TX SUPREME COURT: CHESAPEAKE MAY NOT DEDUCT POSTPRODUCTION COSTS FROM OVERRIDING ROYALTY

TX SUPREME COURT: CHESAPEAKE MAY NOT DEDUCT POSTPRODUCTION COSTS FROM OVERRIDING ROYALTY

BY: Austin Brister from OilandGasLawDigest.com

In a 5-4 decision, the Texas Supreme Court issued its opinion in Chesapeake Exploration, L.L.C. v. Hyder, 14-0302, 2015 WL 3653446 (Tex. June 12, 2015), holding that Chesapeake is prohibited from deducting postproduction costs from an “overriding royalty interest” described in a lease. The Majority noted that while overriding royalty interests are generally subject to post production costs, the language used in the lease creating the Hyder overriding royalty shifted the burden of paying these postproduction costs to Chesapeake, alone.

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