SE Texas Record

Thursday, December 12, 2019

New trial of oil and gas royalty case reset for September

By David Yates | Feb 17, 2010

Last June, a trial over an oil and gas lease abruptly ended when jurors failed to reach a verdict after four days of fruitless deliberations.

As the Southeast Texas Record reported, the trial focused on M&M Resources, Energy Land and the DSTJ Corp. Jurors were asked to sort out who owed whom and how much.

The trial, which originally began on May 25 in Judge Gary Sanderson's 60th District Court, was slated for a retrial Feb. 16.

However, Judge Sanderson told the Record one of the plaintiffs in the case was experiencing medical issues and asked him to continue the case.

Judge Sanderson said he bumped the case up to the September trial docket.

Case background

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

During the trial, petroleum land man Tom Hill had testified 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 had 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 were tasked to decide if it was M&M's fault that DSTJ's well was shut down, or if DSTJ owed 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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