## Facts

- A 1996 warranty deed conveyed a 120-acre tract to the grantees but reserved to the grantor a term non-participating royalty interest (NPRI): one-half of royalties for 15 years and “as long thereafter as there is production in paying or commercial quantities.”
- The deed stated that if, at the end of 15 years, minerals were not being produced, the reserved royalty “shall be null and void” and the grantor’s rights “shall terminate.”
- The deed included a savings clause providing that if a lease covering the land was maintained by payment of “shut-in royalties or any other similar payments ... in lieu of actual production,” such payments would be treated as “production in paying or commercial quantities.”
- The grantees later executed an oil and gas lease that was assigned to the operator (a ConocoPhillips affiliate).
- The 15-year term ended December 27, 2011; actual production began in February 2012.
- Before production began, the operator made a $24,000 payment to extend the lease; the parties disputed whether this payment qualified under the savings clause.
- The grantees claimed the NPRI terminated at the 15-year mark for lack of production and vested in them; the operator and grantor disputed termination and asserted additional defenses, including the Rule Against Perpetuities (RAP).
- The trial court granted summary judgment for the grantees on title to the NPRI after December 27, 2011; appellate proceedings addressed the RAP issue, the savings clause, statutory royalty-payment issues, and attorney’s fees.

## Issues

1. Whether the RAP invalidates the grantees’ future interest in the grantor’s reserved term NPRI.
2. Whether the deed’s savings clause is ambiguous as applied to a lease-extension payment made before production began.
3. Whether Texas Natural Resources Code § 91.402 precludes a lessor’s common-law breach-of-contract claim for royalty underpayment.
4. Whether an attorney’s-fees award under Texas Rule of Civil Procedure 91a was properly affirmed.

## Decision

- The court held the RAP did not invalidate the grantees’ future interest in the reserved term NPRI.
- The court held the savings clause was ambiguous and affirmed remand for further proceedings to resolve its meaning as applied to the lease-extension payment.
- The court held Texas Natural Resources Code § 91.402 does not preclude common-law breach-of-contract claims for royalty underpayment.
- The court affirmed the judgment regarding attorney’s fees awarded under Rule 91a.

## Legal Principles

- A grantee’s future interest tied to termination of a reserved term NPRI based on objective production conditions is not automatically void under the RAP where the interest will necessarily vest, fail, or terminate within a commercially bounded period tied to production.
- Deed language equating “shut-in royalties or any other similar payments ... in lieu of actual production” with production may be ambiguous when applied to nonstandard payments (such as a lump-sum lease-extension payment), requiring fact development to ascertain intent.
- Texas Natural Resources Code § 91.402, governing timing and permissible suspension of royalty payments, does not displace contractual remedies; breach-of-contract claims may proceed alongside the statute.
- Texas Rule of Civil Procedure 91a permits fee shifting tied to dismissal of baseless claims; appellate affirmance of such fees stands absent a basis for reversal.

## Conclusion

The Texas Supreme Court rejected a RAP attack on a grantee’s future interest in a term NPRI, held the deed’s savings clause required further factual resolution due to ambiguity, confirmed that § 91.402 does not bar breach-of-contract claims for royalty underpayment, and left intact a Rule 91a attorney’s-fees award.


ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858 (Tex. 2018)