WV Supreme Court Rules in Oil & Gas Royalty Case

This blog is about energy law as much as environmental law, and I have been deficient in reporting on energy-related state court cases. To rectify that, I'll refer you to Drake v. Waco Oil and Gas Company, Inc., involving an unusual royalty situation. A brother and sister both believed that the sister owned a piece of property that was actually titled in both their names. The brother negotiated a lease of the oil and gas for the sister, with the sister getting the standard one-eighth interest in the value of the gas produced from her property. (The share of the value of the gas that is paid to the gas owner is referred to as the royalty.) When the brother (actually, a potential gas producer found the error when doing a title search) discovered he owned half the property, he sued Waco for the difference between the value of the gas produced, less the cost of producing it - in other words, the entire profit from the well. However, the Court agreed with Waco that the fact the brother had been involved in the negotiations changed the equities, and it was fair that he should get only his part of the 1/8 royalty he negotiated for his sister.

The case was before the Court on a certified question. For you non lawyers, that's a situation that sometimes arises when the facts of a case are not in dispute, and there is no clear guidance from statutes or past decisions of the Supreme Court as to how the law should apply to those facts. When that happens, the Circuit Court can frame a question to the Supreme Court that asks what the law is, assuming certain facts, to save the time that would be lost by deciding the case and then having it go up on appeal.

The case is instructive in two ways - it shows that the Court can redraft a certified question from a lower court to pose the question that it believes should have been asked (or that it wants to answer) and it is an example of the court trying to find the equities rather than strictly follow precedents. In some cases, courts that try to do justice rather than follow the law end up doing neither. In this case, I think they got it right.