Texas Oil & Gas Corporation, Petitioners-Respondents v. Juan M. Vela, Respondents-Petitioners

Summary

The Texas Supreme Court held that the lease’s royalty provision requires payment of one‑eighth of the market price at the time of sale or use, not the contract price fixed in long‑term gas sales contracts, and affirmed the trial court’s finding of a $13.047 per mcf market price. It rejected the equitable estoppel claim of Nordan and Gaines, allowing them to recover royalties, reversed the lower court’s drilling order, and remanded for determination of damages for past drainage.