf Energy well. While plugging the other wells in the area, Superior Energy also plugged the Gulf Energy well, apparently at the specific instruction of the Commission staff. Due to a clerical error, someone at the Commission transposed the coordinates for the Gulf Energy well with another well.