Supreme Court of Texas

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No. 20-0639

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Nettye Engler Energy, LP, 

Petitioner, 

v. 

BlueStone Natural Resources II, LLC, 

Respondent

═══════════════════════════════════════

On Petition for Review from the 

Court of Appeals for the Second District of Texas 

═══════════════════════════════════════

Argued October 28, 2021

JUSTICE DEVINE delivered the opinion of the Court. 

Justice Young did not participate in the decision.

This mineral dispute involves a frequently litigated issue: 

whether and to what extent a royalty interest bears a proportionate 

share of postproduction costs. Here, the deed conveying the mineral 

estate reserved a nonparticipating royalty interest “in kind,” which 

means that, unlike a monetary royalty, the grantor retained ownership 

of a fractional share of all minerals in place. The deed required delivery 

of the grantor’s fractional share “free of cost in the pipe line, if any, 
2 

otherwise free of cost at the mouth of the well or mine[.]” The parties 

agree that a gas pipeline exists and that the royalty is free of production 

costs and postproduction costs incurred before delivery into that 

pipeline, but they disagree about its location under the deed’s terms. 

The grantee’s successor maintains that delivery occurs in the 

gathering pipelines comprising the gas gathering system on the wellsite 

premises, which burdens the royalty interest with all postproduction 

costs from that point until the gas is sold to the ultimate purchaser. The 

grantor’s successor contends that delivery is downstream of the wellsite 

at the transportation pipeline, if not farther, because (1) a gas gathering 

pipeline is not a pipeline as that term is used in the deed and (2) use of 

the term “otherwise” to introduce the alternative delivery point “at the 

mouth of the well or mine” essentially negates a construction of “the pipe 

line, if any” as including any pipeline at or near the wellhead. If the 

deed requires delivery in the transportation pipeline, the mineral 

interest is free of some but not all postproduction costs. The trial court 

granted summary judgment that delivery occurs in the transportation 

pipeline, but the court of appeals reversed and rendered judgment that 

delivery occurs in the gathering pipeline. 

We affirm the court of appeals’ judgment. A gas gathering 

pipeline is a “pipeline” in common, industry, and regulatory parlance, 

and the deed does not limit the delivery location to any specific pipeline 

nor prohibit delivery to a pipeline at or near the well, if any. The court 

of appeals reached the correct result but misconstrued our opinion in 

Burlington Resources Oil & Gas Co. v. Texas Crude Energy, LLC1 as 

1 573 S.W.3d 198 (Tex. 2019).
3 

establishing a rule that delivery “into the pipeline,” or similar phrasing, 

is always equivalent to an “at the well” delivery or valuation point. 

Rather, the opinion merely emphasized that all contracts, including 

mineral conveyances, are construed as a whole to ascertain the parties’ 

intent from the language they used to express their agreement. 

I. Background

In 1986, the predecessors of Nettye Engler Energy, LP (Engler) 

conveyed a 646-acre tract of land by a special warranty deed that 

reserved “an undivided one-eighth (1/8th) nonparticipating . . . royalty 

interest in and to all of the oil, gas and other minerals on, in and under 

the Subject Property.” A nonparticipating royalty is “an interest in the 

gross production of oil, gas, and other minerals carved out of the mineral 

fee estate as a free royalty, which does not carry with it the right to 

participate in the execution of, the [b]onus payable for, or the delay 

rentals to accrue under oil, gas, and mineral leases executed by the 

owner of the mineral fee estate.”2 Such an interest is free of the costs of 

production,3 and when delivered in kind as the deed requires here,4

bears its proportional share of postproduction costs from the point of 

2 KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 75 (Tex. 2015) (citing Lee 

Jones, Jr., Non-Participating Royalty, 26 TEX. L. REV. 569, 569 (1948) (footnote 

omitted)). 

3 Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121-22 (Tex. 

1996). 

4 Chesapeake Expl., LLC v. Hyder, 483 S.W.3d 870, 874 (Tex. 2016)

(observing that “gross production” refers to the total volume of minerals 

extracted from the ground).
4 

delivery to the royalty-interest holder unless the conveyance specifies 

otherwise.5 The 1986 deed describes the royalty as

a free one-eighth (1/8) of gross production of any such oil, 

gas or other mineral said amount to be delivered to 

Grantor’s credit, free of cost in the pipe line, if any, 

otherwise free of cost at the mouth of the well or mine . . . . 

In 2004, the grantees leased the tract’s minerals, and the lessee 

subsequently drilled thirty-four producing wells. When gas is produced 

at the wellhead, it is collected in an onsite gathering system for 

compression, processing, and delivery to third-party transportation 

pipelines off the leased premises. From there, all the gas is sold to third 

parties at various downstream market locations. Both the gathering 

system and transportation pipelines are owned by third parties who 

charge the operator for these services.

For several years, Quicksilver Resources, Inc. served as the

wellsite operator. Quicksilver sold Engler’s share of production along 

with the producer’s share and valued it for royalty purposes at the point 

of sale to the gas purchaser’s pipeline. This valuation rendered Engler’s 

in-kind royalty not only unburdened by production costs but also free of 

5 Heritage Res., 939 S.W.2d at 121-22 (providing the general rule that 

royalties are subject to postproduction costs unless the contracting parties 

agree otherwise); Byron C. Keeling & Karolyn King Gillespie, The First 

Marketable Product Doctrine: Just What is the “Product”?, 37 ST. MARY’S L.J. 

1, 2-3, 13-20 (2005) (describing how, under an in-kind royalty agreement, a 

lessor is entitled to receive delivery of a proportional share of the lessee’s 

production of oil or gas); Byron C. Keeling, In the New Era of Oil and Gas 

Royalty Accounting: Drafting a Royalty Clause that Actually Says What the 

Parties Intend It to Mean, 69 BAYLOR L. REV. 516, 520 n.17 (2017) (explaining 

that, subject to a royalty’s terms, a lessee may market a lessor’s share of 

production and pay the lessee the amount received for that share net of

postproduction costs).
5 

all postproduction costs. That is, Engler was paid a proportional share 

of the gross proceeds from downstream sales of processed gas to 

third-party purchasers. 

In 2016, BlueStone Natural Resources II, LLC, assumed 

operations and began deducting postproduction costs in accounting to 

Engler for its proportional share of production. Under BlueStone’s 

valuation, delivery of Engler’s fractional share occurs at the point where 

unprocessed gas enters the gathering pipeline in the onsite gathering 

system. As a result, Engler’s ownership interest bears a proportional 

share of postproduction costs from that point forward, including 

gathering, compression, and processing costs; transportation and 

delivery costs; and severance taxes. Unlike Quicksilver, which 

compensated Engler for its share of production based on its value at the 

end of the line, BlueStone values it at the beginning. 

Engler’s royalty payments dropped precipitously due to the 

deduction of postproduction costs from sales proceeds, prompting Engler 

to sue BlueStone for common-law conversion and money had and 

received. The central dispute concerned the proper construction of the 

1986 deed’s language. The parties generally agreed that (1) BlueStone 

must compensate Engler for its proportional share of sales proceeds net 

of expenses incurred after production is delivered to Engler’s credit; and 

(2) BlueStone delivers Engler’s share “in the pipe line,” because one 

exists, rather than “at the mouth of the well.” The point of dissension 

concerned the exact location where delivery occurs, with Engler taking 

the position that “in the pipe line” refers either to the distribution 

pipeline at the point of sale or to the offsite transportation pipelines, 

while BlueStone argued that the delivery obligation under the deed is 
6 

satisfied by delivery in the gathering pipelines comprising the onsite 

gathering system.

On cross-motions for summary judgment, Engler argued that 

because the 1986 deed provides for a “free one-eighth of gross 

production” to be delivered “free of cost,” the royalty is free of all 

postproduction costs from the wellhead to the point of sale. Engler cited 

our opinion in Chesapeake Exploration, L.L.C. v. Hyder6 as supporting 

the proposition that such language conclusively renders a royalty 

interest free of any and all postproduction costs. Alternatively, Engler 

claimed that a gathering system is not a pipeline or at least was not 

understood to be a pipeline when the deed was executed. For that 

reason, Engler argued that offsite transportation pipelines are the 

closest delivery point that would be consistent with the deed’s language 

and, at a minimum, the royalty is free of gathering, compression, and 

processing costs incurred before that point. Engler urged that the deed’s 

“in the pipe line” language necessarily refers to an offsite delivery point 

because the deed prioritizes delivery “in the pipe line, if any” over 

delivery “at the mouth of the well or mine” by using the word “otherwise” 

to introduce the latter as a default option when no pipeline exists. 

BlueStone challenged Engler’s proffered deed construction on the 

basis that (1) Engler misconstrued Hyder, which clearly holds that 

words like “free and clear” of all “costs and expenses” do not in and of

themselves, or even necessarily, render a royalty free of all or any 

postproduction costs and (2) gathering pipelines are pipelines in both 

ordinary and trade meaning. That being so, BlueStone insisted that it 

6 483 S.W.3d 870, 872-73 (Tex. 2016). 
7 

properly calculated Engler’s royalty interest based on sales proceeds net 

of expenses incurred beyond the point Engler’s share of production 

entered the onsite gathering system. 

As summary-judgment evidence, Engler provided affidavit and 

deposition testimony from an oil-and-gas attorney to the effect that 

(1) the 1986 deed’s reference to “pipe line, if any” refers to the main 

transportation pipelines and (2) based on the deed’s “free one-eighth 

(1/8) of gross production” and “free of cost in the pipe line” language, 

Engler’s royalty is free from all postproduction costs so long as the gas 

is in the transportation pipeline, meaning it is valued at the point of sale 

rather than at any other upstream point. The gist of the expert’s 

testimony is that “pipe line” refers to the place where title passes from 

the operator/producer to the gas purchaser, and back in 1986, it was not 

uncommon for gas gathering systems to be owned by the 

operator/producer and for gas to be purchased by the transporter. 

Although Engler’s expert did not testify that any such arrangements 

were in existence at the time the 1986 deed was executed—nor does the 

record include such evidence—he concluded that delivery “in the pipe 

line” refers not only to the transportation pipelines but also makes the 

royalty free of cost until title transfers to a third-party purchaser.

BlueStone objected to the expert’s testimony on the basis that it 

was conclusory and opined on pure questions of law, which is not a 

proper use of expert testimony. BlueStone further observed that 

Engler’s expert could not identify a fact that was in dispute in the case, 

and although he testified that the 1986 deed was unambiguous, he 

nonetheless opined on the deed’s interpretation. 
8 

In addition to objecting to the admissibility of expert testimony 

with regard to the deed’s interpretation, BlueStone conditionally offered 

a counter-affidavit from its own expert to refute Engler’s expert’s 

conclusions. BlueStone’s expert testified that (1) the royalty reserved 

by Engler’s predecessor clearly bears postproduction costs; (2) “free of 

cost” can mean free of production costs, so inclusion of the word “free” in 

a deed is not, by itself, enough to free an interest of postproduction costs; 

and (3) the phrase “mouth of the well” defines where the pipeline is 

located, which provides the valuation point for the royalty before 

postproduction costs have been incurred. 

The trial court overruled BlueStone’s objections and granted 

Engler’s motion for summary judgment. The court held that Engler’s 

royalty interest is “not subject to post-production costs” but, at the same 

time, deferred consideration of “the issue of the calculation of proper 

post-production costs [until] a subsequent proceeding.” A few days later, 

we issued our opinion in Burlington Resources, in which we held that 

deed language requiring delivery “into the pipeline, tank or other 

receptacle to which any well or wells on such lands may be connected” 

was analogous to an “at the wellhead” valuation point.7 When delivered 

at the well, a royalty interest is generally free of production costs but 

7 573 S.W.3d 198, 211 (Tex. 2019) (construing an assignment providing 

that “[t]he overriding royalty interest share of production shall be delivered to 

ASSIGNEE or to its credit into the pipeline, tank or other receptacle to which 

any well or wells on such lands may be connected, free and clear of all royalties 

and all other burdens and all costs and expenses except the taxes”). 
9 

not postproduction costs that enhance the downstream value of the 

product.8

BlueStone filed a motion for reconsideration in light of Burlington 

Resources, arguing it is directly on point and dispositive in equating an 

“into the pipeline” royalty provision with an “at the well” delivery point 

such that royalty payments based on proceeds of downstream sales are 

net of all downstream postproduction costs. The trial court denied 

BlueStone’s motion but altered its prior ruling, ostensibly determining 

that Engler’s royalty interest is free of cost in the transportation 

pipeline, not the gathering or distributing pipelines, and thus free of 

some but not all postproduction costs. With the deed so construed, the 

court rendered judgment that Engler’s royalty is unburdened by all 

postproduction costs other than transportation costs, severance taxes, 

and regulatory fees. The court awarded Engler $88,849.33 in actual 

damages for the period of April 1, 2016, to March 31, 2019, and then 

severed that portion of the suit from Engler’s claims for monetary 

damages for ongoing and future deductions. Though neither party 

scored a total victory, only BlueStone appealed the trial court’s 

judgment.

The court of appeals reversed and rendered judgment for 

BlueStone.9 First, the court viewed Burlington Resources as 

establishing a rule that the language “into the pipeline” is equivalent to 

8 Id. at 203.

9 ___ S.W.3d ___, 2020 WL 3865269, at *4 (Tex. App.—Fort Worth July 

9, 2020). 
10

and creates a valuation or delivery point “at the wellhead or nearby.”10 

Based on this understanding of our opinion, the court concluded that the 

1986 deed’s language—“free of cost in the pipe line, if any, otherwise free 

of cost at the mouth of the well or mine”—creates a delivery point 

equivalent to delivery at the well.11 Second, the court rejected Engler’s 

argument that a gathering system is not a pipeline, stating it is 

recognized and regulated as such under Texas law.12 For these reasons, 

the court concluded that “the 1986 Deed’s use of the phrase ‘in the pipe 

line’ effectively sets the valuation point at the wellhead.”13 The court 

therefore rendered judgment that Engler’s royalty is subject to all 

postproduction costs after delivery in the gathering pipeline, including 

gathering, compression, and transportation costs, as well as severance 

taxes and regulatory fees.14 

On petition for review to this Court, Engler assails the court of 

appeals’ construction of Burlington Resources as adopting a rule 

divorced from contractual context. Engler contends that the 1986 deed, 

properly construed, sets the delivery point at the transportation 

pipelines. Engler also contends that the court of appeals erred in not 

considering the testimony of its expert. According to Engler, this 

testimony conclusively establishes that “the term ‘pipe line’ refers to the 

transporting pipeline company that purchases the gas that has been 

10 Id.

11 Id.

12 Id. at *5.

13 Id. 

14 Id. at *2-3, 7.
11

gathered and delivered from the well to the interconnection point with 

the transporter,” meaning that a mid-stream gas gathering system 

would not be considered a “pipeline” for purposes of delivery by those in 

the oil-and-gas industry, at least at the time the deed was executed. 

In response, BlueStone defends the court of appeals’ construction 

of Burlington Resources and the 1986 deed, advancing the same 

arguments asserted in the proceedings below. BlueStone also argues 

that the testimony of Engler’s expert is no evidence of anything, let alone 

conclusive evidence of the deed’s meaning, because it is conclusory, 

opines on questions of law, assumes facts contrary to those in the record, 

and is insufficient as a matter of law to create a fact question about the 

royalty clause’s meaning.15 

We hold that BlueStone discharged its royalty obligation by 

delivering Engler’s fractional share of production in the gathering 

pipelines on the premises and, therefore, BlueStone properly deducted 

postproduction costs between that point and the point of sale in valuing 

Engler’s royalty interest. While the court of appeals construed 

Burlington Resources more narrowly than the opinion’s language 

contemplates, it reached the correct result under the 1986 deed’s plain 

language. 

15 The Texas Land and Mineral Owners Association submitted an 

amicus brief supporting Engler’s petition, and the Texas Oil and Gas 

Association submitted an amicus brief supporting BlueStone’s argument. 

Byron C. Keeling submitted an amicus brief clarifying, as a legal and 

conceptual matter, the distinction between an in-kind royalty and a monetary 

royalty without opining on the merits of the case before the Court. 
12

II. Discussion

A. Standards of Review

Deeds are interpreted and construed as contracts.16 Summary 

judgment and contract-construction disputes present questions of law 

we review de novo.17 Summary judgment is appropriate only when no 

genuine issue of material fact exists and the movant is entitled to 

judgment as a matter of law.18 When both parties move for summary 

judgment and the trial court denies one motion but grants the other, we 

review both, determine all questions presented, and render the 

judgment the trial court should have rendered.19 

When construing an oil-and-gas deed, standard rules of contract 

construction apply.20 Our objective is to “ascertain the true intentions 

of the parties as expressed in the writing itself,” beginning with the 

instrument’s express language.21 In doing so, we consider the entire 

writing and attempt to harmonize the provisions so all are given effect 

and none are rendered meaningless.22 We do this because we presume 

16 Tittizer v. Union Gas Corp., 171 S.W.3d 857, 860 (Tex. 2005). 

17 Id.; URI, Inc. v. Kleberg County, 543 S.W.3d 755, 763 (Tex. 2018).

18 TEX. R. CIV. P. 166a(c). 

19 Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 

844, 848 (Tex. 2009). 

20 Burlington Res. Oil & Gas Co. v. Tex. Crude Energy, LLC, 573 S.W.3d 

198, 203 (Tex. 2019).

21 Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 

S.W.3d 323, 333 (Tex. 2011). 

22 Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 

(Tex. 2006). 
13

the parties intended every clause to have some effect.23 We afford 

contract language its plain, grammatical, and ordinary meaning unless 

doing so “would clearly defeat the parties’ intentions” or the instrument 

shows the parties used the terms in a different or technical sense.24

Whether a contract is ambiguous or not is a question of law.25 If 

a contract has a certain and definite meaning, the contract is 

unambiguous, and we will construe it as a matter of law26 and enforce it 

as written.27 A contract subject to more than one reasonable 

interpretation is ambiguous, giving rise to a fact issue regarding the 

parties’ intent.28 A contract may be ambiguous even if the parties agree 

it is not.29 Here, although the parties advance different constructions 

and Engler relies, in part, on expert testimony to support its preferred 

construction, we conclude that the 1986 deed is not ambiguous.

When construing an unambiguous instrument, we may consult 

facts and circumstances surrounding its execution to aid our 

interpretation.30 But there are limits. We cannot employ surrounding 

facts and circumstances to make contract language say something it 

23 Heritage Res. Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). 

24 Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 

479 (Tex. 2019); Heritage Res., 939 S.W.2d at 121.

25 URI, Inc. v. Kleberg County, 543 S.W.3d 755, 763 (Tex. 2018).

26 Barrow-Shaver, 590 S.W.3d at 479.

27 BlueStone Nat. Res. II, LLC v. Randle, 620 S.W.3d 380, 387 (Tex. 

2021); Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 728 (Tex. 1981). 

28 Barrow-Shaver, 590 S.W.3d at 479.

29 URI, 543 S.W.3d at 763.

30 Id. at 757. 
14

unambiguously does not or to determine “that the parties probably 

meant, or could have meant, something other than what their 

agreement stated.”31 Rather, the “facts and circumstances can only 

provide context that elucidates the meaning of the words employed, and 

nothing else,” and they can only give contract language a meaning to 

which it is “reasonably susceptible.”32 In other words, such evidence 

may not be “used to add, alter, or change the contract’s agreed-to 

terms.”33

This rule also applies to expert testimony and other evidence of 

industry custom and usage.34 When we construe unambiguous 

contracts, we consider only objectively determinable extrinsic facts and 

circumstances surrounding the contract’s execution35 that do not vary 

or contradict the contract’s plain language.36 Although the 1986 deed is 

unambiguous, Engler asserts expert testimony is admissible to clarify 

and explain what the original drafting parties could have meant by “in 

the pipe line.” We disagree because the testimony Engler relies on to 

construe that phrase would impermissibly add words of limitation to 

31 Id.

32 Id. at 765.

33 Barrow-Shaver, 590 S.W.3d at 485 (citing URI, 543 S.W.3d at 758; 

Nat’l Union Fire Ins. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex. 1995)). 

34 Id. at 486-87 (holding evidence of industry custom to interpret an 

unambiguous contract inadmissible when such evidence would alter or 

contradict the contract’s terms).

35 URI, 543 S.W.3d at 768.

36 Barrow-Shaver, 590 S.W.3d at 484.
15

modify the deed’s terms.37 In addition, the expert’s testimony says 

nothing about the industry meaning of “pipe line” in 1986 or about 

surrounding circumstances extant when the deed was executed. Rather, 

the expert’s affidavit merely discusses how “most” gas was “usually” 

processed and sold under “traditional” gas gathering agreements at that 

time.38 Because the proffered evidence does not elucidate the meaning 

of the 1986 deed’s words, we do not consider it. 

B. Analysis

The 1986 deed requires delivery “free of cost in the pipe line, if 

any, otherwise free of cost at the mouth of the well or mine.” Though 

numerous types of pipelines are common in the oil-and-gas industry and 

some were in existence at the time the deed was executed, the 

instrument does not specify any particular pipeline or any particular 

type of pipeline, as it could have. The deed also contemplates that there 

may not be any pipeline for delivery and, in that case, delivery defaults 

to an onsite locus—the mouth of the well or mine.

Here, there is no dispute that a gas pipeline exists and that 

Engler’s royalty interest is to be delivered to its credit free of cost in that 

pipeline. All agree that, in determining the value of Engler’s share of 

production, BlueStone is not permitted to deduct postproduction costs 

37 See id. at 486 (“[W]hen a contract is unambiguous, we do not consider 

outside evidence, including industry custom and usage, to alter or contradict 

the terms.”). 

38 See RESTATEMENT (SECOND) OF CONTRACTS § 220 cmt. d (AM. LAW 

INST. 1981); id. § 222(1) (trade custom or usage may vary the ordinary meaning 

of a word only when the usage has “such regularity of observance in a place, 

vocation, or trade as to justify an expectation that it will be observed with 

respect to a particular agreement”).
16

incurred prior to the delivery point. But whether a gathering system is 

a “pipe line” is hotly contested. In settling that matter, we apply 

well-established contract-construction principles in concluding that the

onsite gathering system is, or at least includes, a pipeline into which 

delivery may be made under the 1986 deed. This is so because (1) a 

gathering pipeline is a pipeline in the ordinary, industry, and regulatory 

meaning of the term; (2) case law confirms that it is not uncommon for 

delivery of a royalty interest to be made into a “pipeline . . . to which the 

well is connected,” rather than a downstream location; (3) the deed does 

not exclude such a pipeline from the usual meaning of the term or specify 

any particular type of pipeline; and (4) the inclusion of a default delivery 

location at or near the wellhead does not negate a wellsite delivery point 

but, instead, confirms it. Although the court of appeals’ reading of 

Burlington Resources accords with our construction of the deed 

language, that case does not establish a rule that compels this 

conclusion. 

1. A Gathering System Is a Pipeline

When an instrument does not indicate that language is being 

used in a technical or special way, we construe the instrument’s words 

as “usually understood by persons in the business to which they 

relate.”39 To effectuate the drafting parties’ intent, we consider the 

meaning of the terms at the time the 1986 deed was drafted.40 Because 

the deed does not include a special definition of “pipe line,” we look to 

39 Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 211 (Tex. 

2011). 

40 See id. (“In construing an unambiguous oil and gas lease, . . . we seek 

to enforce the intention of the parties as it is expressed in the lease.”). 
17

ordinary and industry definitions to aid in our interpretation and 

analysis of this word. 

We begin by consulting contemporaneous dictionaries and 

treatises,41 both of which support the conclusion that the gathering 

system on the lease qualifies as a pipeline under the 1986 deed. The 

common understanding of a “pipeline” is “a line of pipe with pumps, 

valves, and control devices for conveying liquids, gases, or finely divided 

solids.”42 Williams & Meyers’s dictionary of oil-and-gas terms similarly 

defines “pipeline” as: “A tube or system of tubes used for the 

transportation of oil or gas. Types of oil pipelines include: . . . gathering 

lines, extending from lease tanks to a central accumulation point[.]”43 

With respect to a gas gathering system, the definition of “pipeline” 

further says: “In the case of gas, the Gathering system . . . delivers the 

gas to the main pipeline which takes the gas directly to the distributor 

at the place of consumption.”44 The manual goes on to define the 

“gathering system” as a network of pipelines and other equipment that 

delivers gas to the main pipeline.45 It also states:

41 See id. (recognizing a contract did not include unique definitions of 

“drill” and “complete” and using the Williams & Meyers treatise, Oil and Gas 

Law: Manual of Oil and Gas Terms, to define the words). 

42 WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY (9th ed. 1983).

43 8 HOWARD R. WILLIAMS & CHARLES J. MEYERS, OIL AND GAS LAW 766 

(Patrick H. Martin & Bruce M. Kramer, eds., 2021) (emphasis added). Engler 

acknowledges that the definitions provided in the 2020 edition of this treatise 

are “virtually the same” as those provided in the version existing when the 

deed was drafted. The definitions in the 2021 edition also remain the same, so 

we cite to the 2021 edition of the treatise for convenience. 

44 Id.

45 Id. at 436. 
18

A gathering system generally consists of “interconnected 

subterranean natural gas pipelines and related 

compression facilities that collect the raw gas from wells 

and deliver it to a central point, such as a processing 

plant.”46 

 

A sub-definition of a “gathering pipeline system” similarly 

describes it as “a system of interconnected subterranean pipelines and 

related compression facilities that collect the raw gas from wells and 

deliver it to a central point[.]”47 By ordinary or industry definition, the 

gathering system or gathering lines are composed of pipelines to which 

the minerals may be delivered. 

Gathering systems are also treated as pipelines under various 

statutes and regulations. For example, the Texas Administrative Code 

includes regulations for systems used to gather natural gas, describing 

such systems as “gathering pipelines” and “natural gas gathering 

pipelines.”48 Similarly, many statutes use the word “pipeline” to 

describe oil-and-gas gathering systems.49 Among others, the Health and 

46 Id. (emphasis added) (citing Duke Energy Nat. Gas Corp. v. Comm’r, 

172 F.3d 1255, 1256 (10th Cir. 1999)).

47 Id. at 436-36.1 (emphasis added). 

48 16 TEX. ADMIN. CODE § 8.110; see 7 Tex. Reg. 3982, 3989 (1983), 

subsequently amended (former 16 TEX. ADMIN. CODE § 3.13) (“All gathering 

pipelines designed to transport oil, gas, condensate, or other oil or geothermal 

resource field fluids from a well or platform shall be equipped with 

automatically controlled shut-off valves at critical points in the pipeline 

system.”). 

49 See TEX. NAT. RES. CODE § 111.084 (providing that a gathering 

system includes pipelines by stating a gathering system may be operated “by 

pipeline or by truck in connection with the purchase or purchase and sale of 

crude petroleum”); TEX. TAX CODE § 171.1012(k-2) (stating the statute applies 

to pipeline entities such as those “primarily engaged in gathering . . . crude oil, 
19

Safety Code defines a “pipeline facility” as “a pipeline used to transmit 

or distribute natural gas or to gather or transmit oil, gas, or the products 

of oil or gas.”50 The Utilities Code likewise defines a low-pressure 

gathering system as “a pipeline that operates at a working pressure of 

less than 50 pounds per square inch.”51 While these statutory uses are 

certainly not conclusive, the regulatory treatment of gas gathering 

pipelines is informative and consistent with the meaning the word 

“pipeline” ordinarily carries. 

Case law is concordant with this understanding, if not directly at 

least inferentially.52 Often, deed or lease language requiring delivery 

“into the pipeline” is accompanied by language specifying the pipeline 

as the one “to which the lessee connects his wells.”53 Such limiting 

including finished petroleum products, natural gas, condensate, and natural 

gas liquids”).

50 TEX. HEALTH & SAFETY CODE § 756.121(3).

51 TEX. UTIL. CODE § 121.451(3). 

52 See Bayou Pipeline Corp. v. R.R. Comm’n, 568 S.W.2d 122, 124-26 

(Tex. 1978) (referring to a gathering system as a “gas gathering pipeline” in 

discussing whether the system qualifies as a “utility” under a statute); First 

Nat’l Bank of Seminole v. Hooper, 104 S.W.3d 83, 84 (Tex. 2003) (describing 

the Owego Gathering System as a pipeline).

53 Burlington Res. Oil & Gas Co. v. Tex. Crude Energy, LLC, 573 S.W.3d 

198, 207 (Tex. 2019) (collecting cases in analyzing the language of an 

assignment requiring delivery “into the pipeline, tank or other receptacle to 

which any well or wells on such lands may be connected”); see, e.g., Cameron v. 

Stephenson, 379 F.2d 953, 954 (10th Cir. 1967) (“[E]xecutors and assigns 

covenants to deliver free of cost to the credit of assignor at the pipeline to which 

he shall connect his wells . . . .”); Kretni Dev. Co. v. Consol. Oil Corp., 74 F.2d 

497, 497 (10th Cir. 1934) (“[F]ree of cost at the pipe lines, to which he may 

connect his wells . . . .”); Molter v. Lewis, 134 P.2d 404, 404-05 (Kan. 1943) (“To 

deliver to the credit of lessor, free of cost, in the pipe line to which he may 
20

language is not present in the 1986 deed, but these cases demonstrate 

that it is not uncommon for a “pipeline” to be connected to the well or for 

delivery to occur at that point on the wellsite premises. The absence of 

such limiting language in the 1986 deed makes it broader, not narrower, 

than the provisions construed in other cases, confirming rather than 

repudiating that a gathering system is, or at least includes, a pipeline 

for delivery. 

The North Dakota Supreme Court recently interpreted a similar 

in-kind royalty provision in Blasi v. Bruin E&P Partners, LLC.54 The 

Blasi royalty clause provided that the lessee agreed to deliver to the 

lessor’s credit, “free of cost, in the pipeline to which Lessee may connect 

wells on said land, the equal [fractional] part of all oil produced and 

saved from the leased premises.”55 While this royalty provision included 

“connected at the well” language, Blasi, the royalty holder, argued that 

the delivery point was “the pipeline” and that “the term ‘pipeline’ [did] 

connect his wells . . . .”); Voshell v. Indian Territory Illuminating Oil Co., 19 

P.2d 456, 457 (Kan. 1933) (“To deliver to the credit of lessor, free of cost, in the 

pipe line to which he may connect his wells . . . .”); Hamilton v. Empire Gas & 

Fuel Co., 230 P. 91, 91 (Kan. 1924) (“To deliver to the credit of the first party, 

his heirs or assigns, free of cost, in the pipe line to which it may connect its 

wells . . . .”); Scott v. Steinberger, 213 P. 646, 647 (Kan. 1923) (analyzing a lease 

stating the royalty should be paid “free of cost in the pipe lines to which he may 

connect his wells”); Rains v. Ky. Oil Co., 255 S.W. 121, 122 (Ky. 1923) (“[S]econd 

party agrees to deliver to the first party . . . in the pipe line with which it may 

connect the well or wells . . . .”); Wall v. United Gas Pub. Serv. Co., 152 So. 561, 

562 (La. 1934) (“[L]essees shall deliver to the credit of the lessors, free of cost, 

in the pipe line to which he may connect his wells . . . .”). 

54 959 N.W.2d 872, 877 (N.D. 2021).

55 Id. at 876.
21

not refer simply to any pipe or tube connected to the well itself.”56 

Similar to the argument Engler makes here, Blasi maintained that 

“pipeline,” as contemplated by the lease, meant “a pipe used to transport 

oil to a refinery—the type that is ‘generally regulated by state or federal 

authorities for moving oil hundreds or thousands of miles, not a pipe 

between the wellhead and the tank battery to move oil a few feet.’”57 

In assessing Blasi’s argument, the court pointed out that “[t]he 

royalty provision itself identifie[d] the pipeline that [was] 

contemplated”—a pipeline connected to the well—so analyzing industry 

definitions of pipeline was unnecessary.58 Further, the court concluded 

that the provision, by its language, did “not designate a specific type of 

pipe as ‘the pipeline.’”59 Blasi’s interpretation, the court said, would 

introduce “considerable uncertainty,” and parties should not have to 

examine physical characteristics of various pipes to determine if it is 

“the pipeline.”60 Additionally, barring evidence that the parties 

envisioned different delivery points for different minerals, the court 

found it irrational to construe the delivery point in such a way that it 

changes depending on the means by which a mineral is transported.61 

For example, a royalty calculation for oil that is delivered by truck 

directly to a consumer and that never enters a commercial pipeline of 

56 Id. at 877.

57 Id.

58 Id.

59 Id. 

60 Id.

61 Id. 
22

the sort that Blasi envisioned should not be different from a calculation 

for a mineral transported via such a pipeline.62 Finally, the court 

pointed out that the provision did not require the existence of a pipeline; 

rather, the word “may” in the clause provided a failsafe that prevented 

a lessee from avoiding a royalty obligation by failing to connect a 

pipeline to the well.63 The delivery point, therefore, was the point that 

remained constant regardless of the type of minerals produced and 

regardless of whether a pipeline existed at the wells.64 

Despite the use of different language, the royalty provision at 

issue here is analogous, and the effect of the deed’s language is the same. 

An onsite gathering pipeline qualifies as a pipeline, and the 1986 deed’s 

reference to a failsafe or default delivery point at or near the point of 

production does not exclude such a pipeline from bearing its common 

meaning. To the contrary, the alternative phrasing ensures parity in 

the delivery obligation regardless of the type of mineral produced and 

the availability of a pipeline for delivery of such minerals. 

2. The Deed Language Does Not Prohibit Delivery At or Near the Well

As previously noted, the 1986 deed does not identify any 

particular pipeline, specify a particular downstream delivery point, or 

otherwise refer to a pipeline located off the wellsite premises. To 

construe the deed as referring to a particular pipeline or a pipeline 

located off the premises would require adding words of limitation to the 

62 See id.

63 See id. 

64 See id. at 877-78.
23

deed, but we cannot rewrite or add to the instrument under the guise of 

interpretation.65 

Engler nonetheless contends that the deed language implicitly, if 

not expressly, negates a construction of “pipe line” as being any pipeline 

in close proximity to the well. If that were the case, the deed would 

necessarily limit the delivery point to some downstream pipeline 

location—either at the transportation pipeline (as the trial court held) 

or the distribution pipeline (a construction of the deed Engler has 

abandoned). In advancing this construction of the deed, Engler focuses 

on the word “otherwise,” asserting the deed contemplates a dichotomy 

between two potential delivery points—offsite and onsite. In Engler’s 

view, the word “otherwise” precludes delivery near the mouth of the well 

if any pipeline exists, thus foreclosing the possibility that “pipe line” 

could refer to the gas gathering system given its proximity to the mouth 

of the well. Engler posits that the deed’s preferred and default delivery 

locations cannot be the same or similar, so the phrase “the pipe line, if 

any” must refer to the off-premises transportation pipeline.

To achieve its desired construction of the deed, Engler contorts 

the definition of “otherwise,” which generally means: “in a different way 

or manner”; “in different circumstances”; “in other respects”; “if not;”66

“in another way, or in other ways.”67 These definitions do not support 

65 See Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 

471, 481, 487 (Tex. 2019). 

66 WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY (9th ed. 1983).

67 BLACK’S LAW DICTIONARY (5th ed. 1979). 
24

the dichotomy Engler asserts or foreclose the possibility that the two 

delivery points may ultimately yield the same valuation. 

Engler’s royalty is for a fractional share of “oil, gas or other 

minerals” produced from the land and, in describing the royalty interest, 

the deed does not distinguish among the types of minerals that may be 

produced. That being the case, the word “otherwise”, when considered

in connection with the immediately preceding “if any” phrase, simply 

creates a preferential delivery point if any pipeline exists for the specific 

mineral being produced and a default delivery point at the mouth of the 

well or mine if there is no such pipeline or when the produced mineral 

is not capable of delivery into a pipeline.68 Harmonizing the entirety of 

the royalty clause in this way creates internal consistency and parity 

among the specified delivery points—“the pipe line” and “the mouth of 

the well or mine”—and among the various types of minerals that may 

be produced. Engler’s favored construction does not. 

68 To illustrate: some minerals, like gas, must be delivered into a 

pipeline; minerals like oil may or may not be delivered into a pipeline; and

other minerals, like coal, would not be delivered into a pipeline. See Blasi, 959 

N.W.2d at 877-78 (analyzing how oil may be transported by various means and

may never reach a commercial pipeline); 8 HOWARD R. WILLIAMS & CHARLES 

J. MEYERS, OIL AND GAS LAW 436 (Patrick H. Martin & Bruce M. Kramer, eds., 

2021) (explaining that gas collected via a gathering line continually flows from 

the well to the ultimate consumer, since gas cannot be stored). If “pipe line” 

could potentially mean an off-premises transportation pipeline, this would 

create a disparity in the delivery points for different minerals—oil transported 

by truck from the well would be valued “at the mouth of the well,” whereas gas 

transported via pipeline would be valued downstream at the transportation 

pipeline. Under Engler’s construction of the deed, the variety of potential 

delivery points could yield vastly different royalty calculations for no 

discernable or textually supportable reason. 
25

Further, given the existence of transportation pipelines at the 

time the deed was executed, the failure to mention such pipelines—by 

description or even by type—is telling. This circumstance coupled with 

the nonexistence of a gathering pipeline at that time as well as the 

articulation of a wellsite delivery point as a default, supports the parties’ 

intent that delivery would occur into pipelines on the wellsite, if any, 

rather than an intent to establish a downstream delivery point that 

would result in a markedly different royalty calculation.

3. Contracts Are Construed According to Their Terms

Although mineral transactions are subject to certain 

presumptions that state the “usual” rules, we have repeatedly affirmed 

that parties are free to make their own bargains, and courts are 

obligated to enforce agreements as the parties intended.69 We discern 

that intent from the language the parties used to express their accord, 

viewed not in isolation, but in context.70 The analysis in Burlington 

Resources expresses, applies, and confirms this principle.71 There, we 

held that language assigning an overriding royalty interest equated 

certain language specifying an “into the pipeline” delivery point with an 

“at the mouth of the well” valuation.72 But we did not fashion a rule to 

that effect. To the contrary, we explained that “the decisive factor in 

69 Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121-22 (Tex. 

1996) (emphasizing oil-and-gas royalty agreements are construed under

general rules that may be modified by the parties’ agreement).

70 Id. at 121.

71 See Burlington Res. Oil & Gas Co. v. Tex. Crude Energy, LLC, 

573 S.W.3d 198, 202-11 (Tex. 2019). 

72 Id. at 211.
26

each [contract-construction] case is the language chosen by the parties 

to express their agreement.”73 Just as in Burlington Resources, our 

analysis here turns not on an immutable construct but on the parties’ 

chosen language. 

III. Conclusion

Under the 1986 deed, BlueStone satisfies its obligation to deliver 

Engler’s share of production “free of cost in the pipe line” by accounting 

for Engler’s fractional share on a net-proceeds basis that deducts from 

gross sales proceeds the postproduction costs incurred after delivery in 

the gas gathering system on the wellsite premises. We therefore affirm 

the court of appeals’ judgment for BlueStone. 

 

 John P. Devine

 Justice

OPINION DELIVERED: February 4, 2022

73 Id. at 200.