OIL AND GAS CLIENT ALERT: Court Looks at a Percentage of Proceeds Lease

    15 April 2011
    Royalty owners under leases dating back to 1934 have hit a dry hole as a result of the recent decision in Occidental Permian Ltd. v. The Helen Jones Foundation and BP America Production Co., et al., No. 07-09-00059-CV (Tex. App. -- Amarillo, Jan. 31, 2011) and the court’s interpretation of a “percentage of proceeds” provision in the leases. Under a “percentage of proceeds” contract, a plant pays the lessee a percentage of the proceeds from the sale of processed residue gas (50 percent in this case) and another percentage of proceeds from the sale of natural gas liquids from a plant (33.3 percent here).