Supreme Court
Ammonite Oil & Gas Corp. v. R.R. Comm’n of Tex.
- Case number: 21-1035
- Legal category: Oil & Gas
- Subtype: Pooling
- Set for oral argument: September 13, 2023
Case Summary
At issue in this case is whether one oil-and-gas company’s forced-pooling offer to another, which included a 10% risk penalty, was unreasonably low under the Texas Mineral Interest Pooling Act.
EOG Resources drilled sixteen wells on a riverbed tract based on drilling permits it received from the Railroad Commission. EOG’s wells surrounded a seven-mile portion of the riverbed leased by petitioner Ammonite Oil & Gas Corp. Concerned that its mineral interested would be essentially stranded, Ammonite sent a series of letters to EOG proposing the formation of sixteen voluntarily pooled units, including a 10% risk charge to cover the economic risks assumed in drilling the wells. EOG rejected the offer. Ammonite then sought to force-pool its riverbed tracts with EOG’s wells.
The Railroad Commission rejected Ammonite’s applications, finding that Ammonite’s offers to EOG were not “fair or reasonable” as required by the Mineral Interest Pooling Act . Ammonite petitioned for judicial review in the trial court, which affirmed the Commission’s order. The court of appeals did the same. Ammonite petitioned for review to the Supreme Court, arguing that nothing in the plain text of MIPA even requires that a risk penalty be included in a voluntary-pooling offer, so a low-risk penalty (or even the absence of one) cannot render an offer statutorily unreasonable. The Court granted the petition for review.
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