The executive right to lease have been recognized by Texas courts as the exclusive right to execute oil and gas leases and is considered a real property right. Where the executive right is owned by one party and the other components of the mineral estate are owned by another, the first party owes the second a duty of “utmost good faith and fair dealing.”
The case of Betty Yvon Lesley, et al. v. Veterans Land Board of the State of Texas, et al. presented to the Texas Supreme Court a case in which the exclusive nature of leasing or development by the executive right owner was used as a means to avoid leasing and development of the mineral estate of the non-executive plaintiffs. The captioned land was a 3,923-acre tract in Erath County, Texas within the Barnett Shale wherein develop could potentially entail tens of millions of dollars. The defendant executive right owner, a real estate developer, sought to enhance its profits from selling house lots by stopping shale gas drilling and production.
The executive right owner argued that it had no duty to the non-executive parties before actual leasing occurred. The Texas Supreme Court disagreed, ruling that the executive’s duty arose under any circumstance where executive action or omission affected the non-executive’s mineral estate. It also ruled that the non-executive had no right to self-develop and confirmed the separate nature of the executive right as an individual portion of the mineral estate in Texas.
- oil and gas,
- executive rights,
- oil and gas leasing
Available at: http://works.bepress.com/chris_kulander/1/