The Corpus Christi Court of Appeals has affirmed a trial court order dismissing a landowner’s claims that an oil and gas producer breached its lease agreement and trespassed on the owner’s property when it sited a pad for a horizontal well.
Lloyd Michael Hamilton v. Conocophillps Co. and Burlington Resources Oil and Gas Co., LP (No. 13-22-00096-CV; February 8, 2024) arose from a dispute between one of a group of family members who had recently litigated a partition of a family ranch covered by an oil and gas lease and Burlington, the assignee on the lease. Prior to the partition, the family members, including Plaintiff, agreed to a production sharing agreement. Pursuant to that agreement and after the partition, Burlington staked out the boundaries of a proposed well site. Plaintiff objected to the location of the proposed site on the basis that he claimed to have seen jaguarundis (an endangered cat species) around the location. He suggested a different site, but Burlington selected a different one because the area had already been cleared and, hoping to accommodate the jaguarundis, would not require as much construction. Burlington subsequently entered into a surface use agreement with Plaintiff’s mother (who had initiated the partition litigation) to build a road to the site prior to clearing it. Burlington also obtained the necessary permits for the project.
Plaintiff sued Burlington and its parent Conocophillips in September 2020, seeking a temporary injunction on the basis of the accommodation doctrine, citing the threat of the project to jaguarundis. Plaintiff added breach of contract and trespass claims, alleging that Burlington failed to obtain his consent before constructing the pad and for excessive surface usage. Burlington counterclaimed for breach of contract and wrongful injunction. The parties asked the trial court to construe the production sharing agreement, which would largely dispose of the case. After a hearing and briefing, the trial court determined that the agreement authorized Burlington to conduct off-lease production by constructing a sharing well and granted summary judgment for Burlington on those claims. A jury then unanimously found for Burlington on Plaintiff’s accommodation doctrine claim. The trial court entered judgment on the verdict and dismissed Plaintiff’s declaratory judgment and permanent injunction claims. After instructing the parties to confer on a schedule for hearing Burlington’s counterclaim, Burlington moved to nonsuit that claim, which the trial court granted without prejudice. Plaintiff appealed.
The court of appeals affirmed as to every issue except the dismissal without prejudice of Burlington’s counterclaim. As to the breach of contract and trespass claims, the court held that the production sharing agreement clearly authorized Burlington’s drilling of a sharing well for off-lease production. Plaintiff argued that while the agreement may have allowed drilling of the well, it likewise provided that the lease itself governed surface use and did not allow the sharing well. Reading the sharing agreement and lease together, the court reasoned that the sharing agreement would not make any sense if it granted Burlington authority to drill a sharing well but excluded Burlington from using the surface to drill it. Burlington thus did not need separate consent from Plaintiff to drill and operate the surface well, and the trial court did not abuse its discretion by granting summary judgment on the issue. And because the sharing agreement did not require separate consent, Plaintiff’s trespass and declaratory judgment claims fell by the wayside as well. Finally, as to Burlington’s counterclaim, the court ruled that the trial court should have dismissed it with prejudice because Burlington waived it by not proving or submitting jury questions at trial.
