We would all agree, I think, that oil and gas producers and royalty owners share at least one clear, common objective – the accumulation of wealth from hydrocarbon production. Nevertheless, because their’s is not a relationship of equals – oil and gas producers ordinarily possess superior technical expertise and financial resources and control the performance of operations and, in most cases, the marketing of hydrocarbons and the distribution of revenues – royalty owners and oil and gas producers have found themselves, since the Lucas Gusher on Spindletop Hill south of Beaumont, Texas, ushered in the modern oil and gas industry on January 10, 19011, in the roles of wary, natural adversaries who “live in the same house”, much like hyper-competitive siblings, old cats and young dogs, and Longhorns and Aggies. They must, out of necessity, coexist and, from time to time, even cooperate. They remain, however, ever vigilant to assure that one does not gain an advantage over the other. In the case of the royalty owner, that means making certain that he receives everything from the producer to which he is entitled (and maybe a little more). In the case of the oil and gas producer, that means making certain that the royalty owner receives that to which he is entitled, but no more, with any doubts being resolved in the producer’s favor.

Originally published for the 33RD ANNUAL ADVANCED OIL, GAS & ENERGY RESOURCES LAW COURSE October 1-2, 2015.