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Earlier this week, the Texas Senate State Affairs Committee approved the draft of a new statute entitled the Texas Real Property Transfer on Death Act (Senate Bill 462). You can review a draft of the bill here. This bill would create a procedure for a non-testamentary transfer of real property. In this case, non-testamentary means that it passes outside of someone’s will and avoids the entire probate process.

We don’t yet know if the bill will end up as a statute. If it does, it will go into effect on September 1, 2015. The potential statute contains a number of traps for the unwary. For example, the specialized deed authorized by the bill applies only to a person who owns real property as a joint tenant with right of survivorship. As currently written, the bill does not apply to an owner who is a tenant in common or an owner of community property with or without a right of survivorship. As currently written, Section 114.055 of the bill has some very specific requirements that must be complied with if this specialized deed is to be effective. It will also be important to be aware of the conditions that will revoke the deed, described in Section 114.057 of the bill. Interestingly, a contrary provision in a will does not revoke or supersede a transfer on death deed.

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An interesting case that involved easements was recently decided by the Texas Supreme Court. The case is David Hamrick, et al. v. Tom Ward and Betsy Ward and the issue presented to the Court was whether an implied easement of necessity by prior use continues after the necessity has ended. There are two basic types of easements. Express easements, that are created by an agreement (usually written) and implied easements, that arise by operation of the law due to certain specific facts. In Texas, implied easements are split further into a number of subcategories, including easements of necessity and easements by prior use.

grass-landscape-with-road-1440659-m.jpgThe Facts
In 1936 O.J. Bourgeois owned certain property in Harris County, Texas. Mr. Bourgeois gave two acres of the land to his grandson. While the grandson owned this land, a dirt road was built across Mr. Bourgeois’ remaining property to allow the grandson access to the public road. Subsequent owners of the grandson’s property also used the dirt road for access. Eighty years later, Tom and Betsy Ward were the owners of the grandson’s land and still used the dirt road. The Wards put gravel on the road so they could use it for construction of a new house on their property. The Hamricks owned the land that the dirt road crosses, formerly the property of Mr. Bourgeois. The Hamricks filed a lawsuit asking for a temporary injunction preventing the Wards from using this road. The temporary injunction was granted in April 2006. So as not to delay construction of their new house, the Wards built a new driveway to access the main road. In the suit, the Wards requested a declaratory judgment that they had an implied easement for the dirt road. The trial court granted the Wards motion for summary judgment and the Court of Appeals agreed and held that the Wards had a prior use easement across the Hamricks land.

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Parsley Energy Inc., based in Midland, Texas, has been buying undeveloped and productive land in Reagan County.

Parsley Energy is an independent oil and natural gas company founded in 2008 with operations in the Permian Basin. The company develops unconventional oil and gas reserves. It has grown exponentially in the past few years, from a start up with two people to a company that operates several hundred wells and produces more than 12,000 barrels of oil equivalent per day. The company owns more than 97,371 surface acres in the Midland basin and 121,211 surface acres in the Permian. They have horizontal and vertical wells in the core of the Midland basin and expect to continue to grow and produce good rates of return on investments. This appears to be borne out by their latest $252 million purchase in Reagan County, which breaks down into $26,000 per net acre with $60,000 per flowing barrel of oil equivalent. They have added more than 16,000 net acres and 456 net horizontal drilling locations, including these newly announced locations in Reagan County, since their initial public offering in May 2014.

As Parsley Energy develops its assets in Reagan County, they will be requesting leases from mineral owners. This means mineral owners in Reagan County need to consult with an oil and gas lawyer before signing any leases. Signing leases without consulting a lawyer can lead to financial losses and stress. See my previous posts on this issue here and here. It’s not worth the risk yo your land or your finances not to get input from an oil and gas attorney.

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Steve Lipsky and his wife Shyla became famous as Texas landowners who claimed they could set their water on fire–and they alleged this was due to methane contamination from nearby hydraulic fracturing. The couple sued Range Resources who operated a well near their house in Weatherford, Texas. The Lipskys claimed they noticed problems with their water after Range drilled two natural gas wells near their house in 2009.

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The Environmental Protection Agency, without any scientific basis whatsoever, concluded that Range had caused or contributed to the water contamination. The Railroad Commission of Texas did actual did scientific testing and determined that the methane came from a shallower rock formation than the one drilled, and allowed production at the wells to continue. Many people do not realize that methane occurs naturally in many water deposits, but is not drawn into the water pump until the water level falls below a certain level. With lots of fanfare, the EPA sued Range Resources in federal court for the alleged contamination. That suit was later quietly dismissed in its entirety.

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The number of U.S. refineries and petrochemical production plants that have been subjected to United Steelworkers strikes has now reached eleven locations in California, Kentucky, Texas and Washington. It’s hard to imagine a more outrageous case of bad timing. Let’s see: oil and gas are at their lowest prices in years, the oil industry is hog tied by out-of-date export restrictions that prevent many sales to non-U.S. buyers, and the true unemployment rate (hint: it’s not the number the U.S. Labor Department puts out) is depressingly high, about 12.6%. Yet, the United Steelworkers are striking. Go figure.

Part of my growing up years were spent in Detroit, Michigan, where it was not uncommon for violence to be used by the United Auto Workers to force folks to join the union. The father of a girl I went to high school with was murdered because his employees resisted unionizing his small trucking company: His car blew up in the driveway of their home when he got in and turned on the ignition to go to work. No doubt his employees got the message.

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Good news for T exas veterans who want to buy land! In his first act as chairman of the Texas Veterans Land Board (TVLB) Texas Land Commissioner George P. Bush increased the land loan limit . The previous land loan limit was $100,000. Texas veterans are now eligible for low-interest land loans up to $125,000. This is the apparently the maximum loan by the TVLB allowed by Texas law.

clouds-589716-m.jpg The TVLB loan requirements are:

1. For the purchase of one acre or more.

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sunrise-series-1446056-1-m.jpgA federal appellate court decision demonstrates some lessons for Texas mineral owners. That decision was issued by the Fifth Circuit Court of Appeals in the case of Breton Energy, L.L.C., et al. v. Mariner Energy Resources, Inc., et al. The Plaintiffs in this case own and operate an off-shore lease in the Gulf of Mexico that includes an area known as the K-1 sands. The Defendants own and operate an adjacent off-shore lease that covers an area known as the K-2 sands. The Plaintiffs claimed that the Defendants engaged in “unlawful drainage” from the Plaintiffs’ lease in violation of federal and state law.

The Facts:

Breton Energy LLC and Conn Energy Inc. sued International Paper Co. and its successors in interest, consisting of eleven oil companies including Apache Corporation, Chevron and I.P. Petroleum Co. The Plaintiffs claimed specifically that IP Petroleum perforated and drained an oil reservoir under the Plaintiffs’ lease on the Outer Continental Shelf in the K-1 sands. The Plaintiffs also claimed that IP co-mingled resources from this reservoir with hydrocarbons from a nearby reservoir, making it impossible for the Plaintiffs to produce oil and gas from its own wells.The evidence showed that I P Petroleum, even though it had been ordered by the federal Minerals Mining Service not to complete wells in both the K-1 and K-2 sands, did in fact complete wells in both areas. There was also evidence that I P Petroleum’s production exceeded their estimate by almost 30%, which would make sense if they were producing from someone else’s reservoir as well as their own.

The District Court dismissed the Plaintiffs’ claims, and they appealed to the Fifth Circuit.

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This blog frequently shares news regarding developments in the oil and gas industry, particularly in Texas, and how growth in that industry effects Texas mineral owners. As the industry grows, increased opportunities arise for Texas land owners, such as the opportunity to negotiate oil and gas leases. (for more information on leasing, please see my previous blog on this topic that you can access here.

Texas has an oil output of more than 3 million barrels per day, which is one third of the total U.S. oil production. Texas could soon outpace the second biggest oil producing country in Organization of the Petroleum Exporting Countries (OPEC), which is Iraq (after top producer Saudi Arabia).

Production data from the Permian basin shows that in the last year it has become the largest crude oil producing region in the U.S. In 2013, Permian oil was 18% of total U.S. crude oil production according to the U.S. Energy Information Administration. Production in the Permian basin has increased to 1.35 million barrels per day up from 850,000 b/d in 2007 and is exceeding production from the federal leases in the Gulf of Mexico.

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The Permian Basin is on its way to becoming the most productive oil play in the United States. In the next few years, the Wolfcamp Shale in this basin could by itself overtake the Bakken Shale in North Dakota and Montana in the amount of money spent for exploration and production in tight oil plays.

Currently, the exploration of the Wolfcamp Shale is occurring in the following Texas counties: Glasscock, Sterling, Reagan, Irion and Crockett. As the area is explored further, adjacent counties may be involved.

Wood Mackenzie, a research and consulting organization, did an analysis on Wolfcamp recently and came to the conclusion this could happen as early as 2017. At present, Wolfcamp comes in third in expenditures after the Bakken and Eagle Ford Shales. This year’s expenditure in the Wolfcamp is more than $12 billion, mainly due to an increase in drilling rigs in the first and second quarter of 2014, which is 80% of what was spent this year in the Bakken Shale. Wood Mackenzie increased its projections for Wolfcamp capital expenditures in 2015 by more than $4.3 billion to $13.9 billion. Crude and condensate production is about 200,000 barrels per day now but is expected to reach 700, 000 barrels per day by 2020.

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When the news discusses Texas‘ big oil and gas shale plays, they usually mean the Eagle Ford and the Barnett shale. The University of Texas at San Antonio produced a study recently, the “Economic Impact of Oil and Gas Activities in the West Texas Energy Consortium Study Region”, that highlights the opportunities in the Cline shale.

clineshalegraphic.jpg The study estimates that by 2022 the Cline shale will bring more than 30,000 jobs to west Texas and have a $20 billion dollar economic impact. The Cline shale covers less surface area than the Eagle Ford or Barnett, but its hydrocarbons are denser. There is a potential for 3.6 million barrels of oil per square mile to be recovered, for a total of about 30 billion barrels. These numbers indicate that the Cline shale may be larger than both the Eagle Ford and the Bakken field in North Dakota. In fact, the Cline shale may be bigger than both those two plays combined.

The study was done by the Center for Community and Business Research, part of the Institute for Economic Development at UTSA. The study notes that in 2012 $14.5 billion was added to the west Texas economy by oil and gas development and 21,450 full time jobs were created from the oil and gas industry in west Texas. These employees received $1 billion was paid in salaries and benefits in 2012 alone. The study estimated that about 854 vertical wells and 57 horizontal wells were completed in 2012 in this region. The goal of the study was to create a 2012 baseline of industry activity in the region and create forecasts through 2022. “This baseline study is intended to help communities in West Texas plan and prepare for the prospect for increased oil and gas production in the area down the line. For many counties, activity is clearly in the early stages,” said Thomas Tunstall, the research director for this study.

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