American Oil and Gas Reporter - April 2018 - 144

ConventionSection: Kansas Independent Oil & Gas Association
for the bird and its habitat. Cross adds
Kansas continues to encourage keeping
the lesser prairie chicken off the ESA list.
WOTUS And Kansas
Kansas is a plaintiff in one of the
legal actions involving the regulatory definitions for waters of the United States,
Cross reports.
The definitions, part of the Clean Water
Act, were broadened in 2015 by the Obama
administration to include usually dry channels that occasionally feed into navigable
waters, as well as waters that are adjacent
to navigable waters. The definitions have
created an uncertain legal environment
(AOGR, February 2018, pg. 17).
Lawsuits opposing the Obama definitions
were filed in a range of federal courts, and
on Oct. 9, 2015, the U.S. Court of Appeals
for the 6th District granted a stay that was
effective nationwide, while the federal legal
system decided which court had jurisdiction.
A panel of judges from the 6th District
ruled in February 2016 that the court of
appeals, rather than the district courts, had
jurisdiction.
The U.S. Supreme Court made its
initial move regarding the definition of
"waters of the United States" and its jurisdiction under the Clean Water Act on
Jan. 13, ruling the federal district courts,
not the appeals courts system, will hear
legal challenges to the rule
In addition to resolving the jurisdictional
issue, the high court's decision will lift
the nationwide stay, allowing each federal
court to make its own determination on
the definition.
Before that decision, Kansas joined
24 states in comments supporting the Environmental Protection Agency's proposed
rule rescinding the 2015 definition and
recodifying pre-existing rules as ordered
by the 6th Circuit and U.S. District Court
for the District of North Dakota in separate
decisions.
According to the Sept. 27 comments,
the 2015 rule violates the Clean Water
Act, Administrative Procedure Act, National Environmental Policy Act, and the
U.S. Constitution, and also conflicts with
U.S. Supreme Court decisions.
"If the waters of the United States definition is ruled invalid, it will affect not only
oil and gas but the agricultural sector as
well," Cross predicts. "It will have tremendous impacts. I don't know how vigorously
the EPA will enforce that right now but if
there is a change, it probably will not be
good. That is something on which a lot of
industry will keep a close eye."
r

Kansas Supreme Court Hears
Defeasible Term Interest Case

WICHITA, KS.-A significant number
of Kansas oil and gas leases, in addition
to countless land transactions, are negotiated based on the assumption that defeasible term mineral interests, also known
as term mineral interests, generally are
valid. A lawsuit before the Kansas
Supreme Court could upend that principle
and muddle thousands of leases, warns
Joseph Schremmer, a lawyer with the
Wichita-based firm of Depew, Gillen,
Rathbun & McInteer LC.
Used in many land conveyances, a
defeasible term mineral interest allows a
property owner or grantor, to sell or gift
the surface rights to a grantee while retaining the mineral rights, including the
rights to any income from mineral development by reserving those rights for a
set number of years and as long thereafter
as the minerals continue producing,
Schremmer describes. It generally is believed that the mineral rights automatically
transfer to the grantee following the end
of the term. He adds that this conveyance
is very common in Kansas and other producing states, and has been used for more
than 100 years.
Oil or gas operators will negotiate
leases with the grantor during the term
of the mineral reservation or with the
grantee if the term has ended. Schremmer
says the legal conflict arises over whether
the grantee's future interest in the minerals
violates Kansas property law regarding
perpetuities. That law prevents people
from maintaining property ownership beyond a set term, subject to certain future
interests that are deemed uncertain to
vest into a present interest.
Schremmer has filed an amicus curiae
brief with the Kansas Supreme Court
on behalf of the Kansas Independent
Oil & Gas Association in Jason Oil LLC
v. Littler.
"No court has ever looked at whether
this particular type of reservation violates
the rule against perpetuities," he says.
"This is the issue in Jason Oil. The question before the Kansas Supreme Court is
if this reservation . . . violates the rule
against perpetuities."
If defeasible term mineral interest
does violate Kansas property law, he
asks, does that make the reservation ineffective, so that all of the minerals

144 THE AMERICAN OIL & GAS REPORTER

transfer to the grantee?
"This might seem like a real hypertechnical and obscure legal question, but
as a practical matter for the oil and gas
industry, if the court decides to apply the
rule against perpetuities, that likely means
that the grantee will never receive the
minerals, and that means there are countless oil and gas leases that have been
taken, drilled on and paid under, with the
wrong people, all across the state,"
Schremmer says.
The Supreme Court's ruling is important to every person involved in the Kansas
oil and gas industry, as well as anyone
involved with ownership of the state's
agricultural and mineral lands, he adds.
"As a title examiner, I can tell you
from my own experience that you see
these types of conveyances in chains of
title all over the place," he says. "Title
examiners, property owners, and oil and
gas lendees always have assumed that
the reservation is effective, so the grantor
does keep the minerals but only for the
term and for as long as the minerals
produce. There are a lot of oil and gas
leases that depend on that assumption
being right, but this case challenges that
assumption."
Texas Ruling
Other states have similar mineral title
laws and court cases involving mineral
reservations, Schremmer reports. In midMarch, the Texas Supreme Court issued
a ruling in Conoco Phillips Company v.
Koopmann that decided an issue comparable to Jason Oil, he says. While Texas
decisions are not binding on any Kansas
court, he suggests the Texas Supreme
Court is persuasive when it comes to
novel legal issues related to oil and gas
matters, and he says it conceivable the
Kansas Supreme Court may be persuaded
by the Texas ruling.
Schremmer says ConocoPhillips, as
well as decisions handed down by state
supreme courts in Wyoming, California,
Alabama and Michigan, have upheld the
Kansas assumption that term mineral
reservations are effective.
He notes that in Jason Oil a Kansas district
judge has ruled in favor of that assumption,
SEE KANSAS PAGE 158



American Oil and Gas Reporter - April 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2018

Contents
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