Chesapeake Exploration, LLC v. Hyder (Opinion)
Annotate this CaseAs a general matter, an overriding royalty on oil and gas production is free of production costs but must bear its share of postproduction costs unless the parties agree otherwise. In this case, the Hyder family leased 948 mineral acres. Chesapeake Exploration, LLC acquired the lessee’s interest. The Hyders and Chesapeake agreed that the overriding royalty was free of production costs under the lease but disputed whether it was also free of postproduction costs. The trial court rendered judgment for the Hyders, awarding them $575,359 in postproduction costs that Chesapeake wrongfully deducted from their overriding royalty. The court of appeals affirmed. The Supreme Court affirmed, holding that the lease in this case clearly freed the gas royalty of postproduction costs and did the same for the overriding royalty.
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