Major Texas Supreme Court Ruling Could Upend Texas Property Law

For the first time since the shale oil revolution transformed pasture and cotton land in places like the Eagle Ford into multi million dollar oil patches, the Texas Supreme Court has ruled on the rights of landowners, mineral owners, and what are called 'executive rights owners' to determine the fate of private property, News Radio 1200 WOAI reports.

The ruling, in a case out of Frio County, is generally a victory for the oil and gas companies, according to Wendy Kowalik, President of San Antonio's Predico Partners, a financial consulting firm.

She says under the ruling, individuals or companies who don't own the 'executive rights' can dictate whether a range of oil and gas related activities, from oil drilling to pipeline construction, can happen on the property.

She says the result may be that a rancher or a retiree may wake up one day, and find they have to sign a lease to allow an oil drilling rig right outside their bedroom window.

She says this is a critical issue today as retiring Baby Boomers who are worried about the stock market more and more are considering land as an investment.

"Their feeling is, if I am going to buy the property and put a home on it, or do something with it, I would like to negotiate whether a pipeline is going to come through the property or not," Kowalik said.

And she says that may not be possible under this decision, which clarifies the duties and responsibilities of three types of landowners, the surface rights holder, the mineral rights holder, and what is called the 'executive rights' holder, who can acquire the rights to negotiate a oil and gas lease from any owners of the property.

"This ruling will make purchasers of property think twice about how and what they will pay for land and executive rights that could be developed in the future. A surface land owner may now have land where they get a one-time lease bonus payment at the time of exploration and drilling. Then find theyhave lost financially due to a severe drop in value of their property due to drilling that only gives financial future benefits tot he majority mineral owners. This could hinder land sales and lower property values for many in Texas," Kowalik said.

She says this decision is critical, because exploration is still growing in places like the Permian and the Eagle Ford, and more and more ranchers, retirees, and homeowners find themselves tangled up in land rights issues.

"This encourages oil and gas drilling, and it discourages clients who are wanting to buy a piece of property now to hold and live or work on," she said. "Your ownership may overnight have you forced to sign a lease that allows an oil rig on the family legacy property you dreamed to leave to your grandchildren."

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