TCJL today filed an amicus curiae brief in a case involving the interpretation of an offset well clause in an oil and gas lease. The case, Rosetta Resources Operating, L.P. v. Kevin Martin, Jamie Martin, and Ashley Lusk (20-0898), has a peculiar history that includes two summary judgments in favor of the operating company, one court of appeals opinion upholding summary judgment, and the last one reversing summary judgment and remanding back to the trial court. Along the way, the plaintiffs have lost the case, come up with a new argument, lost the case again, and finally obtained a favorable decision out of the Corpus Christi Court of Appeals. But in order to revive the case, the Court of Appeals resorted to an erroneous and tortured interpretation of the lease that imposes expansive new duties on oil and gas operators. This expansion of liability is why TCJL felt compelled to offer our views to SCOTX.
At issue is the construction of an offset well clause. Offset well clauses are standard in oil and gas leases across the state. They protect mineral owners from drainage from their property caused by wells drilled on adjoining property within a certain proximity to the owners’ well. If an offset well clause is triggered, the operator must ascertain whether, in the qualified opinion of a reasonable operator, the triggering well is actually draining the owner’s well and, if so, to spud an offset well to prevent the drainage. The offset well clause in this instance is somewhat inartfully drafted, but it clearly provides that the the clause can only be triggered by a well drilled on adjoining property. The plaintiffs, however, argued in their second round at the Court of Appeals that the clause triggered when a well was drilled on non-adjoining property and regardless of the triggering well’s proximity, meaning that the operator could be liable for a well drilled just about anywhere if the owner claims drainage. Moreover, the plaintiffs contended that the triggering well and the draining well could be different wells, which makes no sense and flies in the face of well settled law. The Court of Appeals, nevertheless, swallowed the plaintiffs’ argument whole. It also dismissed the plain fact that no drainage had in fact occurred in the opinion of a reasonable operator, despite Rosetta’s objections. The Court of Appeals thus created a new duty out of whole cloth that, if not corrected, could undermine certainty in every oil and gas lease in the state. TCJL took the position that these errors elevate the matter to one of interest to the jurisprudence of the state and must be reviewed.
