American Oil and Gas Reporter - March 2016 - 19

IndustryDigest
making its statutorily required 90-day
finding, the service has instead launched
a five year status review of the beetle,"
the notification reads.
According to the litigants, USFWS
listed the American burying beetle in
1989 in part because of claims the
beetle's range had shrunk to a tenth of
its former size. "Claims of a 90 percent
reduction in the historical range of the
species were the foundation of the
service's decision to list the beetle as
endangered-yet scientifically
defensible, rangewide studies of
presence/absence or abundance have
never been completed for this highly
variable and eclectically distributed
species," the IPAA filing contends.
"While anecdotal evidence of a
historical decline in the range and
distribution of the beetle exists in the
public record . . . there is no evidence
that the beetle is in danger of extinction
across all or a significant portion of its
contemporary range."
The notification goes on to cite
further evidence that the co-plaintiffs
say supports a delisting, including an
expanding range and population, and
the lack of any proven threats. ❒

and the justices decided it did.
The justices rejected Chesapeake's bid
for rehearing on the same vote, reissuing
the opinion with minor word changes.
TIPRO had filed an amicus brief on
Chesapeake's behalf, warning that the
court's June 2015 decision could affect
thousands of ORRIs across Texas
(AOGR, January 2016, pg. 152). "If
allowed to stand, the ruling . . . will
result in substantial unintended
windfalls for ORRI owners," worried
TIPRO President Ed Longanecker. "It
also may call into question the
commercial viability of marginal wells."
Chesapeake had argued that under the
precedent of Heritage Resources v.
NationsBank, it could deduct
postproduction costs. The firm contended
the words "cost-free" in the lease language
meant free of production costs, while the
Hyders maintained that term meant free of
production as well as postproduction costs
(AOGR, January 2016, pg. 152).
In rejecting Chesapeake's motion for
rehearing, the Texas Supreme Court
replied, "Chesapeake argues that 'costfree overriding royalty' is merely a
synonym for overriding royalty, and a
number of lease provisions discussed in
other cases support that view. The
exception for production taxes, which we

have said are postproduction expenses,
cuts against Chesapeake's argument. It
would make no sense to state that the
royalty is free of production costs, except
for postproduction taxes."
The exception for taxes might be
taken to indicate that "cost free" refers
only to postproduction costs, the
justices write, but it is not uncommon
for a lease to include a tax exception
from production costs. ❒

AFPM, API Seek Review
Of EPA Biofuel Mandate
WASHINGTON-The U.S.
Environmental Protection Agency's
renewable fuel standard rule making has
sparked legal responses from two
industry groups.
The American Fuel & Petrochemical
Manufacturers filed a petition for
review with the U.S. Court of Appeals
for the District of Columbia Circuit on
Feb. 10, asserting the EPA had failed to
comply with federal requirements to
establish biofuel volume requirements.
A day later, the American Petroleum
Institute filed for a review in the U.S.
Court of Appeals in Washington.
"Despite the agency's best efforts,
certain aspects of the final RFS rule still

Texas Supreme Court
Rejects Chesapeake Bid
To Rehear Hyder Case
DALLAS-The Texas Supreme Court
has rejected Chesapeake Energy Corp's
motion for rehearing in a case that the
Texas Independent Producers & Royalty
Owners Association worries could have
negative consequences for producers.
On Jan. 29, the court declined to rehear
its June 2015 ruling that upheld a 2014
appeals court decision involving lease
language for a Barnett Shale operation
that awarded a Fort Worth family at least
$1 million in royalties and attorney fees.
In its June 2015 ruling in Chesapeake
v. Hyder, the Texas Supreme Court, in a
5-4 vote, affirmed that Chesapeake
improperly deducted post-production
costs from gas royalties paid to the
landowners. According to the court, an
overriding royalty on oil and gas
production generally is free of production
costs, but must bear its share of
postproduction costs unless both parties
agree otherwise. The only question the
court had to resolve was whether the
lease expressed a different agreement,

Jim McKinney (left), senior vice president and manager at EnerVest Ltd., accepts the Independent Oil and Gas Association of West Virginia's 2016 Gunslinger Award for lifetime
service from 2015 winner, George Patterson, during IOGAWV's winter meeting in
Charleston, W.V. In making the presentation, Patterson described McKinney as one possessing "a broad base of knowledge about our industry, an uncanny ability to understand any new issues, and special people skills that move organizations, including this
one." McKinney served as IOGAWV president in 2013-14, as vice president and program
chairman in 2012-13, and has been involved with the association's Environmental and
Safety, Governmental Affairs, and Commerce committees. IOGAWV winter meeting coverage begins on page 92.

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American Oil and Gas Reporter - March 2016

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