Texas Supreme Court Sides with Mineral Owners

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The long wait is finally over for the Hyder family, the Texas landowners who has been battling Chesapeake Energy for years.

Last week, the Texas Supreme Court upheld a lower court’s ruling to award at least $1 million in royalties, interest and attorney fees to the family. The state high court heard the case in March of 2015.

In 2010, property owners (Hyders) sued Chesapeake for improperly subtracting postproduction costs from their royalty checks for gas taken from their own property. In 2012, state District Judge Melody Wilkinson awarded the family nearly $1 million and the decision was upheld last year by the 4th Court of Appeals in San Antonio. Chesapeake continued to fight the decision and in June, the Texas Supreme Court sided with the Hyders. Chesapeake immediately appealed.

This high-profile case has lots of people taking sides with many submitting briefs to the court. The Texas Land and Mineral Owners Association, the National Association of Royalty Owners-Texas Inc. and the Chesapeake Barnett Shale Royalty Owners recently filed “amicus curiae” briefs, publicly siding with the Hyders.

“This is one of a long line of cases in which Chesapeake has sought to profit at the expense of royalty owners.” - National Association of Royalty Owners-Texas

On the flip side, pro-industry leaders were concerned that the decision in the Hyder case could create chaos in the courts for other royalties cases across the Lone Star State. More than a dozen oil companies and pro-industry organizations banded together to file briefs in favor of rehearing the case.

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Elizabeth, what exactly was their language that Chesapeake apparently violated by taking deductions against their royalty?

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William,

The Lease in question contained the following pertinent clauses:

“Lessees’ covenant and agree to pay Lessors’ the following royalty: (a) twenty-five percent (25%) of the market value at the well of all oil and other liquid hydrocarbons produced and saved from the Leased Premises as of the day it is produced and stored; and (b) for natural gas, including casinghead gas and other gaseous substances produced from the Leased Premises and sold or used on or off the Leased Premises, twenty-five percent (25%) of the price actually received by [appellants] for such gas․ The royalty reserved herein by Lessors’ shall be free and clear of all production and post-production costs and expenses, including but not limited to, production, gathering, separating, storing, dehydrating, compressing, transporting, processing, treating, marketing, delivering, or any other costs and expenses incurred between the wellhead and Lessees’ point of delivery or sale of such share to a third party.”

AND

“Lessors’ and Lessees’ agree that the holding in the case of Heritage Resources, Inc. v. Nationsbank, 939 S.W.2d 188 (Tex.1996) shall have no application to the terms and provisions of this Lease.”

AND

“there shall be no deductions from the value of the Lessor's royalty by reason of any required processing, cost of dehydration, compression, transportation, or other matter to market such gas.”

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To me that sounds crystal clear!