This opinion reviewed the appellate court’s decision, which held that Louis Strieber’s non-participating royalty interest did not violate the rule against perpetuities. ConocoPhillips Company and Burlington Oil and Gas Co., LP contend that the reservation of the non-participating royalty interest by Louis Strieber created a future interest in the Koopmanns that violated the rules against perpetuities.46 On December 27, 1996 Louis Strieber deeded to Lorene Koopmann and her late husband a 120-acre tract of land (“the Koopmanns”). Strieber reserved a non-participating royalty interest (NPRI) for a period of 15 years, and “as long thereafter as there is production in paying or commercial quantities.”47 Ten years later, the Koopmanns entered into a lease with Hawke Enterprises. The lease had a threeyear primary term with an option to extend by two years in exchange for a payment of $24,000. Shortly after this transaction, Hawke assigned the lease to Burlington Resources (Burlington), a subsidiary of ConocoPhillips. In 2009 Burlington tendered the payment for the option to extend the lease. By August 2011, they were unable to produce oil or gas, and Strieber became concerned because her NPRI would terminate in four months. Therefore, as an incentive to accelerate the drilling process and save her NPRI, Strieber conveyed Burlington a 60-percent interest in her NPRI. In December of 2011, Burlington notified the Koopmanns that they anticipated a well on the leased premises would begin producing oil and gas in the first quarter of 2012.48 Burlington tendered a shut-in royalty payment to hold the lease until the well could begin production. However, production from the well was not obtained until February 2012, approximately two months past the NPRI’s 15-year initial term. A dispute arose as to whether the NPRI had terminated and vested in the Koopmanns, and Burlington informed the Koopmanns they were going to suspend royalty payments until the dispute was resolved. The Koopmanns returned the shut-in royalty payment to Burlington and claimed to be the sole owners of the NPRI after its termination on December 27, 2011. The Koopmanns brought a declaratory action against Strieber, Burlington and ConocoPhillips to be declared the sole owners of the NPRI, and a non-declaratory action against Burlington, which consisted of multiple tort and contract theory claims that arose from Burlington’s suspension of royalty payments.49 The trial court awarded the Koopmanns the NPRI but did not award them interest on unpaid royalties. ConocoPhillips appealed, claiming the deed between Strieber and the Koopmanns violated the rule against perpetuities. The appellate court ruled that the deed between Strieber and the Koopmanns did not violate the rule against perpetuities, using a “two-grant” theory. Conoco then appealed to the Supreme Court of Texas. Generally, the rule against perpetuities states that no interest is valid unless it must vest, if at all, within 21 years after the death of some life or lives in being at the time of the conveyance.50 The purpose of the rule against perpetuities is to prevent everlasting property interests that restrain the power of alienation. Here, Conoco argued the NPRI reserved by Strieber for as long thereafter as production continued created a “springing executory interest” in the Koopmanns, which is subject to the rule against perpetuities. The court denied the appellate court’s two-grant theory, which purported that a grantor’s reservation of a royalty interest in a single deed implied two grants 1) a grant of a fee simple absolute of the entire estate to the grantee; and 2) a re-grant of the royalty interest back to the grantor. The appellate court reasoned that the second grant created a possibility of reverter in the original grantee, and a possibility of reverter does not violate the rule against perpetuities. Rather, the court ruled that the Koopmanns interest in the NPRI was a future interest and was, in fact, subject to the rule against perpetuities, however, the court noted that the distinction between a future interest and a possibility or reverter is largely historical. The court determined that in the oil and gas context, a defeasible term interest reserved in the grantor does not tie up the land based on remote contingencies, but instead, it promotes alienability and therefore does not violate the rule. In conclusion, the court held the rule against perpetuities did not invalidate the Koopmanns’ future interest in the NPRI created by Strieber’s deed.51 The appellate court’s decision was affirmed; however, the analysis to reach this court’s conclusion was different. The importance of this case is that it shows a shift in the court’s interpretation of the rule against perpetuities. Instead of rigidly following the rule, the court will look toward whether the purpose of the rule, which is to promote alienability of land and prohibit confusion, aligns with the given facts.
45 ConocoPhillips Co. v. Koopmann , No. 16-0662, 2018 WL 1440639, (Tex. Mar. 23, 2018).
46 Id at *3.
47 Id at *1.
48 Id at *2.
49 Id .
50 Peveto v. Starkey, 645 S.W.2d 770, 772 (Tex. 1982).
51 ConocoPhillips Co. at *16.