Sitting for the court: Justice Paul W. Green, Justice Nathan L. Hecht, Chief Justice Wallace B. Jefferson, Justice Phil Johnson, Justice David Medina, Justice Dale Wainwright, Justice Don R. Willett, Justice Scott A. Brister, Justice Harriet O'Neill
Justice Willett is not sitting.
Wagner & Brown Ltd., et al. v. Jane Turner Sheppard
from Upshur County and the Sixth District Court of Appeals, Texarkana
For petitioners: Macey Reasoner Stokes, Houston
For respondent: Ben L. Mesches, Dallas
The Supreme Court will hear arguments on the issue of whether oil and gas lease termination for failure to pay royalties automatically terminates the pooled unit. A principal issue is whether an oil and gas lease terminated for royalties nonpayment attributed to a clerical error automatically terminates the mineral-rights owner’s participation in a pooling agreement. In this case Sheppard leased her one-eighth mineral interests in almost 63 acres to a production company, C.W. Resources, for a quarter of the royalties free of production costs. C.W. Resources and Wagner & Brown had leases on most of the other seven-eighths mineral rights. Under a pooling agreement, Wagner & Brown combined Sheppard’s tract with others it leased and drilled two producing wells. Sheppard was not paid royalties within 120 days of production from those wells, which terminated her lease by its terms. She sued to declare her participation in the pooling agreement terminated because her lease had terminated and to declare she was entitled to a one-eighth share in production from the two wells producing on her tract. The trial court held that her interest was not subject to the pooled unit agreement. The court of appeals affirmed.