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Chieftain Exploration Co., Inc. v. Gastar Exploration Inc.

Court of Appeals of Texas, Tenth District

August 30, 2017

CHIEFTAIN EXPLORATION COMPANY, INC., Appellant
v.
GASTAR EXPLORATION INC. AND CUBIC ASSETS, LLC. Appellee

         From the 369th District Court Leon County, Texas Trial Court No. NOT-13-126

          Before Chief Justice Gray, Justice Davis, and Justice Scoggins

          MEMORANDUM OPINION

          TOM GRAY Chief Justice

         Chieftain Exploration Company, Inc. appeals the trial court's summary judgment in favor of Gastar Exploration, Ltd. and Gastar Exploration Texas, L.P. (now Gastar Exploration Inc.) and Cubic Assets, LLC. Gastar also appeals the denial of its request for attorney's fees. Because the trial court did not err in granting Gastar's and Cubic's motions for summary judgment but did err in denying Gastar's request for attorney's fees, the trial court's Final Summary Judgment is reversed and remanded in part and, to the extent not expressly reversed and remanded, is affirmed.

         Background

         The Streater Gas Unit, a pooled unit, was formed in 2010 by Gastar and two other entities (Presco, Inc. and Navasota Resources, Ltd., LLP) which had executed various oil and gas leases included in the Unit. The Unit was comprised of 56 leases, covering 702.3 acres of land. These leases are listed in the Unit Designation. Tract 17, which was comprised of 56 surface acres, was included in the Unit. The Streater Well was drilled on the Unit but not on Tract 17.

         Title to the minerals in Tract 17, the 56 acre tract, is divided, with two parties each owning an undivided one-half of the minerals: the McBeth Family Limited Partnership and Lone Oak.[1] An undivided ¼ nonparticipating royalty interest, now owed by Chieftain, was carved out of Lone Oak's mineral estate.

         Before Chieftain acquired its NPRI, two oil and gas leases were executed, each covering the lessor's one-half of the mineral estate in the 56 acre tract: the McBeth Lease, executed by the McBeth Family Limited Partnership, and the Lone Oak Lease, executed by Lone Oak. The Lone Oak Lease covered 3, 466 acres, including the 56 acre tract. The McBeth Lease covered 591.3 acres, which also included the 56 acre tract.

         Chieftain's Appeal

         Chieftain sued Gastar asserting violations of the Natural Resources Code, breach of contract, and violations of the Texas Theft Liability Act and claiming it was owed oil and gas royalties from a well drilled in a pooled unit. As a successor in interest to Gastar's rights in the Streater Unit, Cubic intervened in the suit. Each party filed competing motions for summary judgment. Gastar filed a traditional motion for partial summary judgment asserting Chieftain's claims fail as a matter of law because Chieftain is not owed any royalties. Cubic filed a traditional motion for summary judgment asserting that the terms of a Ratification and the Lone Oak Lease defeat Chieftain's claims as a matter of law. Chieftain also filed a traditional motion for partial summary judgment on its claims. The trial court granted Gastar's and Cubic's motions and denied Chieftain's motion.

         Summary Judgment Review

         We review a trial court's order granting summary judgment de novo, taking as true all evidence favorable to the nonmovant, and indulging every reasonable inference and resolving any doubts in the nonmovant's favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). A party moving for traditional summary judgment has the burden to prove that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Seabright Ins. Co. v. Lopez, 465 S.W.3d 637, 641 (Tex. 2015). When both sides move for summary judgment on the same issue and the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both sides, determine all questions presented, and render the judgment the trial court should have rendered. See Seabright, 465 S.W.3d at 641-642.

         Issues

         Asserted by various issues, Chieftain's appeal centers on its desire to be paid what it alleges to be its share of royalties from the Streater Well located in the Streater Unit. We first discuss whether the Lone Oak Lease was pooled in the Streater Unit, which would entitle Chieftain to payment. If the Lease was not pooled, we then will address other reasons for payment asserted by Chieftain

         Pooling of the Lease/Land

         Oil and gas leases in general, and pooling clauses in particular, are a matter of contract. Samson Expl., LLC v. T.S. Reed Props., Inc., No. 15-0886, 60 Tex. Sup. Ct. J. 1413, 2017 Tex. LEXIS 599, at *13 (June 23, 2017); Wagner & Brown, Ltd. v. Sheppard, 282 S.W.3d 419, 424 (Tex. 2008). A lessee's authority to pool requires the lessor's consent, which is typically furnished through a pooling provision in the mineral lease. Samson, at *13; Se. Pipe Line Co. v. Tichacek, 997 S.W.2d 166, 170 (Tex. 1999). Pooling is valid only if done "in accordance with the method and purposes specified in the lease." Id. A ...


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