Increasingly cited by courts in oil and gas producing states, Kuntz, Law of Oil and Gas provides an exhaustive survey of oil and gas conveyancing and operations, with citations to authorities that help attorneys find a quick answer or case on point. The publication has just recently been updated.
§ 3.2(d). Kentucky’s Broad Form Mineral Deed law does not change the law of co-tenacy: In Johnson v. Environmental & Public Protection Cabinet, 289 S.W. 3d 216 (Ky. Ct. App. 2009), the court held that Kentucky’s constitutional Broad Form Mineral Deed amendment, which bars strip-mining over surface owner objections by decreeing that the intention of the parties to a broad-form mineral deed was that mining methods commonly in use in the area at the time of the deed would be used [deep mining rather than strip mining], did not change the basic cotenancy law of Kentucky that any cotenant has the right to mine without the permission of all the other cotenants. Thus, a lessee of one of the surface owners had the right to use strip-mining techniques.
§ 13.3. Kansas: Coalbed methane gas belongs to gas owner: The Kansas Supreme Court, in Central Natural Resources, Inc. v. Davis Operating Co., 201 P.3d 680 (Kan. 2009), held that a 1924 warranty deed granting “all coal . . . together with the right to mine and remove same” did not convey to the coal owner methane gas contained within the coal.
§ 13.3. Indiana: Coalbed methane gas belongs to coal owners: In Cimarron Oil Corp., v. Howard Energy Corp., 909 N.E.2d 1115 (Ind. Ct. App. 2009), the court of appeals wrote a lengthy opinion summarizing the nature and history of coalbed methane and discussing the “eastern rule,” which characterizes coalbed methane as a component of coal and belonging to the coal estate, and the “western rule,” which provides that the owner of gas owns coalbed methane. The court concluded that both rules “focus on intent” and found that the 1976 lease “for the sole and only purpose of mining and operating for oil and gas” did not indicate an intent that the lessee should be able to “invade” the coal seam. Though the court noted that public policy would favor considering coalbed methane a part of the coal estate, it left adoption of a bright-line rule to the legislature.
§5.6, § 48.3 Texas: Lessee’s exercise of the pooling power under the pooling clause of the oil and gas lease may result in pooling that survives termination of the lease: In Wagner & Brown, Ltd. v. Sheppard, 282 S.W.3d 419 (Tex. 2008), the Texas Supreme Court held that, depending upon the terms of the lease, land may remain within a pooled unit even though the lease on that land has terminated. The plaintiff’s land had had been pooled under a lease that later terminated while the other leases within the pooled unit remain in effect. The court reasoned that a lessee’s pooling authority is governed by the intent of parties as expressed in the relevant documents. Since both the lease pooling clause and the lessee’s declaration of pooling referred to pooling “premises” and “lands,” rather than just the leased interests, the instruments showed an intent to bind all interests in the lands. These interests included plaintiff’s reversionary interest, which was an interest in land. The court also held that a lessor whose interest is pooled under a lease that later terminates while other leases within the pooled unit remain in effect may be held liable for all costs attributable to the pooled unit. The court also held that an operating cotenant must account on a well-by-well basis and cannot deduct the costs of unsuccessful reworking operations on one well from the income produced by a second well on the property.
§ 14.5. Arkansas: Duhig Doctrine applied to quitclaim deed. In, Sutton v. Sutton, 2009 Ark. 109, __ S.W.3d __ (2009), the Arkansas Supreme Court applied the Duhig Doctrine to a quitclaim deed, wherein the owner quitclaimed the tract at issue, reserving one-half the minerals. Because a ½ mineral interest was previously outstanding, the court held that the owner reserved nothing.
§ 19A.10. Kansas and Oklahoma. Statutory liens in favor of sellers of production are inferior to voluntary and perfected security interests. In Mull Drilling Co., Inc. v. SemCrude, L.P., 407 B.R. 82 (D. Del. 2009) and Samson Resources Co. v. SemCrude, L.P., 407 B.R. 140 (D. Del. 2009), the bankruptcy court evaluated the efficacy statutory provisions in Kansas and Oklahoma for establishing rights to sellers of production. In Mull the court held the security interest created by K.S.A. § 84-9-339 in production sellers was junior to Bank of America’s security interest “duly perfected against the Debtors in this case in accordance with Article 9's rules regarding perfection.” In Samson the court held Oklahoma’s Production Revenue Standards Act, Okla. Stat. tit. 52, § 570.1 et seq., did not impose a “resulting, implied or constructive trust” in favor of Oklahoma production sellers. Liens held by producers pursuant to the Oklahoma Oil and Gas Owners Lien Act, Okla. Stat. Ann. tit. 52, § 548 et seq., were junior to the debtor SemCrude’s prepetition lenders who held perfected Article 9 security interests.
§40.5. North Dakota. Court rejects marketable-product rule: In Bice v. Petro-Hunt LLC, 768 N.W.2d 496 (N.D. 2009), the lessee was allowed to deduct treating costs when calculating royalty payable on market value at the well.
§ 46.4. Texas. Lease did not terminate for failing to be capable of production in paying quantities where lessee had shut in a gas well because the purchaser refused to take gas because of its high carbon-dioxide content: A Texas court rejected a claim that a well was not capable of production in paying quantities where the lessee had shut in a gas well when the purchaser refused to continue taking gas because of its high carbon dioxide content. The absence of downstream processing facilities required to improve the quality of the gas and make it marketable did not render it incapable of production in paying quantities. Blackmon v. XTO Energy, 276 S.W.3d 600 (Tex. App.—Waco 2008).
§ 67.5. Federal oil and gas leases: In Kerr-McGee Oil and Gas Corp. v. U.S. Department of Interior, 554 F.3d 1082 (5th Cir. 2009), cert. denied, 2009 U.S. LEXIS 6035 (U.S. Oct. 5, 2009), the court held that the Outer Continental Shelf Deep Water Royalty Relief Act authorizes the suspension of royalties on the federal deepwater leases at issue until a minimum volume threshold is met, without regard for current oil and gas prices.
§ 74.3. Colorado. Dewater coal veins in preparation for coalbed-methane production constitutes a beneficial use of water: In Vance v. Wolf, 205 P.3d 1165 (Col. 2009), the court held that dewatering coal veins constituted a beneficial use of water under the prior-appropriation doctrine even though the water was treated as a nuisance product.
§ 68.1. Pennsylvania. Local township ordinance regulating drilling operations held pre-empted by state oil and gas law. In Range Resources Appalachia, LLC v. Salem Township., 964 A.2d 869 (Pa. 2009), the Pennsylvania Supreme Court held that Pennsylvania’s Oil and Gas Act preempted a township ordinance that regulated surface and land use for drilling operations. The Pennsylvania Supreme Court reviewed the ordinance in detail and concluded that it sought to police many of the same aspects of oil and gas extraction activities that the Act addressed, and the comprehensive and restrictive nature of the ordinance’s regulatory scheme represented an obstacle to the legislative purposes underlying the Oil and Gas Act.
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