Post Production Deductions Town Hall
Huge News from Apache
for West Texas Mineral Owners
Apache Corporation (NYSE, Nasdaq: APA) today announced that after more than two years of extensive geologic and geophysical work, methodical acreage accumulation, and strategic testing and delineation drilling, the company can confirm the discovery of a significant new resource play, the “Alpine High.” Apache’s Alpine High acreage lies in the southern portion of the Delaware Basin, primarily in Reeves County, Texas. The company estimates hydrocarbons in place on its acreage position are 75 trillion cubic feet (Tcf) of rich gas (more than 1,300 British Thermal Units) and 3 billion barrels of oil in the Barnett and Woodford formations alone. Apache also sees significant oil potential in the shallower Pennsylvanian, Bone Springs and Wolfcamp formations.
IDENTITY AND INTEREST OF AMICUS CURIAE TEXAS LAND AND MINERAL OWNERS ASSOCIATION
Texas Land and Mineral Owners Association (“TLMA”) is a statewide advocacy association whose members are farmers, ranchers, and royalty owners. TLMA’s charter is to support a business and legal environment that accommodates the continued exploration for and production of oil and natural gas and also protects the property rights of mineral owners.
The National Association of Royalty Owners-Texas, Inc. (“NARO-Texas”) is a non-profit trade association organized under Texas law, representing a statewide membership of oil and gas royalty owners and landowners. NAROTexas seeks to protect the economic interests and promote the legal rights of oil and gas royalty owners throughout Texas. TLMA and NARO-Texas are paying the fees for preparation and submission of this brief.
Texas Land & Mineral Owners’ Association files this brief in support of the Hyders’ arguments. The lease in question was negotiated by sophisticated parties represented by counsel; the parties exercised their freedom of contract and agreed to modify the general rules regarding cost sharing of post-production costs; the parties in clear and unambiguous language declared that the lessor’s overriding royalty shall be “cost-free;” the court of appeals applied settled rules of construction to interpret the lease and correctly decided the case; and this Court does not have conflicts jurisdiction. In the alternative, if the Court should grant the Petition for Review, the judgment of the Fourth Court of Appeals should be affirmed.
This is one of a long line of cases in which Chesapeake has sought to profit at the expense of royalty owners by unjustified deduction of post-production costs from royalties. Chesapeake is the most aggressive exploration company in the industry in seeking to deduct post-production costs. Its practices have led most recently to a class action RICO suit in Pennsylvania1 and an investigation by the U.S. Department of Justice of its royalty payment practices. Investigative reports published by Pro Publica, the Wall Street Journal and Forbes3 conclude that Chesapeake’s methods have greatly reduced the royalties it pays to its royalty
owners, by an average of 85 cents per mcf – much more than other similarly situated operators. Royalty owners’ suits have been brought against Chesapeake by the Dallas-Fort Worth Airport, the City of Fort Worth, the Fort Worth Independent School District, the City of Arlington, the Arlington Independent School District, the Bass family, and Tarrant County College, among many others. These suits have caused the company to report in its latest annual report that “adverse results in pending cases would cause our obligations to royalty owners to increase and would negatively impact our future results of operations.”
For the full amicus brief, click here