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The issue of urban drilling has become a political maelstrom tearing at the fiber of our peaceful community.

The Town of Flower Mound, known to have one of the strictest oil and gas drilling ordinances in north Texas, recently supported a decision by its Oil and Gas Board of Appeals standing by the Boards ruling regarding the denial of fifteen variances requested by Red Oak Gas to permit a drill site on the property now known as the “River Walk.” The decision was unanimous and the Board will defend its decision in Denton County court.

The Town’s decision on this particular application does not seem to be arbitrary given that as of May, the Town has already provided drilling permits for 21 wells on 9 separate drill site locations, most in less densely populated areas.

Passions related to urban drilling in Flower Mound run deep on both sides from the “just say no to drilling” campaign to mineral owners who feel overly restrictive Town ordinances are denying them their rights which they say constitute an undue taking of their property. Conversely, citizens who have invested significantly in their residences feel that urban drilling without tight restrictions threaten the value of their properties and the beauty of their environment. This may sound intransigent; but ask yourself how much you would pay for a home with a four acre production facility 300 feet from your backyard?

There is no doubt that the atmosphere in Flower Mound is supercharged and battle lines are being drawn around this topic.

Obviously, the issues are complex, both politically and legally. Texas was built on oil and gas and consequently there is strong case law that supports the right to extract minerals. To the confusion of many, the law is consistent in holding the mineral estate as the dominant estate, and as such, it takes precedent over the surface estate.

Many legal and energy experts opine that several area cities could face costly litigation if they don’t reconsider their seemingly recalcitrant setback rules separating homes from gas wells. Those supporting 1,000 foot setbacks cite noise reduction, safety, property values and a pristine Flower Mound as reason enough to prevent the proliferation of “sub-division” wells.

The genesis of any such litigation would be in the undue taking of property, in this case the minerals, which could result in millions of dollars of potential liability related to the value of the unrecoverable minerals. It stands to reason that if an individual owns property that has significant value and a company has invested hundreds of thousands of dollars for the right to capture that value, that city policies rendering both the minerals and the investment valueless will be challenged.

Many other cities who have been confronted with this possibility have either backed off stricter restrictions or opted to adopt less stringent rules to avoid potential litigation. With Red Oak’s filing of their appeal, Flower Mound has become the recipient of the first salvo in what could be a long and arduous battle.

Remember, this is not a lawsuit; it is an appeal of a governmental ruling. Existing legal precedent notwithstanding, there is not necessarily a clear cut favorite in this matter. In this case Red Oak has been denied fifteen separate variances related to its drilling application. If the Town’s decision was only related to offsets, it might struggle to prevail since it has received letters of support for the drilling application from the offset land owners. However, the denied variances include issues related to the floodplain, environmentally sensitive water issues, protecting upland and riparian habitat, tank battery location and right-of-way issues. Even if the Town loses in regard to the setback issues, it is possible that it could still prevail in blocking the application by being successful on only one of these remaining issues.

If litigation evolves from urban drilling it will not turn on the angst of those Town citizens who are generally in opposition. The issues are specific and differ for each location and those immediately affected by such drilling will have the loudest voice in the courtroom.

As the possible number of drillable locations diminish and as companies struggle to find a drill site that can meet Town restrictions, the outcry from both sides of this issue will grow louder. So far the Town and its Council have chosen to stick to their collective guns, choosing to fight each battle on its merits and resisting efforts to loosen restrictions to the dismay of many mineral owners.

It is a very interesting and sensitive balancing act in which our Town leaders have been burdened. Both sides have very legitimate arguments regarding the dispute over urban drilling and something to lose depending on its outcome.

It seems almost certain that with swords drawn and deep lines etched in the dirt on both sides, that in the foreseeable future the debate will rage, the newspapers will continue to follow the issue and many of us may be jamming courtrooms to discover the definitive answer.

As we are all aware the divorce rate in the United States has continued to rise. Accordingly, there are more divorced people entering into second marriages. An offshoot to this is a rise is the use of marital agreements which can address a myriad of issues as couples enter into subsequent unions and wish to establish what is to be characterized as separate (owned by the individual) or community (owned by both) property during the marriage. This written premarital agreement is more commonly known as a prenuptial agreement.

A premarital agreement is simply an agreement between prospective spouses made in contemplation of marriage to become effective at the time of the marriage.

Premarital agreements allow persons about to marry to confirm and modify the characterization of their property. Such agreements can also be used to award alimony, allocate the management of property during the marriage, designate or waive homestead interests, and provide for the choice of law to be applied in any future dispute.

Property which may be subject to a premarital agreement can be broadly defined to include any “interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.” Tex. Fam. Code Ann. § 4.001(2). This far-ranging definition of property encompasses a variety of assets, including retirement benefits, stock options, leasehold interests, and unsecured debt. The following matters may be addressed in a premarital agreement:

(1) the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;

(2) the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;

(3) the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;

(4) the modification or elimination of spousal support;

(5) the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
(6) the ownership rights in and disposition of the death benefit from a life insurance policy;
(7) the choice of law governing the construction of the agreement; and

(8) any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty. Tex. Fam. Code Ann. § 4.003(a).

The premarital agreement must be in writing and be signed by both parties, and the agreement is enforceable without consideration. Tex. Fam. Code Ann. § 4.002. Each party needs to have separate legal counsel in the negotiation of the terms of the agreement.

It is important to note that any right of a child to support may not be adversely affected by a premarital agreement. Tex. Fam. Code Ann. § 4.003(b). Therefore, any provision in a premarital agreement that eliminates or reduces a party’s child support obligation in the event of divorce would be unenforceable. Agreements for private education, college expenses, or cars for children might be enforceable as a contract between the parties as long as it was found to not be a “violation of public policy” if it infringes on a parent’s rights or against a child’s best interests.

The Family Code permits the parties to contract in a premarital agreement with respect to any matter listed and any other matter not in violation of public policy or any statute imposing a criminal penalty. All provisions of a premarital agreement are subject to a public policy review standard. Although never addressed by a Texas court, other states have found that agreements requiring one party to pay the other party money or property upon divorce in an amount unreasonably large or not conditioned upon further consequences to be unenforceable and void under public policy.

Parties may agree that income from separate property is the owner’s separate property. As a matter of fact, in agreements made after September 1, 2003, the partition and exchange of property, including future earnings and income arising from the property, is the separate property of the owning spouse, unless the agreement specifies that the future earnings and income will be community property.

Premarital agreements are most often used to create equity between future spouses based on their respective financial positions as they enter the marriage.

Married couples also have the option to enter into post-marital agreements, called Partition Agreements, which are similar in nature to premarital agreements and allow the parties to assign assets and liabilities as separate or community property according to the circumstances and desires of the parties.

Until the promulgation and passage of the “Mineral Interest Pooling Act of 1965” (“MIPA”) there was no specific code in Texas that addressed the consequence of a mineral owner being left out of or refusing to participate in a pooled unit. The law seemed to satisfy the rights of mineral owners seeking their way into a unit, but was a nebulous collection of words forming an amorphous blob of ambiguity as it related to a mineral owner being forced into a unit against his or her will.

In the last ten years the act was used only 41 times, none resulting in a meaningful decision on this issue by the Texas Rail Road Commission (“TRRC”), the administrative body which is designated by the state to oversee matters related to oil and gas drilling and production. That all changed August 25, 2008 based on a ruling of the TRRC in regard to an application to force pool unleased and/or unfound mineral owners into the drilling of a Barnett Shale well in Tarrant County.

Pursuant to its application, Finley Resources was unable to come to terms with or find the owners (“holdouts”) of 26 lots consisting of approximately 5.704 acres that were to be included in a 96.32 acre pooled unit to be drilled by Finley. Finley was asking the TRRC to “force pool” such interests into its pooled unit for the drilling of a new Barnett Shale well pursuant to the MIPA. As amazing as it seems given the rich history of oil and gas drilling in the Texas, this specific issue had not been administratively adjudicated by the TRRC.

The MIPA language seems plain enough on the surface as to an operator’s right to “force pool” unleased or unfound mineral interest owners, but was silent regarding the rights of such owners. Finley went through the appropriate application process, dotted its i’s and crossed its t’s and had Chesapeake Energy’s support of its application to the TRRC.

Although the issues are many and far too complex to completely address herein, to be successful in the application and approval process, the main points that Finley had to establish were that: 1. the applicant is in compliance with the process; 2. the applicant made a fair and reasonable offer to the unleased interest in the form of a lease, a farmout agreement, or participation; 3. the unleased interest refused the offers; and 4. the decision will protect the correlative rights of all the parties, prevent unnecessary drilling and basically serve the greater good. Also considered in the final decision is the risk related to the drilling of the well (“penalty risk”). This is the risk taken by the “paying” operator on behalf of the mineral owners who are “carried” in the well and can be a factor in determining if there will be any “penalty” assessed against such “carried” mineral owners interest related to the risk assumed by the operator of the well being successful.

The TRRC came down with a landmark decision in this case and, in a first time administrative decision, ruled in favor of Finley, allowing the company to “force pool” such “holdout” interest into the well and unit as participants, the cost of the well to the “forced” participant to be recovered by the operator out of the proceeds of production. Such “forced pooling” is common in other states such as Oklahoma but has never been so interpreted by the TRRC in Texas.

The TRRC held that the offers made by Finley were “fair and reasonable” (Finley had established its offers were “as good as or better” than the offers made to other mineral owners in the unit); that the “force pooled” mineral interest should receive a 20% royalty (which was the same royalty paid to other owners) and an 80% working interest proportionately reduced by the owners share of expenses. The TRRC also held that the “penalty risk” was zero because of the generally low risk of failure associated with Barnett Shale wells. Finally, the TRRC held that the decision “will serve the purposes of protecting the correlative rights and avoiding the drilling of unnecessary wells i.e., “for the greater good,” (my words).

What might this Landmark decision potentially mean to mineral owners who do not want to see drilling of any kind, whose neighbor’s have already  leased their mineral interests, ceding control to the operators,? Emboldened operators ready to take their fight to the TRRC to force unwilling mineral owners to make a decision or be “forced” to participate in the drilling of a well against their wishes. The Finley case played out in a relatively non-affluent area. In more affluent areas, where mineral owners have the wherewithal and the will to defend their position, the outcome may well be similar to the courthouse march that is beginning in regard to operator’s perceptions of overly restrictive city  permitting codes and the coming march by gas pipeline companies to condemnation hearings and potential jury trials.

Mediation has garnered tremendous momentum in Texas and nationally as an effective process in disposing of family law disputes (divorce, child custody, child support, etc.) in lieu of the more involved and more costly adversarial proceedings that wind their way through the judicial process.

Historically, the most common means of mediation has been the “caucus” mediation, which typically follows the filing of an action by an attorney on one side of the dispute. The other side answers the petition; discovery and possibly other motions ensue and often times the judge then orders the parties to mediation. A mediator is selected, who reviews the files, offers his understanding of the issues and seeks a commitment from each party that they will negotiate in good faith to resolve all outstanding issues. The mediator separates the parties and their attorneys, reviews each parties understanding of the issues and their positions and then shuttles between the separated parties in an attempt to narrow the gap between those positions. If an agreement is reached (which is not always the case) the mediator or one of the attorneys reduces the agreed upon to terms to writing, the parties execute the agreement and it is then presented to the court.

In the last several years’ mediation has moved more towards “pure form” mediation. In this process the mediator meets directly with the two parties to help them resolve their differences. This may involve multiple sessions between the mediator and the disputing parties. After each session the mediator may assign to each party tasks to perform or goals to consider prior to the next meeting. As the parties come closer together the mediator will work to close any remaining gaps and, at the time resolution is achieved, the mediator often prepares a final agreement and accompanies the parties to court for formal prove-up. Although it is not necessary to have an attorney present throughout the process, parties often retain attorneys to consult with so that they can receive independent advise on issues that are more complex or legally beyond the understanding of the party. The parties may also want to consult with their CPA during the process in regard to financial considerations and the determination of “equal value” if diverse assets are involved.

Although there are distinct advantages to “pure form” mediation and generally cost savings as well, it is always advisable to consult an attorney to get a full understanding of the process and its advantages and disadvantages. It is not the solution to every dispute and can end in “no decision” and necessitate the courthouse trip that the parties intended to avoid when they embarked on the mediation.

Uh oh! You’ve been you’ve been sued or injured (financially or personally)!

What for you ask? Possibly its a matter affecting your business, maybe a dispute with your neighbor, and all too often it’s for divorce, or over a custody issue or child support payments, but put that question aside for the moment because its time to act!

Maybe for the first time in your life you are forced to seek the counsel of an attorney. What do you do? What questions do you need to have answered? Today we will attempt to bring some order to the uncertainty and chaos that frequently surrounds the multitude of decisions with which you are now faced.

If you have been served with a lawsuit, before you do anything else, read the petition. In the petition it will state the number of days from the date of service that you have to file an answer. Your failure to answer the petition may result in a default judgment against you. You will need time to source an attorney and that attorney will need time to file an answer. You know its time to get busy but you ask yourself…..

How do I source an attorney that is right for me and my situation? As we all know the website and the phone book are chock-full of ads for attorneys but is it possible to know from the printed word which one is right for you and your situation? A better way is to ask your friends and business associates for recommendations. Call your area Chamber or other outlets that you know that are familiar with the community. Ask questions about the firm’s reputation. How are they to work with? Do they get results?

After you’ve completed your research and chosen one or more firms to visit call them and ask if they will provide a free consultation. Many firms will meet with you for a half hour or more to discuss your situation at no charge. Be sure to show up with a list of questions.

#1. How long have you been in practice and in what areas of law do you focus? Make sure that you feel comfortable that the attorney you select has the experience to effectively represent you in your unique circumstances.

#2. Who will be working on my case? This question may be more important than you think. You need the focus of an experienced lawyer. On the other hand more junior lawyers and paralegals are far less expensive. You would like the best of both worlds. Make sure that your case is being prosecuted with the highest level of competence at the most reasonable cost.

#3. What are your fees, will you require a retainer and how does that work? Fees vary based on the lawyer. Most firms (there are a few in the area that do contingency fee cases) require that you pay an upfront amount in the form of a retainer, which is held in the Trust Account of the attorney. Itemized invoices are then sent to you but billed against the retainer until it is depleted. If your case exceeds the amount of the original retainer the attorney will most likely expect you to replenish the retainer account.

#4. Are most of your cases settled or do they go to court? There is not necessarily a right answer to this question. Many cases are settled prior to litigation and that is often a good thing. It is important though that you understand that the attorney you select understands the mediation process and also knows their way around the courthouse.

#5. Do you carry malpractice insurance? Hopefully this never becomes an issue, but not all attorneys carry malpractice insurance.

#6. What are you expectations of me? Client cooperation can be critical to the success of a case. Attorneys expect that their clients will fully cooperate and make themselves available as needed. Conversely, you have the right to expect that the attorney will keep you informed and make themselves or their staff available to respond to you as well.

This information is not intended to be legal advice and is intended to provide general information only. Do not assume that any information contained herein applies to your specific situation without consulting an experienced attorney. Sending e-mail or requesting an initial consultation does not create an attorney client relationship.

The News Connection has recently begun a poll whereby it surveys its readership to determine their opinions regarding the best service providers in Denton County in a variety of professional and business categories.   The poll consisted of readers filling in the blanks in each category for their choice for “BEST OF DENTON COUNTY”.

In a release to its friends and clients regarding this award, Elsey & Elsey said, “We are honored and humbled to announce that the law firm of Elsey & Elsey was selected as the “BEST LAW FIRM IN DENTON COUNTY” by the readers of the News Connection.

Chad, Lori and I would like to thank each of you that played a part in our being so recognized. Having only been open in the Denton County area for a little more than a year it is clear that it is you, not us that put Elsey & Elsey in a position to even be considered for this award.

It was our desire from the beginning to grow this firm based on building meaningful relationships with our clients and our friends, recognizing that we are in service to each of you whenever a need arises. We set out to be more than a law firm that just focused on billable hours, but hoped to become a contributing member of the Lewisville/Flower Mound communities. We strive to be attentive and sensitive to each of our clients’ particular situations and to be honorable and forthright when dealing with them and those we oppose. We truly hope that in our relationships and in our business that “THE BEST IS YET TO COME”.”

Ms. Friesenhahn stated that both Chad Elsey and Chuck Elsey, Member/Owners of Elsey & Elsey, are active members of the Flower Mound Chamber and that the firm had demonstrated a strong sense of community in its participation, with contributions of both time and money, in the variety of activities sponsored by the Chamber.

Ms. Friesenhahn further explained to the Board members that Lori Elsey, wife of Mr. Chuck Elsey, was co-chair along with Ms. Lori Walker, of the Chamber sponsored 2006 Fiesta Flower Mound, which held August 26th at Circle “R” Ranch.

In the same meeting, Ms. Friesenhahn also introduced Mr. Chuck Elsey of Elsey & Elsey as the newest member of the Flower Mound Chamber Board of Directors.

Elsey & Elsey, a law firm in the Lewisville/Flower Mound/Greater Denton County area, provides services to its clients and members of the community in the areas of Business and Corporate Law, Real Estate and Commercial Law, Employment Law, Family Law, Estate Planning and Probate, Personal Injury and Litigation.