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Certified question about oil & gas royalties

By Don Cruse

In re Moose Oil & Gas Co., No. 08-40480 (5th Cir.) (per curiam)

Today, the Fifth Circuit certified a set of questions to the Texas Supreme Court about the construction of some oil & gas pooling agreements.

You can view the Fifth Circuit’s opinion and order certifying these questions (PDF).

From within the governing contracts, the Fifth Circuit identifies this provision (which it calls the Royalty Provision) as “the language principally at issue here”:

“During the period of time Consenting Parties are entitled to receive Non-Consenting Party?s share of production, or the proceeds therefrom, Consenting Parties shall be responsible for the payment of all production, severance, excise, gathering and other taxes, and all royalty, overriding royalty and other burdens applicable to Non-Consenting Party’s share of production ….”

Barnes argues that Tawes, as a Consenting Party, is responsible for “all royalty” owed to her.

As with all respectable oil & gas cases, this one features its share of property transfers, side contracts, and payments disputes. It eventually took a detour through bankruptcy court and up to the Fifth Circuit, and now back to the Texas Supreme Court for a definitive construction of these oil & gas contracts under Texas law.

With that combination of messy facts, unsettled law, and procedural wrinkles, the only surprise is that it didn’t show up as the oil & gas question on this week’s Texas Bar Exam. (There’s always next year.)

Full post as published by Supreme Court of Texas Blog on July 29, 2010 (boomark / email).