Case study

Decision on Oilfield Joint Operating Agreements

December 3, 2012 Case Study

Tawes v. Barnes

This case involved the model form Joint Operating Agreement that is used in oilfield operations. It was filed by a royalty owner who had not received royalty payments from a lessee who had gone into bankruptcy. The royalty owner sued several parties who were parties to a model form Joint Operating Agreement that pooled the royalty owner’s lease with other leases—arguing that royalty owners are third-party beneficiaries of such joint operating agreements. On this theory, the royalty owner sought to recover the unpaid royalties from a working interest owner who had never entered into any contract with the royalty owner. The case was litigated in federal court, and the United States Court of Appeals for the Fifth Circuit considered the issue sufficiently important and unsettled to certify it to the Texas Supreme Court.  The Supreme Court held the royalty owner had no right to enforce the joint operating agreement as a third-party beneficiary or by privity of estate. Beck Redden partner Russell Post prepared the briefs and guided the Supreme Court appeal, and he shared the oral argument with trial counsel. Tawes v. Barnes, 340 S.W.3d 419 (Tex. 2011)

Russell S. Post 713.951.6292