Land man testifies in oil and gas lease trial

By David Yates | Jun 4, 2009

The oil and gas lease trial in which the plaintiff is also the defendant carrying on in Judge Gary Sanderson's 60th District Court continued this week as jurors heard testimony from a local petroleum land man.

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

Petroleum land man Tom Hill testified on June 4 that he was hired by ELR to obtain leases from land owners in the name of M&M.

Court documents show that on Sept. 22, 2002, M&M assigned 21 of those 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 and ELR were 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 and ELR's alleged fraud and negligence.

Hill testified that to his knowledge ELR has never acted unethically.

"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."

DSTJ attorneys questioned Hill on why he did not bring up pooling rights to the land owners when obtaining leases from them.
Hill testified that he was not instructed to do so.

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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