Springer Ranch, Ltd. v. Jones

Alice Burkholder owned 8,545 acres of Texas land. Burkholder signed an oil-and-gas lease on the entire property. After Burkholder’s death, the land was divided into three tracts. The mineral lease remained effective. One tract came to be owned by Springer Ranch (Springer) (plaintiff), one by Rosalie Sullivan (defendant), and one by a group that included O. F. Jones (defendant). Each tract had two wellheads connected to vertical wells. In 1993, Springer, Sullivan, and the Jones group executed a contract stating that all royalties payable under the lease would be “paid to the owner of the surface estate on which such well or wells are situated.” Approximately 20 years later, a horizontal well was drilled. The wellhead was on Springer’s property, but the well ran horizontally under both Springer’s and Sullivan’s tracts, with takepoints for collecting hydrocarbons under both properties. Sullivan contacted the well operator, demanding a portion of the royalties from the horizontal well. Springer contested, arguing that under the 1993 contract, Springer was entitled to all the royalties because the well surfaced on his property. The operator ceased paying royalties pending resolution of the dispute. Springer sued Sullivan, seeking a declaratory judgment regarding royalty rights. The trial court construed the 1993 contract as requiring that royalties be divided between Springer and Sullivan in proportion to the productive portions of the well under each party’s property. Springer appealed.