In an opinion that interprets the statutory definition of “qualified transaction” in the context of an agreement between oil and gas operators, the Fort Worth-based Eighth Division of the business court determined that the agreement met the statutory requirements and that the court had jurisdiction over the parties’ dispute.
Slant Operating, LLC v. Octane Energy, LLC (Cause No. 24-BC08A-0002; May 23, 2025) arose from a dispute over a letter agreement in which each party agreed to a reciprocal waiver of objection of the other’s “off-lease penetration point” permit applications. The parties further agreed to keep each other advised of “daily drilling, completion, and flowback reports for each” well and “daily production data” therefor. There were no monetary provisions in the agreement. Pursuant to the agreement, Slant waived objections to Octane’s plan to drill five wells from a penetration point on Slant’s leashold. Sometime later, Slant sought to drill its own wells from an off-lease penetration point on Octane’s leasehold. When Slant formally requested a waiver, Octane refused. Slant nevertheless submitted its permit application to the RRC, to which Octane responded with an official objection to the application.
Slant brought suit in Tarrant County in August, 2024, alleging breach of contract and seeking $11.8 million in loss of anticipated revenue. Octane moved to transfer venue to Midland County. Slant opposed the motion and nonsuited. Shortly thereafter, Slant refiled the claim in the business court, alleging that the court had jurisdiction because the claim involved a qualified transaction over $10 million (the Legislature just lowered the threshold to $5 million). Octane objected to jurisdiction because the agreement didn’t have “material terms that would show that it is a qualified transaction” (probably because it contained no monetary terms). After a hearing, the court permitted Slant to amend its petition and for the parties to conduct jurisdictional discovery. After Slant filed its amended petition and the parties conducted discovery, the court heard arguments.
In an opinion by Judge Bullard, the court determined that it had jurisdiction. The decision turned on whether the reciprocal waiver agreement came within the definition of a “qualified transaction” in § 25A.001(14). If it did, then the question became whether: (1) the amount in controversy exceeded $10 million, the then-jurisdictional threshold pursuant to § 25A.004(d)(1), and (2) whether “the action arose out of a qualified transaction, which is supported by consideration worth at least $10 million.”. As Justice Bullard pointed out, the “amount in controversy is not the same as consideration. Consequently, not every commercial dispute with an amount in controversy of over $10 million will arise under a qualified transaction and confer jurisdiction on the Business Court” (internal citations omitted).
First, the court determined that Slant’s pleadings “contain[ed] sufficient facts to satisfy the $10-million amount-in-controversy requirement.” Octane argued that Slant failed to show the value the parties placed on a waiver. Slant countered by valuing the waivers as “the value of the additional oil and gas that both Slant and Octane expected to receive as a result of the increased productive lateral length that drilling at an off-lease penetration point provided.” Slant pegged this number at 515 feet per well or 33,000 additional feet of productive lateral length between 65 wells. If fully produced, Slant asserted, it would come to 2.6 million barrels of oil, 2.9 billion cubic feet of gas, and 305,000 barrels of natural gas liquids, altogether worth $130 million at the execution of the agreement. For the wells at issue in the case, Slant alleged that expected production would be worth more than $11.5 million. Slant pointed out that Octane got the same benefit from Slant’s waiver of Octane’s wells as Slant could expect from Octane’s waiver of Slant’s wells That was enough for Justice Bullard, who ruled that Slant satisfied the pleading requirements (proving it up, of course, goes to the merits), which is all it had to do at this stage of the proceedings.
So did Octane refute the existence of jurisdictional facts? No, answered Justice Bullard. Octane’s argument rested primarily on the agreement’s lack of a stated monetary value, or consideration (though the statute doesn’t require an agreement to have one). “Consideration is an exchange of promises bargained for by the parties to a contract,” Justice Bullard wrote. “Consideration ‘consists of either a benefit to the promisor or a detriment to the promisee.’” Whatever that consideration may be “is determined at the time of contracting” (citations omitted). The problem for Octane was that the agreement stated that Slant agreed to waive its objection to specific wells for which Octane submitted permit applications in exchange for certain reporting from Octane and Octane’s agreement “to waive its right to protect future Slant drilling permit applications.” Those mutual promises, Slant argued, “entitled each party to consideration with an aggregate value of at least $10 million at the time of contracting.” Based on Slant’s agreement to waive objection to Octane’s permit applications at the time of contracting established consideration, regardless of whether Octane’s mutual promise to waive in the future was or was not enforceable.
Octane’s attempts to frame Slant’s pleadings as producing no evidence did not avail it. As Justice Bullard reminded us, the court will apply a standard “akin to the no-evidence summary judgment standard.” In response to the no-evidence argument, Slant was required to present more than a scintilla of evidence, enough to create a genuine issue of material fact as to the court’s jurisdiction. Slant’s uncontroverted expert affidavits accomplished that. The court, consequently, denied Octane’s plea to the jurisdiction. This ruling, however, did not decide whether the amount in controversy exceeded $10 million or whether the agreement constituted a qualified transaction, only that the court had jurisdiction to determine those issues.
This opinion exemplifies why proponents of the business court were right. Because the court’s jurisdiction rests on statutory definitions and standards, the business community needs well-reasoned, thoughtful opinions about how jurisdiction should be pleaded and contested. Judge Bullard’s opinion is a model of both careful reasoning and thoughtfulness, not to mention authoritative in its review of the pertinent law.
