Texas Supreme Court Rules in Favor of Chesapeake Energy in Acreage Fight

Oklahoma City’s  Chesapeake Energy has come away a winner before the Texas Supreme Court in a battle with another energy company over acreage clauses.

The Supreme Court, in a ruling on Friday upheld a lower court ruling in favor of Chesapeake Exploration Limited Partnership and Chesapeake Exploration, LLC.

Chesapeake was sued by XOG Operating LLC in a disagreement over a retained acreage clause after XOG conveyed rights as lessee under four oil and gas leases in three sections of west Texas land.  The disagreement developed after Chesapeake completed six wells during the primary term of the assignment and XOG felt it should have had some of the assigned acreage in Wheeler County.

The Amarillo Court of Appeals had earlier sided with Chesapeake as the firm argued it was entitled to hold 320 acres for each of the five wells in one field and 320 acres for one gas well completed in a formation with no field rules. The court agreed that state field rules properly defined “proration unit” as 320 acres and thus Chesapeake earned 320 acres for each of the wells.

The supreme court affirmed the trial court’s decision that none of the land in question reverted to XOG under the retained-acreage provision.



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