The San Antonio Court of Appeals has rejected the proposition that production of unleased minerals converts an owner of a floating NPRI to a co-tenant entitled to a fixed NPRI on that production.
Blackrock Mineral Partners, LLC and Dynasty Land & Minerals, LLC v. JP Morgan Chase Bank, N.A., Trustee of the Red Crest Trust (No. 04-26-00095-CV; September 16, 2026) arose over a disagreement about the construction of an oil and gas lease. Blackrock and Dynasty owned a nonparticipating royalty interest (NPRI) in the Burks Ranch. JP Morgan, trustee of the Red Crest Trust, owned a mineral interest burdened by Blackrock’s NPRI. The 1929 deed conveying the NPRI from the Red Crest Trust’s predecessor-in-interest granted a 1/64 of 1/8 of the landowner’s 1/8 interest in the oil, gas, and other minerals” under certain property in La Salle County. The deed further provided that the interest conveyed by the deed “is a royalty interest included in and with the royalty under any lease now on said lands or any subsequent lease given thereon . . . .” XTO Energy operated the oil and gas wells under property owned by the Red Crest Trust on the Burks Ranch, although Red Crest didn’t have a lease with XTO.
The parties disputed the meaning of “lease” in the deed. Blackrock argued that the deed conveyed a 1/512 interest on “any oil and gas lease.” Consequently, since Red Crest didn’t execute a lease with XTO, Blackrock should be treated as a co-tenant with Red Crest. Ergo, Blackrock was entitled to a 1/512 royalty on production after accounting for XTO’s production costs. Red Crest countered that Blackrock was trying to convert a floating NPRI into a fixed NPRI. Blackrock sued Red Crest and XTO for trespass to try title, quiet title, monies had and received, and declaratory relief. Blackrock settled with XTO and moved for summary judgment against Red Crest on the basis that Blackrock owned a nonparticipating royalty interest equal to 1/512 of production on the Burks Ranch. The trial court denied the motion. Blackrock appealed.
In an opinion by Chief Justice Martinez, the court affirmed. First, Blackrock argued that “a floating NPRI burdening unleased minerals becomes part of the mineral estate, entitling the floating NPRI holder to royalty payments.” Prize Energy Resources, L.P. v. Cliff Hoskins, Inc., 345 S.W.3d 537 (Tex. App.—San Antonio 2011, no pet.). Red Crest countered that Prize Energy was inapposite. The court agreed, holding that Prize Energy dealt with a joint operating agreement providing that “any interest owned and contributed by a party hereto is an unleased interest in the oil and gas rights, then such unleased interest shall be treated for all purposes of this agreement as if it were an oil and gas lease covering such unleased interest on a form providing for the usual and customary one-eighth royalty.” The deed in question didn’t contain a similar provision. Additionally, Prize Energy did not decide whether a floating NPRI that is expressly tied to “the royalty under any lease” generates an entitlement to production in the absence of a lease. Absent Prize Energy, Blackrock could produce no authority supporting its argument that “its floating NPRI should be treated as a fixed NPRI because the Red Crest Trust has failed to execute a lease.”
The court likewise rejected Blackrock’s co-tenancy argument. Blackrock again produced no authority supporting the proposition that “[b]ecause there is no lease, the unleased mineral owner’s right to receive royalties is not subject to the royalty reserved by the lease.” Red Crest countered that Blackrock couldn’t enjoy the benefits of a co-tenant because it was an NPRI owner. Citing its own precedent, the court ruled that “[a] ‘non-participating royalty’ does not entitle the owner to produce the minerals himself, or permit him to join in a lease of the mineral estate to which the royalty is appurtenant, or entitle him to share in bonus or delay rentals that may be paid for the lease, but merely entitles him to a share of production under the lease free of exploration and production expenses.” Whatever the definition of “lease” might be here, Blackrock’s floating NPRI remains.
Finally, Blackrock argued that Red Crest breached its duty of good faith and fair dealing by not signing a lease with XTO. Unfortunately for Blackrock, it didn’t plead a cause of action for breach of the duty. Blackrock thus waived the claim. The court affirmed the trial court’s judgment.
