Texas Supreme Court Hears Arguments in Dispute Over Deed Granting Oil and Gas Interests
Austin, TX (Law Firm Newswire) May 12, 2017 – The Texas Supreme Court considered competing arguments over a property deed that granted oil and gas interests and gave rise to opposing royalty claims.
The case involves a 55-acre tract that was purchased by the Wenske family, with the previous owners retaining a one-quarter non-participating royalty interest (NPRI). The property was subsequently purchased by the Ealy family, with the Wenskes reserving three-eighths of the minerals. The Wenskes say the Ealys are solely responsible for the cost of the NPRI, but the lower court sided with the Ealys, holding that each of the mineral owners bears its proportionate share of the burden of the NPRI.
“Disputes over royalty interests are quite common,” said Gregory D. Jordan, an Austin oil and gas attorney with the Law Offices of Gregory D. Jordan who has handled many such claims. “Which party bears the burden of a royalty interest usually depends on the language of the relevant deeds. In order to avoid unexpected consequences, parties should consult competent counsel when conveying oil and gas interests,” continues Jordan.
The state high court’s decision may rest on whether its holding in the 1969 case of Bass v. Harper is still good law. In that case, the Texas Supreme Court held that a deed conveyed a royalty interest that was burdened by multiple prior royalty reservations, leaving the property buyer with a fractional interest. The Wenskes argued that their case is directly analogous, but the Ealys argued that the deed language in the present case is different from that in Bass, and the holding in Bass is no longer good law.
The Wenskes argued that the Bass case is controlling, and the plain language of the deed shows that the Ealys are taking the property subject to the burden of the NPRI, and the Wenskes are reserving a royalty interest free of that burden.