Background
Blackrock Mineral Partners and Dynasty Land & Minerals own a nonparticipating royalty interest in the Burks Ranch under a 1929 deed conveying “One-Sixty Fourth of one eighth of the landowner’s one eighth royalty interest.” The deed stated that the conveyed interest was a royalty interest included in the royalty under any existing or subsequent lease. The Red Crest Trust owns the mineral interest burdened by Blackrock’s interest.
XTO Energy operates wells on the ranch, but the Red Crest Trust has not executed an oil and gas lease with XTO. Blackrock sued the trust and XTO, contending that, without a lease, Blackrock should be treated as a cotenant entitled to 1/512 of production after production costs. Blackrock settled with XTO. The trial court entered a final judgment declaring that the deed conveyed a floating nonparticipating royalty interest and denied Blackrock the relief it sought against the trust.
The Court’s Holding
The Fourth Court of Appeals affirmed. It held that Blackrock had identified no authority establishing that a floating nonparticipating royalty interest expressly tied to royalty under a lease becomes a fixed royalty interest when the mineral owner has not executed a lease. The court distinguished Prize Energy Resources, L.P. v. Cliff Hoskins, Inc. because that case involved a statutory proceeds claim and a joint operating agreement that expressly treated unleased interests as leased interests, neither of which was present here.
The court also rejected Blackrock’s cotenancy theory. A nonparticipating royalty owner lacks the right to produce minerals or join in leasing and is entitled only to a share of production under a lease free of exploration and production expenses; here, no lease existed. Finally, the court held that Blackrock waived its argument that the Red Crest Trust breached a duty of utmost good faith and fair dealing because Blackrock had not pleaded that claim or raised it in its summary-judgment motion. The court likewise declined to consider Blackrock’s reply-brief complaint that judgment had been entered for the trust without a cross-motion because that issue and requested remedy were raised for the first time in reply.
Key Takeaways
- A floating nonparticipating royalty interest expressly tied to royalty under a lease does not become a fixed production interest merely because the mineral owner has not executed a lease.
- An NPRI owner cannot claim cotenant rights to produce minerals or receive production proceeds when the governing interest entitles it only to royalty under a lease and no lease exists.
- Claims and procedural challenges not preserved in the trial court or timely raised in an appellant’s opening brief may be waived.
Why It Matters
The decision underscores that Texas courts construe royalty deeds holistically and enforce the interest described by the deed rather than enlarging it to address the consequences of an absent lease. Owners of floating NPRIs tied to lease royalty cannot rely on general cotenancy principles to obtain a fixed share of unleased production.
The opinion also illustrates the importance of preserving both substantive claims and procedural objections. A theory not pleaded or presented in the summary-judgment proceedings—and an appellate issue first introduced in a reply brief—may not be considered.