Occidental Permian, Ltd., Occidental Petroleum Corporation, Oxy USA Inc., Oxy USA WTP LP, and Rodeo Midland Basin, LLC v. Citation 2002 Investment LLC and Endeavor Energy Resources, L.P. (No. 23-0037; May 17, 2024) arose from a dispute over the scope of an assignment of oil and gas interests in Reagan County. In 1987 Shell Western sold certain interests in Texas and New Mexico to Citation for $75 million. The assignment incorporated by reference an exhibit that described the interests subject to assignment, some of which include a property depth description (e.g., a tract of land “down to 8,393 feet.” In 1997 Shell assigned certain interests to Oxy’s predecessor, Altura. This assignment included some of the same tracts previously conveyed to Citation but at deeper depths. Both parties subsequently assigned some of the interests to third parties (Endeavor and Rodeo). These “deep rights” are the subject of dispute.
Both parties filed trespass to try title suits and motions for summary judgment on the interpretation of the 1987 assignment. Oxy argued that the exhibit in the 1987 assignment explicitly limited the depth of certain interests and that Oxy was free to assign them to another operator. Citation argued that the assignment conveyed all interests and that the language in the exhibit did not limit the grant. The trial court agreed with Oxy, granted Oxy’s motion, and denied Citation’s motion. The parties then filed an unopposed motion to appeal the interlocutory summary judgment order pursuant to § 51.014(d) and TRCP 168 (permissive appeals), which the trial court approved. The court of appeals accepted the appeal and reversed and remanded. SCOTX granted Oxy’s petition for review.
In an opinion by Justice Bland, the Court affirmed. The controlling legal question in the case was whether the 1987 assignment conveyed the entirety of Shell’s interests, despite language in the incorporated exhibit that referred to property depths in some cases. Starting with an analysis of the exhibit to the 1987 assignment, the Court compared this case to Piranha Partners v. Neuhoff, 596 S.W.3d 740 (Tex. 2020), which “similarly incorporated an ‘Exhibit A’ that described details of the conveyed mineral estate.” There the Court determined that the broad granting language in the assignment controlled and conveyed the entire lease interest, whereas the exhibit contained “mere descriptors to help identify the lease.” Here the Court observed that “Exhibit A lists smaller property interests encompassed by larger property interests, with no express reservation of the property beyond the smaller interests to Shell as the grantor. Exhibit A contains no language directing the proper method for reading its tables. Instead, it serially lists leases that encompass other listed interests.”
Nevertheless, the Court acknowledged that Exhibit A “presents ambiguities,” so it looked to other language in the assignment itself for clarification. The assignment granted “all” of Shell’s “right, title and interest in and to the oil and gas fee, mineral and leasehold estates described in” Exhibit A. It further stated that it conveyed all of Shell’s right, title and interest in and to “any contracts or agreements, including, but no limited to, . . . rights above or below certain footage depths or geological formations, affecting the property described in” Exhibit A. Based on this clause, the Court determined that Exhibit A’s separate listing of contracts or agreements that contain depth limitations does not narrow the broad grant, which refers to rights “above and below certain footage depths.” Reinforcing this interpretation, the Court noted, was a third granting clause which conveyed all rights and interests “regardless of whether same may be incorrectly described or omitted from Exhibit A.”
The Court rejected Oxy’s argument that the third granting clause amounted to “an overly broad Mother Hubbard clause,” which the Court has held “is not effective to convey a significant property interest not adequately described in the deed” (citation omitted). Pointing to its decision in Davis v. Mueller, 528 S.W.3d 97 (Tex. 2017), which interpreted similar language, the Court reiterated that “this language constituted a general grant of conveyance that ‘could not be clearer.’”
Oil and gas lawyers will be particularly interested in the court of appeals’ distinction between a case in which it held that an exhibit to an assignment limited the assignment’s scope and one in which it ruled otherwise. SCOTX didn’t have to do that, since they had Piranha to fall back on. In any event, SCOTX has clearly indicated that relying on a descriptive exhibit to reserve anything from an assignment with broad granting language is not likely to fly very far.
