(Law 360, March 23, 2015)
The Texas Supreme Court justices heard arguments on March 24 in a Chesapeake Energy Corp. royalty dispute that has the potential to clarify whether mineral rights owners can break from tradition and enter agreements letting them off the hook for post-production costs. Chesapeake is seeking to overturn a 2014 decision in which the Fourth Court of Appeals held two of the company’s subsidiaries, Chesapeake Exploration LLC and Chesapeake Operating Inc., liable to plaintiff Martha Hyder and family members, represented by Wick Phillips, for about $1 million. The court, affirming a trial judgment in favor of the Hyders, held that while the general rule in Texas makes overriding royalties like those the Hyders owned subject to post-production costs, the family’s lease shifted the burden to Chesapeake of paying for post-production activities like transferring and delivering the gas.
