Boldrick v. BTA Oil Producers

BTA Oil Producers (the defendant) executed a joint-operating agreement for the exploration and development of a tract of land. Chevron USA, Inc. (Chevron) was named an operator in the agreement. Under the terms of the agreement, if a working-interest holder chose non-consent status, an interest carved out of that working interest was chargeable with a pro rata portion of all costs and expenses under the operating agreement in the same manner as if the carved interest were a working interest. The defendant then assigned an overriding royalty interest on the land to James Boldrick (the plaintiff). The assignment was expressly subject to the terms of the operating agreement. Chevron drilled a producing well on the land and the defendant elected non-consent status. As a result, the defendant was not entitled to payments from the well’s production until it paid the required non-consent penalty to Chevron. Since the defendant was not receiving any royalties from the well, the plaintiff was also not receiving his overriding royalty payments.

The plaintiff sued, seeking to recover overriding royalties from the defendant. The defendant filed a motion for summary judgment, claiming that the plaintiff’s overriding royalties were not payable until the defendant received its own royalty payments after its non-consent penalties were paid in full. The trial court granted the defendant’s motion for summary judgment, and the plaintiff appealed.