Endeavor Energy Resources, L.P. v. Discovery Operating, Inc.

448 S.W.3d 169, 2014 Tex. App. LEXIS 11664, 2014 WL 5463884
CourtCourt of Appeals of Texas
DecidedOctober 23, 2014
DocketNo. 11-12-00322-CV
StatusPublished
Cited by7 cases

This text of 448 S.W.3d 169 (Endeavor Energy Resources, L.P. v. Discovery Operating, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Endeavor Energy Resources, L.P. v. Discovery Operating, Inc., 448 S.W.3d 169, 2014 Tex. App. LEXIS 11664, 2014 WL 5463884 (Tex. Ct. App. 2014).

Opinion

OPINION

JIM R. WRIGHT, CHIEF JUSTICE

Discovery Operating, Inc. (Discovery) and Patriot Royalty and Land, LLC (Patriot) brought a trespass to try title action against Endeavor Energy Resources, L.P. and Endeavor Petroleum, LLC (collectively Endeavor). Claiming under various oil and gas leases, the parties asserted competing claims of title to, and ownership of, determinable fee interests in the minerals in the following lands: (1) NW/4 Section 9, Block 35, T-l-N, T & P Ry. Co. Survey, Martin County, Texas; and (2) SW/4 Section 4, Block 35, T-l-N, T & P Ry. Co. Survey, Martin County, Texas. Discovery and Patriot contended that Endeavor, as an oil and gas lessee, had held leasehold interests in all of Section 4 and the N/2 of Section 9 by virtue of four oil and gas leases but that the leases partially terminated as to the NW/4 of Section 9 and the SW/4 of Section 4. After the alleged partial termination, Patriot, as lessee, leased the mineral interests in the disputed quarter sections and then assigned the leases to Discovery. Endeavor contended that its leases remained in full force and effect as to the disputed quarter sections.

Stanley D. Elrod, Karen M. Thomas, Jon David Elrod, Janice K. Gaither,- and Joseph Elrod (the Elrod Intervenors) and Rebecca J. Williams, Norvella Ann Schafer, and Jackie Lue Wells, Trustees of the Mildred Haggard Irrevocable Grantor Trust (the Haggard Trust Intervenors) intervened in the suit. The Elrod Interve-nors and the Haggard Trust Intervenors are the oil and gas lessors of the mineral interests in the disputed quarter sections. All of the Intervenors aligned themselves with Discovery and Patriot.

The parties stipulated that the competing claims of ownership of the mineral estates in the disputed quarter sections emanated from a common source of title. See Rogers v. Ricane Enters., Inc., 884 S.W.2d 763, 768 (Tex.1994) (a claimant in a trespass to try title action may recover by proving superior title out of a common source). The parties filed competing traditional motions for summary judgment. The trial court entered an order in which it granted Discovery and Patriot’s motion, the Elrod Intervenors’ motion, and the Haggard Trust Intervenors’ motion, and denied Endeavor’s' motion. In its order, the trial court awarded Discovery and Patriot exclusive title to, and possession of, the oil and gas leasehold estates in the disputed quarter sections. Endeavor appeals the trial court’s order. We affirm.

The record shows that Endeavor acquired mineral leasehold interests in the N/2 of Section 9 and all of Section 4 under four oil and gas leases (the Endeavor Leases). The Endeavor Leases were dated March 24, 2004, July 15, 2004, July 16, 2007, and July 16, 2007. The March 24, 2004 lease was from Mildred Haggard, as lessor, to Jimmy Henson, as lessee. This lease covered the N/2 of Section 9, which [172]*172consisted of about 320 acres of land, and it was for a primary term of three years. Henson assigned an interest in the lease to Endeavor. The July 15, 2004 lease was from Janice K. Gaither, as lessor, to Jimmy Henson, as lessee. This lease covered all of Section 4, which consisted of about 640 acres of land, and it was for a primary term of three years.2 Henson assigned an interest in the lease to Endeavor. One of the July 16, 2007 leases was from Joseph Elrod, as lessor, to Endeavor, as lessee. This lease covered the South Half (S2) of Section 4, and it was for a primary term of six months. The other July 16, 2007 lease was from David Elrod, as lessor, to Bryan Gossett, as lessee. This lease covered the S/2 of Section 4, and it was for a primary term of six months. Gossett assigned an interest in the lease to Endeavor. At the time the Endeavor Leases were executed, the Intervenors or their predecessors in interest owned a combined 100% of the surface and mineral estates in the disputed quarter sections that are involved in this appeal (NW/4 of Section 9 and SW/4 of Section 4).

Each, of the Endeavor Leases contained a continuous development clause that provided as follows:

17. At the expiration of the Primary Term hereof, this lease shall automatically terminate as to each proration unit upon which there is no well or wells thereon located and then producing oil or gas in commercial quantities unless Lessee is then engaged in drilling or reworking operations in accordance with the other provisions hereto. In the event Lessee is engaged in drilling or reworking operations at the expiration of the Primary Term, this lease shall remain in full force and effect as to all proration units so long as a continuous drilling program is maintained whereby not more than one-hundred twenty (120) days shall elapse from the completion of one well to the commencement of another well until all proration units are tested.

The Endeavor Leases also each contained the following automatic termination clause:

18. At the end of the Primary Term or upon the cessation of the continuous development of the Leased premises required above, whichever is later, this lease shall automatically terminate as to all lands and depths covered herein, save and except those lands and depths located within a governmental proration unit assigned to a well producing oil or gas in paying quantities and the depths down to and including one hundred feet (100’) below the deepest productive perforation(s), with each such governmental proration unit to contain the number of acres required to comply with the applicable rules and regulations of the Railroad Commission of Texas for obtaining the maximum producing allowable for the particular well.

The summary judgment evidence showed that Endeavor, as the operator, drilled and completed two producing wells—the Haggard “9” # 1 Well and the Haggard “9” # 2 Well—on the North Half of Section 9 and two producing wells—the Elrod “4A” # 3 Well and the Elrod “4A” # 4 Well—on the South Half of Section 4. The Haggard wells were both located in the NE/4 of Section 9; the Elrod wells were both located in the SE/4 of Section 4. Endeavor did not drill any wells in the disputed quarter sections (NW/4 of Section 9 and SW/4 of Section 4). The parties stipulated that Endeavor’s Haggard “9” #1 Well, Haggard “9” #2 Well, Elrod “4A” # 3 Well, and Elrod “4A” # 4 Well had at all times continuously produced oil [173]*173in paying quantities. We will sometimes refer to these four wells collectively as the “Endeavor Wells.”

The Endeavor Wells are producing oil from the Spraberry (Trend Area) Field. The parties agree that production from this field is governed by special field rules that have been promulgated by the Texas Railroad Commission (RRC). A portion of the agreed summary judgment evidence contains a December 16, 2008 RRC “Final Order Amending Field Rule Nos. 2 and 3 in the Spraberry (Trend Area) Field Various Counties, Texas.” Rule 2 relates to spacing requirements for.wells. Rule 3 relates to acreage assigned to wells. Rule 3 provides in relevant part as follows:

The acreage assigned to an individual well shall be known as a proration unit. The standard drilling and proration units are established hereby to be EIGHTY (80) acres. No proration unit shall consist of more than EIGHTY (80) acres except as hereinafter provided.

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448 S.W.3d 169, 2014 Tex. App. LEXIS 11664, 2014 WL 5463884, Counsel Stack Legal Research, https://law.counselstack.com/opinion/endeavor-energy-resources-lp-v-discovery-operating-inc-texapp-2014.