2021 Q1

2021 Q1

National Association of Division Order Analysts January / February / March 2021

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NADOA N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s G R O W T H T H R O U G H E D U C T I O N

Volume MMXXI • No 1

www.NADOA.org

Contents Feature

NADOA 2021 Officers President Lewis Box, CDOA 1st Vice President Michele Lawton 2nd Vice Presiden t April Luedecke, CDOA Treasurer Michelle Harris-Fairclough, CDOA Corresponding Secretary Vicki Danielson, CDOA Recording Secretary Maryann Maimo, CDOA, CPLTA The NADOA News Magazine is a quarterly publication of the National Association of Division

Articles

Ellis Rudy Memorial Scholarship................................... 5 Legal Updates Ohio Supreme Court on Dormant Minerals and Marketable Title Act Gerrity v. Chervenak............................................ 10 West v. Bode.......................................................... 11 Texas – Drilling on Non-Contiguous Acreage. ......... 12 Oklahoma – Cline v. Sunoco, Inc............................. 14 Institute Preview........................................................... 21 Leadership Lines........................................................... 29 OERB Educational Resources.............................................. 30 Discovery Lab. ......................................................... 31

Order Analysts PO Box 44009 Denver CO 80201

In This

Subscription: By membership to NADOA, at $75.00 per year. News Magazine Editor Rona L. Erickson, CDOA Kaiser-Francis Oil Company [email protected] 918.491.4319 Associate Editors April Luedecke, CDOA [email protected] Cheryl Hampton [email protected]

Issue

President’s Corner. .................................................1 Decimal Points.......................................................2 Division Order $al.................................................3 Cobwebs. ................................................................4 Certification...........................................................6 2021 Membership Recognition. ..............................8 Self-Care...............................................................15 New Members.......................................................15 Counterpart Connection.......................................16 2021 NADOA Board/Committee Chairs...............33 University Program Calendar...............................34 Calendar of Events. ..............................................35

Graphic Design, Paul Beach

On the Cover: Catchin’ rays on the Fort Lauderdale beach

All rights reserved. No part of this publication may be reproduced/copied without written permission. Editorial disclaimer: The contents of this newsletter are intended for member use only and any other use without permission from the NADOA Board of Directors is strictly prohibited. Articles published herein represent the view of the authors; publication neither implies approval of the opinions expressed nor accuracy of the facts stated and NADOA accepts no liability for misprints.

President’s

Corner

Lewis Box, CDOA 2021 NADOA President

Can you believe this pandemic has been raging across our country and around the world for more than a year now? I hope that you and yours have been able to stay safe as the vaccine rollout ramps up. As this issue of the magazine was being readied to go to press, a large swath of the country was in the grip of an icy winter storm that caused additional suffering. The NADOA Board and the Institute Committee both held virtual meetings in late January. We have been planning so far as though Institute will proceed in September as scheduled. The Institute committee is running scenarios for both reduced capacity and full capacity. We are at the mercy of the various Florida health departments for capacity limits. We won’t begin to know what the capacity requirements will look like until we get much closer to the date of Institute. Speaking of Institute, we will be offering an early bird member registration special of $575 until June 31, with member pricing at $595 after the special, and non-member pricing of $675. Institute is scheduled for September 8-10, 2021. As always, if you’d like to get involved in helping out at Institute please reach out to myself (lbox@ comstockresources.com), Jennifer Kegans ([email protected]), or Norma Dooley ([email protected]). Volunteers are welcome and we will take all the help we can get! Keep your eyes peeled for additional registration information throughout the newsmagazines; room rates, transportation options, and other important information will be included. I do want to make sure that you are aware that NALTA has rescheduled their conference for the exact same dates as the NADOA Institute. I know I’m partial to a sandy beach over rainy, cloudy mountains. We hope you’ll be able to join us in sunny Fort Lauderdale, FL for the 48th edition of NADOA’s Institute.

Please remember to wear your mask, wash your hands for 20 seconds, and stay 6 feet away from everybody until we can all get this pandemic under control.

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G r o w t h T h r o u g h E d u c a t i o n - J a n u a r y / F e b r u a r y / M a r c h 2 0 2 1

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NADOA

Decimal Points

Regional Reporters

Rona Erickson, CDOA Editor

April Luedecke, CDOA Associate Editor

Cheryl Hampton Associate Editor

ABADOA

Steptoe & Johnson PLLC [email protected] Donna King, CDOA [email protected]

Remember to keep your NADOA directory information updated. Due to all the changes taking place in our industry and the world, it is more important than ever to maintain professional contacts and receive the educational benefits of membership in NADOA. 2021 NADOA Article Deadlines

CAPDOA

DADOA OPEN DALWORTH Lewis Box, CDOA

[email protected]

HADOA

OPEN

MAADOA

Angie Coady, CDOA [email protected]

First Quarter..............February 12, 2021

PBADOA

OPEN

Second Quarter. ...............May 14, 2021

SADOA

Joe Anderson [email protected]

Special Institute Edition. .....July 2, 2021

Arkansas

Jackie Clotfelter, CDOA [email protected] Kimberly A. Backman [email protected]

Third Quarter. ....... September 24, 2021

North Dakota

Fourth Quarter......... November 5, 2021

New Mexico

Zachary P. Oliva [email protected]

If you have a suggestion for someone to act as a Regional Reporter to help NADOA keep abreast of current legislation and legal issues for your region, please submit the name or the name of the firm.

Louisiana

OPEN

Division Order $al

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Steptoe & Johnson PLLC – Visit: https://www.steptoe-johnson.com and click on News for details. Capturing the Energy of Renewables series – See Calendar of Events for Dates The Steptoe webcasts are recorded. To access previously recorded webcasts, go to Steptoe- Johnson.com and enter Webcasts in the search feature. Kiefaber & Oliva LLP - Visit www.kolawllp.com/events for further information. LANDMAN EDUCATION SERIES – Upcoming Webinars on Calendar of Events Locke Lord LLP - Visit www.lockelord.com and click on News & Events for details. ENERGY TRANSITION WEBINAR SERIES – See Calendar of Events for Dates As a way of getting better every day, in 2021 NADOA Website Committee welcomes Local Division Order Associations to use the GoToWebinar forum for their 2021 events to foster more educational opportunities at the local level. If your organization is interested, please email the 2021 Webinar Committee at [email protected]. If you are aware of other educational webinars, please advise NADOA News Magazine editor, Rona Erickson ([email protected]), Associate editor, April Luedecke (aprilluedecke@yahoo. com), Associate editor, Cheryl Hampton ([email protected]), or 2021 NADOA Education Chairs, Yoli Bazan or Stephanie Nguyen ([email protected]).

Cob Webs

Educational webinars can be approved for 1 (one) CDOA certification point. NADOA webinars, Steptoe & Johnson PLLC webcasts and Kiefaber & Oliva LLP webinars are pre-approved. Please check the certification page to determine if other webinars are pre-approved or need to be submitted for approval to the NADOA Certification Committee. Contact Sherry Werth for approvals ([email protected]) OR cdoa@ nadoa.org. Certification points should only be applied for after completing the event. If you are unable to attend an event due to unforeseen circumstances, it is an ethics violation to apply for the credit. NADOA - Webinar information and registration links will be posted on the website (www. nadoa.org). Links to recorded webinars are available to NADOA members by using the Webinar link in the Members Only section on the homepage. For webinar questions or comments, contact [email protected]

SEE CALENDAR OF EVENTS FOR TOPICS AND DATES

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The scholarship fund has been established to assist NADOA members financially who may not have company support, to help defray the cost to attend the annual NADOA Institute. If you are interested in applying for a scholarship in 2021, please complete the application and submit it no later than June 1, 2021 to Russell T. Rudy at [email protected] or mail to: Russell T. Rudy Energy, LLC, 5701 Woodway Dr., Ste. 346, Houston, TX 77057-1505

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CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “… applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published NADOA Certification Committee P O Box 1656 Palm Harbor, FL 34682 If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail.

CANDIDATES FOR CERTIFICATION

Shea Bradley – Dallas, TX

Angelica Oubre – Houston, TX

James Spillers – Kinder, LA

CANDIDATES FOR RECERTIFICATION

Kathy Cloud – Houston, TX Dorena Garza – Houston, TX Jennifer Gurgevich – Midland, TX Felicia Hall – The Woodlands, TX

Sydney Anne Harrell – Irving, TX Megan McKee – Fort Worth, TX Stephanie Moore – Willis, TX Edward Rielly – Houston, TX

Melinda Warren – Midland, TX Shelby Watson – Houston, TX Diana M Weldon – Houston, TX Connie Wilcoxson – Rockwell, TX

2021 CERTIFICATION COMMITTEE

Chairman

Yolanda “Yoli” Bazan, CDOA [email protected]

Hilcorp

Recertification Credits

Sherry Werth, CDOA

[email protected] [email protected]

Independent

Recertification Applications Darryn McGee, CDOA

Cimarex Energy

Applications & Candidate Publications

Stephanie Moore, CDOA

[email protected]

Callon Petroleum Company Comstock Resources

Review Manual/Forms

Lewis Box, CDOA

[email protected] [email protected] [email protected]

Testing Policies

Bonnie Didrickson, CDOA Megan McKee, CDOA

Independent

Range Resources

WHAT’S GOING ON WITH THE CDOA COMMITTEE By Bonnie Didrickson, CDOA

A new website is about to roll out for submitting CDOA credits. The new CDOA portal is scheduled to be up and running on March 2, 2021. During the transition to the new system, CDOA credits cannot be entered from February 15 to March 1, 2021. A tutorial has been set up for help in navigating the new website. To maintain consistency and to avoid confusion,

all credits must be submitted within 90 days of the event. This includes seminars, webinars, and yearly employment points. The Committee has a new email address – [email protected]. As always, the Committee is here to serve the membership. Always feel free to contact us with any questions.

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Certification Update Greetings Fellow CDOAs & Future CDOAs, It is unbelievable how the year is flying by so fast and we are already in March. As everyone is aware, these are trying times for the oil & gas business. In light of the challenging times ahead of us, be assured your CDOA Certification Committee is working hard this year to improve the CDOA Certification and Recertification experience. I am excited to let everybody know that NADOA will have a “NEW” & “IMPROVED” Certification System up and running on March 7, 2021. Note that the date was changed due to our Texas Winter Armageddon. Unfortunately, our website provider did not have electricity for an entire week. Our current system is no longer being supported from a technical standpoint. Please bear with us as we migrate to the new system. Additional information will be forthcoming when the new system is up and running the second week of March. As part of the CDOA Committee effort to improve, effective March 2, 2021, the CDOA Certification Policy Article IV, Section B has been revised. As a CDOA, you will have an additional 30 days to enter points for the original seminar, event, or webinar in the CDOA Portal. To maintain consistency and avoid confusion, all credits must be submitted within 90 days of the event. This includes seminars, webinars, and yearly employment points. This basically means that any NADOA webinar can be watched & entered for points anytime from the initial airing date for up to 90 days. You read that right. Effective March 2, 2021, you have an extra 30 days to enter your points into the CDOA Certification Website!! As always, it is the CDOA’s responsibility to enter the points into the CDOA Portal. Unfortunately, we are not able to apply the new policy retroactively. All pre-approved credits set up on/after March 2, 2021, will fall under the new 90-day deadline. The new language within the Policy reads as follows, “Each CDOA will be responsible for reporting the number of recertification credits appropriate for a seminar/ event attended by the CDOA, subject to audit by the Certification Committee. Each CDOA must enter the event on the CDOA member certification system

within sixty (60) ninety (90) days of the ORIGINAL seminar/event’s date. Did you know that the CDOA Committee has a new email address – [email protected]? I challenge and encourage each of you to get involved and reach out to the Certification Committee for volunteer opportunities. 2020 was a record year for credit submissions. Although we approved nearly 400 total credit hours less than we did in 2019, we supported more than 700 individual lines of credits than we did in 2019 . Due to the current environment, we have more one-hour credit submissions than in the past. Please continue to help us out by requesting pre-approved credits whenever possible. To obtain pre-approval, please send a request to cdoa@ nadoa.org and include the following information: Date, Time/Length of presentation, Speaker, Topic, detailed description of the Presentation, or a copy of the presented materials. We ask that you give us 2 weeks’ notice whenever possible. If you have an in-house event on the ‘fly’, feel free to ask for approval after the event. It’s easier for both the member and the Committee to submit/approve a pre-approved credit rather than a CDOA entering the credit(s) manually. If you have any questions, please contact Sherry Werth at srw6886@gmail. com and include [email protected] in your email. Are you aware that in 2020 we finally reached 701 CDOAs? CDOAs are all part of a small & elite group of professionals. NADOA is your organization, and the CDOA Committee welcomes your involvement. Whether it is to submit a suggestion such as testing alternatives (of course being budget-conscious), volunteering to re-write a Chapter in the CDOA Manual, creating a Study Group at your office, or volunteering to innovate CDOA Flash Cards in Quizlet, I desire to encourage each of you to recognize your natural talents and bring them forward for the next generation of Division Order Analysts in the Oil & Gas Industry. Your efforts can and will make a difference. As always, the Committee is here to serve the membership. Please feel free to contact us with any questions. By Yoli Bazan CDOA, CPLTA

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NADOA Membership Recognition Michelle Harris-Fairclough, CDOA Do you have a great mentor that you’d like to thank? Do you know an organization that is promoting the advancement of the Division Order profession?

Nomination categories and an example form are included in this issue of the NADOA News Magazine or are available on the NADOA website: http://www.nadoa.wildapricot.org/page- 1709232 Deadline: June 1, 2021

Consider nominating someone or an organization for an NADOA Membership Recognition Award.

2021 Nominations for NADOA Membership Recognition

I would like to nominate ___________________________________________________ for the Ellis Rudy Memorial Lifetime Achievement Award. This award is presented to the NADOA member who has exemplified the Division Order profession through demonstrated leadership contributions to the industry and the profession during his or her career. I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Corporate Award. This award is presented to the group or company that has contributed to NADOA’s growth and development, the Division Order profession and the industry during the past year. I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Award for Education. This award is presented to the NADOA member who has dedicated their time and service to the betterment of Division Order Professionals through influence and mentorship. I would like to nominate ___________________________________________________ for the NADOA Membership Recognition Award for Interaction. This award is presented to the NADOA member or affiliated organization who has had a positive community impact and extraordinary service and dedication in leading and promoting the Division Order profession. I would like to nominate ___________________________________________________ for the Russell Schetroma Memorial Speaker’s Award. This award is presented to the NADOA member who has made a difference in the lives of our members by contributing to the growth, development and education of our association or industry during the past year.

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2021 Nomination Form for NADOA Me bership Recognition

2021 Nomination Form for NADOA Membership Recognition

I would like to nominate ___________________________________________ for the NADOA Membership Recognition Award for Interaction . This award is presented to the NADOA member or affiliated organization who has had a positive community impact and extraordinary service and dedication in leading and promoting the Division Order profession. Please detail the nominee’s involvement in NADOA, the services they have performed and/or contributions they have made (You may attach a separate sheet if necessary). Please detail the nominee’s involvement in NADOA, the services they have performed and/or contributions they have made (You may attach a separate sheet if necessary).

___________________________________________________ Signature ____________________________________________________ Please Print Name ____________________________________________________ Email Address

Send nominations to: Member Recognition Awards Committee c/o Michelle Harris-Fairclough ([email protected]). Nominations will be accepted through June 1, 2021.

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Legal

Update These materials reflect only the personal views of the authors and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these

materials may or may not be relevant to any particular situation. Thus, the authors and their law firm cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the authors or their law firm. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.

Ohio Supreme Court Rules on DMA’s Notice Requirements for Abandonment of Mineral Interests

Ohio

On December 17, the Supreme Court of Ohio held in Gerrity v. Chervenak that the circumstances of each respective case will control the efforts a surface owner must take before resorting to notice by publication under the Dormant Mineral Act (DMA). In Gerrity, Timothy Gerrity sought a judgment quieting title and declaring him the owner of the mineral estate underlying a 108-acre property in Guernsey County. John Chervenak—trustee of the Chervenak Family Trust, owner of the surface estate—claimed that the mineral estate belonged to the trust because it had been deemed abandoned under the DMA. Mr. Gerrity, conversely, claimed that Mr. Chervenak’s use of the DMA was ineffective because he failed to comply with the Act’s notice requirements. The Guernsey County Court of Common Pleas awarded summary judgment to Mr. Chervenak, and the Fifth District Court of Appeals affirmed that decision. The Supreme Court of Ohio held that Mr. Chervenak complied with the DMA’s notice requirements. In so doing, the Court rejected Mr. Gerrity’s argument that a surface owner must identify all mineral interest holders and attempt service by certified mail on each because the DMA acknowledges that identification of all mineral interest holders may not be possible and therefore permits notice by other means (i.e., publication). The Court declined to adopt a bright-line rule detailing the efforts a surface owner must expend before resorting to notice by publication, leaving the creation of such a rule to the legislature. Nevertheless, the Court provided some guidance by reviewing Mr. Chervenak’s notice efforts. Prior to resorting to service by publication, Mr. Chervenak searched the records of Guernsey County where the property was located and learned that the mineral interest holder of record had a Cleveland address. Mr. Chervenak then searched in the Cuyahoga

County Recorder’s Office and Probate Court for records that would establish a more recent address or heirship information. Having found none, he mailed notice to the Cleveland address, which was returned undelivered. The Court concluded that those efforts were reasonably diligent, and that Mr. Chervenak properly resorted to service by publication. The Court also concluded that, under the circumstances, Mr. Chervenak was not required to perform an online search. In conclusion, the Court held that a “[r]eview of public- property and court records in the county where the land subject to a severed mineral interest is located will generally establish a baseline of reasonable diligence in identifying the holder or holders of the severed mineral interest.” The Court emphasized, however, that whether additional efforts are necessary “will depend on the

circumstances of each case.” About the Authors:

Jason Lucas, MEMBER Jason Lucas focuses his practice in the areas of energy transactions and natural resources law. His experience includes major energy transactions, large-scale due diligence projects, mineral title opinions, and closings. Phone: (304) 231-0464 Email: [email protected]

Dallas F. Kratzer III, OF COUNSEL

Dallas Kratzer is a litigator whose practice focuses on business litigation as well as labor and employment law. Phone: (614) 458-9827 Email: [email protected]

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Ohio Supreme Court Finds No Conflict Between MTA and DMA in Reuniting Mineral Interests

Ohio

On December 2, 2020, the Supreme Court of Ohio issued its opinion in West v. Bode , 2020-Ohio-5473, and determined that either the Marketable Title Act (“MTA”) or the Dormant Mineral Act (“DMA”) may be used to reunite a severed mineral interest with the surface property subject to that interest. In West v. Bode , surface owners Wayne and Rusty West sought a judgment declaring that the MTA had extinguished a severed oil and gas royalty interest relating to their property. Three mineral interest holders intervened and requested a judgment declaring that they owned a fraction of the oil and gas royalty interest. The Monroe County Court of Common Pleas awarded summary judgment to the mineral interest holders because, in its view, the DMA and the MTA irreconcilably conflicted with one another and, under those circumstances, the more specific DMA superseded the MTA in the mineral interest context. The Seventh District Court of Appeals reversed, concluding that the MTA and the DMA were “co-extensive alternatives.” In its holding, the Seventh District Court of Appeals stated that the applicability of the MTA or DMA in a particular case, “depends on the time passed and the nature of the items existing in the pertinent records ... If the claim is extinguishment under the MTA, then the 40-year provision and the test applicable thereto apply; if the claim is abandonment under the DMA, those statutory procedures and 20-year test of R.C. 5301.56 apply.” As such, the Seventh District Court of Appeals did not view the MTA and DMA as irreconcilable and mutually exclusive of each other. Thus, the Supreme Court of Ohio was asked to decide whether both the MTA and DMA apply to severed mineral interests, or whether the statutes are irreconcilable and therefore the specific statute of the DMA supersedes and controls over the general MTA. The Supreme Court of Ohio affirmed the decision of the Seventh District Court of Appeals and held that there is no irreconcilable conflict between the general

provisions of the MTA as applied to severed mineral interests, and the DMA and, as such, both acts retain effect. In reaching its conclusion, the Court relied upon the same rule as the Seventh District Court of Appeals that if a general provision (the MTA) conflicts with a special provision (the DMA), they shall be construed, if possible, so that effect is given to both. Otherwise, if the conflict between the provisions is irreconcilable, the special provision prevails as an exception to the general provision. While the Court noted that the MTA and the DMA were certainly different—observing that the MTA has a longer lookback period and is self-executing and that the DMA has different saving events and notice requirements—it held that those differences were reasonable and reconcilable. The Court further observed that they shared a central purpose of “simplifying and facilitating land title transactions by allowing persons to rely on a record chain of title” and that a mineral interest holder could comply with both statutory schemes to avoid losing any mineral interest. The Court stated that it was reasonable to believe that the legislature intended for the DMA to provide surface owners an additional mechanism to accomplish reunification of dormant mineral interests with the surface estate in order to promote the use of natural resources when those interests could not be extinguished under the MTA. Additionally, the Court cited its decision in Blackstone v. Moore , 2018-Ohio-4959, explaining that, in that decision, it “expressly affirmed” a judgment preserving mineral interest under the MTA. Lastly, it is important to note that the Court declined to consider whether owners of severed mineral interests are entitled to due process of law before the owner can be deprived of that interest. As the issue of due process was not raised by appellants in the trial court or court of appeals, the Court did not render any opinion on the merit of such argument.

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Contributors:

J. Kevin West, Member [email protected]

Andreah S. Frenn, Associate [email protected]

Dallas F. Kratzer III, Of Counsel

Dallas Kratzer is a litigator whose practice focuses on business litigation as well as labor and employment law. Phone: (614) 458-9827 Email: [email protected]

Drilling on Non-Contiguous Acreage Found to Trigger Offset Well Provision

Texas

December 29, 2020 — In Martin v. Rosetta Res. Operating, LP , 2020 Tex. App. LEXIS 7952, 2020 WL 5887566, the Texas Thirteenth Court of Appeals held that a lessee’s obligation to protect undrilled acreage from drainage and to spud an offset well were triggered by the plain terms of the lease. The Martin court construed an “unambiguous” mineral lease as a matter of law, and noted that it must enforce the intention of the parties as expressed in the four corners of the lease. In its written decision, the court challenged the parties’ construction of a lessee’s obligations in a pooled unit and enforced what it considered to be the plain language of the lease terms. The Martins are landowners in Live Oak County, Texas and entered into mineral leases (the “Martin Leases”) with Mesquite Production, Inc. (“Mesquite”) in 2001 and 2006. The leases each contained the following “Addendum 18”: Notwithstanding anything contained herein to the contrary, it is further agreed that in the event a well is drilled on or in a unit containing part of this acreage or is drilled on acreage adjoining this Lease , the Lessor [sic], or its agent(s) shall protect the Lessee’s [sic] undrilled acreage

from drainage and in the opinions of reasonable and prudent operations , drainage is occurring on the un-drilled acreage, even though the draining well is located over three hundred thirty (330) feet from the undrilled acreage , the Lessee shall spud an offset well on said un drilled acreage or on a unit containing said acreage within twelve (12) months from the date the drainage began or release the acreage which is un-drilled or is not a part of a unit which is held by production (emphasis added). Mesquite then assigned the Martin Leases to Rosetta Resources Operating, LP (“Rosetta”). In 2008, Rosetta, Newfield Exploration Co. and Dynamic Production, Inc. (collectively “Newfield”) established a pooled unit (the “Martin Unit”) which included some of the Martin Leases, among other leases. That same year, Newfield drilled the GU-1 Well in an area of the Martin Unit which is also covered by the Martin Leases. In 2009, Newfield established another pooled unit called the Simmons Unit, which is separated from the Martin Leases by two twenty-acre tracts. Newfield drilled the Simmons-1 Well on the Simmons Unit, 1.5 miles away from the GU-1 Well.

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In 2014, the Martins filed suit against Rosetta and Newfield, alleging that the defendants breached their contractual duties under Addendum 18 of the leases to protect the Martin Leases from drainage by the Simmons-1 Well. Newfield filed a motion for summary judgment, arguing that the duty prescribed in Addendum 18 was not triggered by the drilling of the Simmons-1 Well because the well was not located on the Martin Leases, on a unit including the leases, or on land adjoining the leases. The trial court granted the motion and the court of appeals affirmed. The court of appeals also concluded that the duty to prevent drainage and to spud an offset well was not triggered by drilling on the Simmons Unit because the Simmons Unit does not “adjoin” the Martin Leases. Rosetta then moved for summary judgment on the same basis as Newfield, and the Martins subsequently filed a second amended petition, asserting that Rosetta’s contractual duty under Addendum 18 of the Martin Leases was triggered not by the drilling on the Simmons Unit, but rather, by the drilling of the GU-1 Well on the Martin Unit. The trial court ultimately granted Rosetta’s motion for summary judgment, and the Martins appealed. The court began its analysis with stating the well- established principle that if a mineral lease is unambiguous, then the court will construe it as a matter of law and seek to enforce the intention of the parties as expressed in the lease. The court’s main issue with Addendum 18 was its lack of accuracy and clarity. First, the provision misidentifies which party owes the conditional “duty to protect” undrilled acreage from drainage, imposing the duty on the “Lessor, or its agent(s),” with the Martins being the lessors. However, Rosetta conceded that it was a scrivener’s error and should have imposed the conditional duty on the “Lessee.” Rosetta did not raise this issue at the trial court stage, and therefore the court of appeals could not affirm summary judgment on this basis. Second, Addendum 18 appears to be “out of order or incomplete” in its description of the lessee’s obligation to “spud an offset well.” Rosetta argued that its obligation to “spud an offset well” is conditional and is triggered only when two events occur: (1) a well is drilled on or in a unit containing the lease or on adjoining lands; and (2) “draining is occurring” on the undrilled acreage as determined by “the opinions of reasonable and prudent operations.” The court’s issue with this intended meaning is that language of Addendum 18 “does not

limit the duty to spud an offset well to situations where ‘drainage is occurring’ because there is no conditional language—such as ‘if ’ or ‘in the event’—directly pertaining to that clause.” However, the parties agreed that Addendum 18 imposes duties on Rosetta only in the event that both of the enumerated circumstances are present, and the court therefore addressed whether those circumstances triggered Rosetta’s obligations. Addendum 18’s first requirement for the obligation to “spud an offset well” to be triggered is that a well is drilled on or in a unit containing the lease or on adjoining lands. The court of appeals had previously concluded that the drilling of the Simmons-1 Well did not satisfy this condition because it did not adjoin the Martin Leases. However, the GU-1 Well is, in fact, located “on or in a unit containing part of ” the Martin Leases and therefore triggers the obligation to protect the Martins’ undrilled acreage from drainage. Rosetta argued that the GU-1 Well did not cause any drainage on the Martins’ undrilled acreage, but the court noted that was immaterial. The language of Addendum 18 imposes “a general duty to protect the undrilled land against all drainage whenever a well is drilled on that land or any adjoining property, without regard to which drilling activity was causing the drainage.” The second condition on Rosetta’s obligation to “spud an offset well” is that “in the opinions of reasonable and prudent operations, drainage is occurring on the un-drilled acreage, even though the draining well is located over three hundred-thirty (330) feet from the undrilled acreage.” The court noted that there was no dispute that drainage was occurring on the undrilled portions of the Martin Leases, and therefore the second condition was met. It did not matter that the drainage was caused by the Simmons-1 Well rather than the GU-1 Well, the obligations as provided by Addendum 19 were still triggered as a result of any drainage. Thus, the trial court’s judgment was reversed and remanded. When executing leases, it is easy to skim over the boilerplate language and assume all of the important leasing scenarios are covered. However, lessors and lessees alike should be forward-thinking in their leasing strategies and ensure the lease provisions precisely identify potential situations and the obligations imposed on each party should the occasion arise. As this case shows, pooling leased lands can create a host of unique issues, and an imprecise and unclear lease only exacerbates those issues.

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C ontact If you have any questions regarding this case law update or suggestions for topics to be covered in future issues, please call our office at 713-229-0360 or contact:

The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice or to create a lawyer-client relationship. © 2020 Kiefaber & Oliva LLP. All rights reserved. This publication may qualify as “Attorney Ad- vertising” requiring notice in some jurisdictions. Houston (principal office): 815 Walker St., Suite 1140, Houston, Texas 77002, 713-229-0360 | Columbus: One East Livingston Avenue, Suite B, Columbus, Ohio 43215, 614-349-4525.

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Zachary Oliva Partner [email protected]

Cline v. Sunoco, Inc. Civil Action No. 6:17-cv-313-JAG

Oklahoma

the Court agreed with Sunoco that it caused economic, not physical, harm to the plaintiff. However, Sunoco’s practice of “paying statutory interest” only after the roy- alty owner demanded it amounted to an enormous loss for the public. Although Sunoco may have “acted on the advice of counsel,” and Sunoco’s practice “was consistent with the industry practices,” its conduct clearly violated the PRSA and kept millions of dollars that belonged to others. Finding that Sunoco’s position that it could keep other people’s money indefinitely was reprehensible, the Court did not find that it erred in issuing the punitive damages award and declined to alter or amend the judg- ment. The Court further denied the renewed motion for a new trial and motion to alter the judgment made by Sunoco in November 2020 and the Order was issued on December 9, 2020.

In a decision handed down on December 9, 2020, US District Court Judge John A. Gibney, Jr. denied Sunoco’s motions for a new trial and to alter the August 2020 judg- ment. The Oklahoma Production Revenue Standards Act (“PRSA”) requires a first purchaser of crude oil, such as Sunoco, to pay proceeds promptly for the oil. If the purchaser pays late, it must pay interest to the owner of the well that produced the oil. On December 10, 2019, the Court concluded that the PRSA requires Sunoco to make statutory interest payments automatically with late payments. Perry Cline is the named representative of a class certified by the Court on October 3, 2019. In August 2020, the Court announced that Sunoco breached its obligation under the PRSA to pay statutory interest on late payments it made on oil proceeds. Accordingly, the Court entered judgment against the company, found for Cline and awarded actual damages in the amount of $80,691,486 and punitive damages of $75,000,000. On September 24, 2020, Sunoco filed two motions: one for a new trial and one to alter the judgment. In its argument that the punitive damages award is “excessive”, Sunoco contended that its “conduct was not reprehensible under the Supreme Court’s standards”. Regarding the “degree of reprehensibility of the defendant’s conduct”,

Avoid headaches from explaing the ins and outs of royalty ownership to your interest owners...

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Self Care 5 Ways to fight winter blues • Get outside • Connect • Help • Embrace the slow down • Breathe

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NADOA welcomes the following new Active members

REMINDER: Please remember to pay your dues as soon as possible even if your company is not picking up the expense. The benefits of being an active member are rewarding.

Megan Couchman Comstock Resources

Mikayla Inlow

EOG Resources Inc

RaChell Enix Modesta Sanchez Kaiser-Francis Oil Company Pioneer Natural Resources

Cameron J Holderread

Candice Walker

Equinor US

GeoSouthern Energy

NADOA welcomes the following new Associate member

Karissa Martin – Student

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Counterpart

Connection

Stan Vargas, CDOA Local Association Coordinator

APPALACHIAN BASIN ASSOCIATION OF DIVISION ORDER ANALYSTS (ABADOA) Association Based in the Pittsburgh, Pennsylvania Area Serving NY, OH, PA, WV (Inactive)

CAPITAL ASSOCIATION OF PROFESSIONAL DIVISION ORDER ANALYSTS (CAPDOA) Association based in the Oklahoma City, OK Area

………………………………… ARKLATEX ASSOCIATION OF DIVISION ORDER ANALYSTS (ALTDOA) Association based in the Shreveport, LA Area (Inactive) …………………………………

CAPDOA 2019 BOARD President: Kodi Foreman Vice President: Maryann Maimo

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Secretary: Amy Lofgren Treasurer: Amy Smith Director: Danny Peach Director: Hailey Price Director: Michelle Harris Fairclough Advisor: Whitney Katigan NADOA Director: Valerie Wible Coming up for 2021:

Historian Director.....................Brenda Pirozzolo – CGI Scholarship Director.................Lewis Box – Comstock Resources The Board Advisor (Former President)....................Angie Roberts - Range Resources Corp. NADOA Liaison.........................Megan McKee - Range Resources Corp. DALWORTH – CALENDAR OF EVENTS – 2021

02/25/2021 (TH)....................... Board ZOOM Meeting 03/25/2021 (TH).......................Webinar Luncheon

Will King – KPMG – Escheat Updates

4/29/2021 (TH) ........................Webinar Luncheon (TBD) 05/26/2021 (W)........................ Board ZOOM Meeting 06/2021..................................... SPRINGWEBINAR 07/29/2021 (TH).......................Webinar Luncheon (TBD) 08/26/2021 (TH).......................Webinar Luncheon (TBD) 09/08/21 – 09/10/21.................NADOA 48THAnnual Institute Marriott Harbor Beach Resort Fort Lauderdale, Florida 10/28/2021 (TH).......................Webinar Luncheon (TBD) 11/18/2021 (TH)....................... Board ZOOM Meeting 12/9/2021 (TH)......................... Christmas Party – ZOOM ?

Tuesday, February 16, 2021 Virtual Business Meeting featuring Roberto Seda who will be covering “Acquiring an Interest Through a Deceased Mineral Owner” Tuesday, April 20, 2021 Virtual Business Meeting Tuesday, June 15, 2021 Virtual Business Meeting Tuesday, August 17, 2021 Seminar Tuesday, October 19, 2021 Business Meeting Tuesday, December 14, 2021 Business Meeting / Christmas Party ………………………………… DALWORTH ASSOCIATION OF DIVISION ORDER ANALYSTS (DALWORTH) Association serving the Dallas/Fort Worth, TX Area For more information regarding CAPDOA, please visit our website at www.capdoa.org.

President’s Bio

Kimberly Bowman is a Senior Division Order Analyst with Finley Resources in Fort Worth,Texas. She started her career at Chesapeake Energy’s Corporate office in Oklahoma City in February 1997 in the Division Order Department. In 2014 she relocated to Fort Worth, Texas. Prior to working in Oil & Gas,

she worked for the Express Employment Professionals corporate office in Oklahoma City. Kimberly’s been a member of OCAPL and CAPDOA in Oklahoma City, served various roles on the DALWORTH Board and was on the NADOA Board in 2019 and 2020 as DAWORTH Liaison. She is currently a Representative with Texas Energy Council for DALWORTH. Kimberly resides in Hudson Oaks,Texas with her husband Jeff Bowman, and has two grown children, Johnathan and Ashley Ginter of Yukon, Oklahoma. She enjoys spending time with family, landscaping their one acre of land. Also enjoy supercross, motocross, sprint car racing and traveling the United States. She is also an advocate for the Crohn’s & Colitis Foundation of America (CCFA) and North Texas Chapter. Hoping we find a cure for Crohn’s in her lifetime. For information regarding DALWORTH, please visit our website at www.dalworth.org. …………………………………

DALWORTH 2021 BOARD

Position Elected President...................................Kimberly Bowman – Finley Resources First Vice President. ..................OPEN Second Vice President...............Lindsay Grose – Verdad Resources, LLC Third Vice President..................Eli Murray - Dorchester Minerals, LP Recording Secretary..................Liz Karlen – Pegasus Resources LLC Corresponding Secretary..........Tyler Jacobs – Range Resources Corp. Treasurer...................................Lauryn Barnes - Sundown Minerals Compliance Director. ...............Megan McKee - Range Resources Corp. House Director. ........................Christy Ewert - Resource Royalty LLC Hospitality Director (1 of 2). ....Isabel Zhang - Berry Petroleum Co. LLC Hospitality Director (2 of 2). ....Somchay Fairbanks – Pegasus Resources LLC

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DENVER ASSOCIATION OF DIVISION ORDER ANALYSTS (DADOA) Association based in the Denver, CO Area

DADOA 2021 Board: President – Evelyn Kastner Vice President – Kaitlin LaFlamme Secretary – Leslie Blancett Treasurer – Allison Blancett Director – Wendy Hopkins Director – Renae Ludrick Director – Adam Sinclair Board Advisor – Linda Osminer NADOA Director – Stan Vargas

DADOA has cancelled our in-person luncheons for 2021 due to COVID-19, but we will continue to send out virtual educational events and other information throughout the year. We hope to be able to get back to in-person luncheons when conditions allow, but in the meantime, we encourage members to take advantage of the webinars and virtual events we’re able to provide. Congratulations to DADOA’s 2020 President’s Council Award Recipient, Renae Ludrick! Renae was selected for her outstanding service to DADOA by going above and beyond expectations in organizing multiple learning opportunities for all members, and other organizations, free of charge during the pandemic. All while working remotely herself in her capacity as a Division Order Analyst for Whiting Petroleum. Her efforts have shined brightly in our industry. For more information regarding DADOA, please visit our website at www.dadoa.org. ………………………………… HOUSTON ASSOCIATION OF DIVISION ORDER

ANALYSTS (HADOA) Association based in the Houston, TX Area

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