Opinion ID: 6110129
Heading Depth: 3
Heading Rank: 2

Heading: Unreasonableness of Implied Proximity Requirement

Text: Although the leases' express language includes no proximity requirement for the offset well, Herbst urges us to imply such a restriction. Herbst complains that failing to do so renders the phrase offset well meaningless, thereby writing the word offset out of the provision entirely. We disagree. The phrase offset well undoubtedly has meaning; the pertinent question is what that meaning is. For the reasons discussed below, we hold that the meaning Herbst ascribes-imposing a location or proximity requirement that goes beyond the leases' express language-is an unreasonable interpretation of the language the parties chose. See Exxon Corp. , 348 S.W.3d at 215 (where the lease expressly defines the duty, we will not impose a more stringent obligation unless it is clear that the parties intended to [do so]). 7  As noted, Herbst contends an offset well is necessarily one that protects against drainage and that proximity to the draining well is necessary to effectuate that purpose. This is a reasonable premise in the context of vertical drilling, where placement of an offset well is an important factor in minimizing the amount of oil or gas being drained. See Elliff , 210 S.W.2d at 561 (noting the recognized principle that oil and gas found in underground reservoirs will migrate across property lines towards any low pressure area created by production from the common pool). But the same principle does not apply in the context of horizontal drilling and hydraulic fracturing in the Eagle Ford Shale. First, the only locations that matter in the horizontal-drilling context are the locations of the perforated and fractured portions of the horizontal wellbore. A well may be drilled in close proximity to the lease boundary, yet have absolutely no chance of preventing (or causing) drainage depending on the direction of the horizontal wellbore and the placement of the perforations. See Holliday, 44 ST. MARY'S L.J. at 779 (explaining that horizontal drilling increases the exposure of the perforated (i.e., producing) portion of the wellbore). Suppose, for example, the Lucas well's surface location was within 467 feet of the lease line, but the horizontal wellbore traveled perpendicular to and away from, rather than parallel to, the lease line. In that case, protecting against drainage would be a logical impossibility. As this hypothetical illustrates, if the parties had intended the offset well to protect against drainage, the provision would presumably have included requirements regarding the direction and placement of the perforated portions of the horizontal wellbore. The dissent nevertheless insists that incorporating an intent to protect against drainage into the use of the term offset well would be in accordance with decades of the industry's usage. Post at 120. But even leaving aside the ineffectiveness of a proximity requirement in effectuating that intent, discussed above, this conclusion ignores the absence of a significant possibility of drainage occurring in this context in the first instance. 8 It is undisputed that the leases at issue, which govern tracts within the tight Eagle Ford Shale formation, contemplated the use of horizontal drilling and hydraulic fracturing, both of which are necessary to economically recover oil and gas from such formations. Wells, 9 TEX. J. OIL GAS & ENERGY L. at 320. And as noted, commentators recognize the minimal risk of drainage in this context. E.g., id. at 333-34 ([G]iven the low permeability of the Eagle Ford shale formation, the historic issues of conventional formations-the risk of substantial drainage from neighboring tracts and the risk of not allowing the formation to produce at its maximum efficient recovery rate-would appear to be largely inapposite with unconventional shale formations.). In light of this context, the court of appeals' holding that Murphy could prevail only by affirmatively demonstrating that the Herbst well was protecting against  drainage, despite the absence of a significant possibility that drainage was in fact occurring, is simply not logical. And while Herbst does not argue that Murphy had such a burden, Herbst's contention that the parties intended to presume drainage by the Lucas well, and correspondingly intended to prevent such drainage via the offset well, is similarly not reasonable. 9 Even if it were, as discussed, requiring the offset well to be drilled in close proximity to the lease line would not address the problem.