Court Opinion

ID: 6215539
Source: CourtListenerOpinion
Date Created: 2022-02-07 08:11:38.557119+00
Date Added: 2024-06-11T08:57:04.497569
License: Public Domain

Supreme Court of Texas
                            ══════════
                             No. 20-0639
                            ══════════

                      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,
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, LLC 1 as

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

                                        2
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

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

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

(observing that “gross production” refers to the total volume of minerals
extracted from the ground).

                                        3
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).

                                      4
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

                                    5
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. Hyder 6 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).

                                       6
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.

                                      7
       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”).

                                       8
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).

                                    9
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.

                                    10
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.

                                    11
                                  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).
       19Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d
844, 848 (Tex. 2009).
       20Burlington Res. Oil & Gas Co. v. Tex. Crude Energy, LLC, 573 S.W.3d
198, 203 (Tex. 2019).
       21Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341
S.W.3d 323, 333 (Tex. 2011).
       22Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345
(Tex. 2006).

                                        12
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 law 26 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.

                                       13
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 execution 35 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.
       33Barrow-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)).
       34Id. 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.

                                      14
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

       37See 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”).

                                      15
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).
         See id. (“In construing an unambiguous oil and gas lease, . . . we seek
         40

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

                                       16
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.

                                      17
       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

       46Id. (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,

                                        18
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).
       52See 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).
       53Burlington 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

                                        19
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.

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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.

                                        21
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.

                                    22
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).

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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.

                                       24
      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.

                                        25
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.

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