Double stacked trial over oil and gas lease royalties starts up

David Yates May 27, 2009, 11:11am

An oil and gas lease trial in which the plaintiff is also the defendant is now under way in Judge Gary Sanderson's 60th District Court.

In 2006, M&M Resources, along with Energy Land Resources, filed suit against DSTJ Corp., claiming the company owed seven months of royalties on an area well shut down by the Texas Railroad Commission.

Court documents show that on Sept. 22, 2002, M&M assigned 21 leases to DSTJ for a .5 percent royalty fee. Four of the 21 leases were known as the Blackman Tract, a region of land owned by multiple Jefferson County residents.

Once the agreement was in place, DSTJ proceeded to drill the Quail No. 1 well on the Blackman Tract, which was functional from October 2003 until March 2004, when it was sealed by the Texas Railroad Commission, court papers say.

"Despite the production obtained from the Quail No. 1, DSTJ has never made any royalty payments to plaintiff," the suit states. "DSTJ's failure to make royalty payments � constitutes a default of DSTJ's obligations under the assignment."

In response to M&M's suit, DSTJ filed a countersuit alleging M&M was engaged in shady dealings and had snuck "improper lease provisions" into their agreement that prevented DSTJ from pooling the tracts.

The company claims it had to shut down the well due to M&M's alleged fraud and negligence.

"DSTJ drilled a well that � because pooling rights had not been obtained � had to be shut in," the countersuit states. "(DSTJ) lost the cost of the well, incurred the costs of the shut in, and lost the value of certain production."

Jurors will have to decide if it was M&M's fault that DSTJ's well was shut down, or if DSTJ owes M&M for seven months of royalties for the time the well was up and running.

M&M is represented in part by attorney Terry Wood of the Crutchfield, De Cordova & Wood law firm in Beaumont.

DSTJ is represented in part by the Law Offices of Keith Kebodeaux, also in Beaumont.

Case No. A172-979

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