Supreme Court rules BP can hold gas well lease

By Kristin Regula | May 15, 2017

AUSTIN – A reversal of opinion in a verdict set by a court of appeals has allowed British Petroleum (BP) to hold on to the lease of a natural gas well in Texas.

AUSTIN – A reversal of opinion in a verdict set by a court of appeals has allowed British Petroleum (BP) to hold on to the lease of a natural gas well in Texas.

The opinion previously made by the court of appeals was reversed by the Supreme Court of Texas.

The lease had been on a well known as Vera Murray No. 11, under the Vera Murray lease. There were other wells under that lease known as No. 9 and No. 10, but both of those wells had been shut down by BP before the leasing of Vera Murray No. 11 had become the subject of a civil suit by Red Deer Resources LLC.

Red Deer Resources had become the top lease holder on Vera Murray No. 11, with the main goal of the civil suit being to terminate the lease that had been held by BP since the year 2000. The reason for Red Deer Resources wanting the lease terminated was two-fold – the company had asserted that the wells leased and operated by BP was non-commercial, and that BP had tried to employ the shut-in clause on Vera Murray No. 11. This meant that by shutting the well down for at least 60 days, BP would be able to collect shut-in royalty checks from Red Deer Resources LLC while at the same time still keeping the lease on the shut-in well in question if it should resume operations within the 60 day period.

However, BP did not re-open the well within the 60 day period – it has remained shut off since June 13, 2012. This, according to Red Deer Resources, put BP in violation of its lease since the Vera Murray No. 11 well was the only well in the Vera Murray lease capable of (according to the court opinion) producing payable quantities of gas. However, according to the court opinion, the Vera Murray No. 11 well was only producing such levels before 2012, and not at a consistent level suitable to maintain the lease.

With that information, the original ruling of the trial court where the suit was filed was against BP, with the Vera Murray lease being terminated. The court of appeals also held up the ruling against BP despite the fact that the company filed for an appeal.

Even though the verdict was upheld by the court of appeals, BP filed yet another appeal. This time, that second appeal reached the Supreme Court of Texas. This time, the ruling was in BP’s favor due to flaws in the way Red Deer Resources presented its case to the jury in the original civil trial, specifically in the way two questions were presented. According to the opinion written by Justice Paul W. Green, the theories presented by Red Deer Resources were invalid. Subsequently, the original verdict against BP was reversed, with the new ruling, according to the opinion, being a “take-nothing judgment” in favor of BP.

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