pjc-oil-and-gas-2022-lib

PJC 313.17

D AMAGES

lated on what the lessor or royalty owner would have received as a royalty from such a well if it had been drilled or timely drilled. This involves a component of both past and future damages; the future production component of such a well (whether hypothetical or actual) must be discounted back to a present value and is often the subject of con tested expert testimony. The Texas Supreme Court has noted that the basis for dam ages is not the amount of oil or gas actually drained, although that amount may affect actual damages. See Coastal Oil & Gas Corp. v. Garza Energy Trust , 268 S.W.3d 1, 18 (Tex. 2008) (royalty owner sought drainage damages occurring because of alleged trespass). The supreme court in Garza held that the measure of damages for breach of the implied covenant to protect against drainage is the value of the minerals lost because of the lessee’s failure to act with reasonable prudence. See Garza Energy Trust , 268 S.W.3d at 4. The court found there was no competent evidence of that value to support the drainage claim. The supreme court commented on its past holdings regarding former methods of measuring drainage damages. See Garza Energy Trust , 268 S.W.3d at 18. The Committee expresses no opinion on what is meant by these comments or whether the supreme court’s holding in Garza changed the standard for damages in drainage cases accepted since Barker . Prejudgment interest. Instructing the jury not to add interest is suggested because prejudgment interest, if recoverable, will be calculated by the court at the time of judgment. If interest paid on an obligation is claimed as an element of damages, it may be necessary to modify the instruction on interest.

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