Opinion ID: 2165636
Heading Depth: 1
Heading Rank: 13

Heading: governing state law

Text: Coral and KJJ argue that this contract involves the eventual ownership of real estate interests in Nebraska and, therefore, it should be governed by Nebraska law. [9] We agree that this court has implicitly recognized that oil and gas leases have many of the same components as real estate interests. [10] Moreover, this court, like many states, has explicitly recognized that an interest in an oil and gas lease is an interest in real property to the extent that it grants the lessee the right to remove minerals from the land. [11] This action, however, arises out of a dispute over the meaning of the parties' executory promises in a joint operating agreement. An operating agreement is the standard contract used in the oil and gas industry to govern the rights and duties between the operator and nonoperator interest owners of oil and gas tracts or leaseholds in the development and operation of mineral properties. [12] `[T]he agreement normally is not intended to affect the ownership of the minerals or the rights to produce.' [13] Other courts have implicitly recognized that operating agreements create contractual rights, not property rights. [14] Although Coral and KJJ sought a judgment establishing title to the interests covered by the JOA, it concedes that the key issue in this lawsuit . . . which affects all of [Coral's] causes of action, is the proper construction of Article VIII(G) entitled `Preferential Right to Purchase.' [15] Even if successful, Coral's claim would have obligated Central to sell Coral and KJJ the interest sold to EXCO on the same terms. [16] But that determination would not have directly affected title to real property in Nebraska. The Restatement (Second) of Conflict of Laws § 187(1) at 561 (1971) provides that [t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue . . . . Because the dispute over Coral and KJJ's preferential purchase right involves a contractual claim to purchase property interests, rather than directly affecting title to Nebraska real property, the parties were free to choose Texas law to govern this claim, and the district court did not err in so determining.