Oil & gas lawyers "on edge" waiting for Texas Supreme Court's response to Chesapeake request

Oil and natural gas attorneys in the Lone Star State are collectively "on edge" waiting for the Texas Supreme Court to respond to a request from Chesapeake Energy Corp. asking for a rehearing on a high-profile royalty payment case.

The Texas Supreme Court ruled against the Oklahoma City-based energy company and in favor of landowners in a June 12 opinion handed down in the Hyder v. Chesapeake case.

In a 5-to-4 decision, the Texas Supreme Court sided with the Hyder family of Fort Worth by upholding their lease, which stated Chesapeake would bear all post-production costs for natural gas extracted from the family's land.

Chesapeake asserts that the family should bear its share of the costs and filed a motion for rehearing on Aug. 5 where the company argued that the court misread the contract’s single overriding-royalty

Like other landowners in the shale boom, Burney said the Hyder family carefully avoided the use of "market value at the well" language in their lease with Chesapeake and added other customized language regarding post-production costs.

"Anyone who uses market value at the well, will have to pay post-production costs," the San Antonio-based law professor noted. “The question is how can landowners draft a clause that avoids that rule, after Heritage Resources v. NationsBank.” provision.


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