The Eagle Ford Shale region of Texas is booming, and not just in the oil business. Legally, too, with area experts predicting “a crush of lease litigation,” as production companies and royalty owners of land tracts in the Eagle Ford gear up to contend mineral rights allocations. Nearby San Antonio lawyers are gearing up, too, for the “gush” of lease disputes now that oil is right at $50 a barrel.
So what’s really going on, and why are regional courtrooms filling up with lawsuit after lawsuit disputing deeds and title rights? The downturn of oil prices have “far-flung relatives surfacing to assert claims against their Texas cousins, alleging they mishandled a mineral lease” now that the money isn’t rolling in quite so hard and fast as just a few months ago as drilling has slowed or even halted on some tracts. And when the money gets thin, the folks ain’t happy. At least not in the Texas Hill Country, as San Antonio lawyers are all too aware.
But not everyone is scrambling to file a lawsuit. Some attorneys insist “there will be a contingent of landowners content to wait out the downturn without litigation,” opting to wait for higher prices before commencing drilling again. Still, part of what makes the Eagle Ford area leases so complicated is the sophistication of the legal terms in leases, an oil and gas attorney like Michael Hancock knows.
Unlike previous mineral rights agreements back in the first oil heyday at the turn of the 20th century, or even “in past decades,” these agreements made by landowners “in a power position secured environmental protections, indemnities, and surface rights protections—on top of 25 percent royalties—that allowed them to maintain the cattle ranches, homesteads, and flourishing wildlife on their properties amid a massive oil boom.” In other words, they didn’t just roll over or pick up and move off when Big Oil came to town. Standing their ground when signing the leases means that they have high expectations for controlling what goes down on—and comes up from—their land.
Mike Hancock and other San Antonio lawyers have seen owners become “much more aggressive and assertive in protecting their rights,” including their stewardship of the land’s “ecology and wildlife.” Which means oil production companies are coming under more intense scrutiny for how they use their land, and how much they pay their lessors.
Except that’s only one source of the increased litigation in the area. The other is the battles between family heirs, as San Antonio lawyers have seen, with claims of mismanagement clogging up courtrooms in which there is no quick resolution. “The court’s docket is so busy, there’s little time for the judges to halt everything for a lengthy trial, and visiting judges are sometimes assigned to oversee major disputes that require weeks of courtroom battle.”
Whether it’s about the distribution of royalties according to deed and lease interpretations or violation of contract in terms on the part of the production companies, the courtroom battles may even outlast the oil price slump.