SM Energy Co. v. Sutton
376 S.W.3d 787
| Tex. App. | 2012Background
- 1966 Briscoe Ranch lease allowed partial releases and relieved lessee of obligations for released acreage.
- Sutton Producing reserved an ORRI of 5.46875% in the original assignment to Kenoil; a 1978 assignment added a 2.00% ORRI with savings language.
- Crimson Energy released about 22,000 acres back to Briscoe Ranch in 2000, ending Crimson Energy’s leasehold on those acres.
- 2001 leases were signed for the released acreage and subsequently assigned down to SM Energy via chain of transfers.
- Suttons sued SM Energy in 2010 for unpaid ORRIs and prejudgment interest; trial court granted Suttons’ summary judgment; SM Energy appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Suttons’ ORRIs were extinguished on release of acreage. | Suttons: ORRIs attach to new leases via savings clauses. | SM Energy: ORRIs extinguished by partial release under Fain rule. | ORRIs extinguished; savings clauses do not save them. |
| Whether savings clauses apply to carry ORRIs to 2001 leases. | Suttons: savings clauses extend to 2001 leases. | SM Energy: savings clauses do not apply post-release, no express continuation. | Savings clauses do not apply; ORRIs not burdening 2001 leases. |
| Whether any remaining issues (discovery rule, limitations, prejudgment interest) are moot. | moot; raised issues not deciding the outcome. |
Key Cases Cited
- Sunac Petroleum Corp. v. Parkes, 416 S.W.2d 798 (Tex. 1967) (ORRI does not survive lease termination without express provision)
- EOG Resources, Inc. v. Hanson Production Co., 94 S.W.3d 697 (Tex.App.-San Antonio 2002) (incorporated agreements construed together; extinguishment absent express saving provision)
- Sasser v. Dantex Oil & Gas, Inc., 906 S.W.2d 599 (Tex.App.-San Antonio 1995) (overriding interests extinguished on termination absent express saving clause)
- Fain v. McGaha, 331 S.W.2d 346 (Tex.Civ.App.-Fort Worth 1960) (partial release extinguishes ORRIs unless express contrary provision)
- Birnbaum v. Swepi LP, 48 S.W.3d 254 (Tex.App.-San Antonio 2001) (court considers entire lease and assignments to interpret ‘termination of the present lease’)
- Keese v. Continental Pipe Line Co., 235 F.2d 386 (5th Cir.1956) (comments on ease of destroying oil payments; informs interpretation of terminating provisions)