Targa Northern Delaware v. Franklin Mountain Energy 2 (n/k/a Conterra Energy Operating M), 2025 Tex. Bus. 12 (1st Div.) (mem. op.)

2025 Tex. Bus. 12
The Business Court of Texas,
1st Division
TARGA NORTHERN
DELAWARE, LLC, Plaintiff
v.
FRANKLIN MOUNTAIN
ENERGY 2, LLC (n/k/a
COTERRA ENERGY
OPERATING M LLC) and
FRANKLIN MOUNTAIN
ENERGY, LLC (n/k/a COTERRA
ENERGY OPERATING F LLC),
Defendants
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Cause No. 24-BC01B-0001
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MEMORANDUM O PINION
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[¶ 1] 	Before the court is defendants’ Second Amended Plea to the
Jurisdiction 	(PTJ).1 They 	assert 	that 	this 	court 	lacks 	subject 	matter
1 Defendant filed its initial Amended Plea to the Jurisdiction on January 28, 2025, with
redactions and sealed exhibits. 	Defendants refiled their plea on February 26, 2025,
without redactions and with public exhibits. Defendants styled their February twenty-sixth
FILED IN
BUSINESS COURT OF TEXAS
BEVERLY CRUMLEY, CLERK
ENTERED
3/28/2025

MEMORANDUM O PINION, P AGE 2
jurisdiction because this case is about who owns natural gas in the ground in
New Mexico, which is real property, and this court lacks jurisdiction to decide
that dispute.2
[¶ 2] 	Conversely, plaintiff urges that this court has subject matter
jurisdiction because its sole cause of action seeks damages for defendants’
alleged failure to deliver severed natural gas, which is personalty, and Texas
has jurisdiction to resolve that contract breach claim even if the result may
have collateral effects regarding New Mexico real property.
[¶ 3] 	Defendants’ plea fails because the seminal issue is who materially
breached the contract first regarding the delivery of severed natural gas. 	If
defendants did so, recovering damages is plaintiff’s remedy. 	But if plaintiff
did so, defendants’ remedy is for the court to order plaintiff to release its rights
regarding the subsurface gas, which is realty.
[¶ 4] 	In short, this case will factually decide who first materially
breached 	its duty regarding 	the 	delivery 	of 	severed 	natural 	gas. 	Any
subsequent effect that decision may have on the ownership of native natural
motion as its “Amended Plea to the Jurisdiction.” The court refers to the latter document
as Defendants’ Second Amended Plea to the Jurisdiction.
2 PTJ at 5.

MEMORANDUM O PINION, P AGE 3
gas in New Mexico is incidental and collateral to that outcome. Therefore, this
court has jurisdiction to resolve the prior material breach dispute.
[¶ 5] 	These facts are taken from Plaintiff’s Second Amended Petition
and the parties’ contract unless indicated otherwise:
I. 	BACKGROUND
A. The Parties
[¶ 6] 	Plaintiff Targa Northern Delaware, LLC is a midstream company
that operates natural gas gathering and compression facilities.3
[¶ 7] 	Defendants Franklin Mountain Energy 2, LLC and Franklin
Mountain 	Energy, LLC’s 	(FME) 	are 	two 	upstream 	oil 	and 	natural 	gas
exploration and production companies.4
B. The Agreement
[¶ 8] 	Effective June 1, 2021, the parties entered into an Amended and
Restated Gas Gathering, Processing and Purchase Agreement.5 In general, the
3 PTJ at 6.
4 PTJ at 6. Franklin Mountain Energy 2, LLC is now known as Coterra Energy Operating
M LLC and Franklin Mountain Energy, LLC is now known as Coterra Energy Operating F
LLC. However, the parties and the court continue to refer to defendants singularly as FME.
5 SAP ¶ 9; PTJ Ex. 1 (Agreement). They further amended the Agreement on March 1, 2022,
and February 1, 2024. SAP ¶ 9.

MEMORANDUM O PINION, P AGE 4
Agreement provides that:
• 	FME granted, conveyed, assigned, and dedicated to Targa for
gathering and processing certain natural gas produced from and attributable to
FME’s “Interests.”6
• 	“Interests” means any of FME’s right, title, or interests in lands
or wells located in “Dedicated Acreage” that provide FME with the right to
produce, transport, and market Gas produced from the Dedicated Acreage.7
• 	“Dedicated Acreage” means lands in New Mexico specified in a
separate Agreement exhibit.8
• 	“Gas” means natural gas or any mixture of hydrocarbon gases or
of hydrocarbon gases and noncombustible gases, consisting predominantly of
methane.9
• 	“Committed Gas Interests” means all of FME’s Gas in place under
Dedicated Acreage.10
6 Agreement Art. 2.1. “Art.” refers to a specific Article in the Agreement.
7 Agreement Ex. A, § 1.01(vv).
8 Agreement Ex. A, § 1.01(cc); Agreement Ex. E.
9 Agreement Ex. A, § 1.01(nn).
10 See Art. 2.1(i)(a) (“Gas … which may be produced from and be attributable to such
Interests”) (emphasis added).

MEMORANDUM O PINION, P AGE 5
• 	“Committed Gas” means all Gas that FME produces from the
Committed Gas Interests.11
• 	FME is to produce Committed Gas and, except for Gas taken in
kind, deliver it to Targa at designated “Receipt Points.”12 In turn, Targa
agreed to purchase that delivered Committed Gas.13
• 	If 	Targa 	curtails 	or 	cannot 	accept 	all 	of 	FME’s 	delivered
Committed Gas and there are no uncured FME defaults, then (i) the affected
volumes are released from the Agreement for as long as the curtailment or
inability lasts and (ii) FME is free to sell that affected volume to others.14
• 	If Targa’s curtailment or inability to accept deliveries continues
for certain specified time periods and there are no uncured FME defaults, in
addition to its temporary release rights above, FME is entitled to receive from
Targa a permanent release of the affected Committed Gas volumes and the
“reasonably associated” Committed Gas Interests; if provided FME exercised
11 See Art. 2.1(i)(b).
12 Arts. 2.1, 2.3. The parties redacted the Agreement’s “Receipt Point” definition, but it is
understood to be an identified location to where FME is to deliver Committed Gas.
13 Arts. 2.1, 2.3. The purchase price is not relevant to deciding FME’s PTJ.
14 Art. 2.4 (Temporary Release).

MEMORANDUM O PINION, P AGE 6
that right in writing within specified time periods and did not waive its release
right for that specific curtailment.15
• 	Notwithstanding any other Agreement provision, “title to the
Interests shall remain in Seller or its Affiliates, as the case may be.”16
• 	FME’s release rights “are the sole and exclusive remedies at law
or in equity available to [FME] with respect to such affected volumes or
[Targa’s] curtailment of or inability to accept such volumes, and [FME]
irrevocably waives and releases any other rights or remedies.”17
• 	While in effect, the Agreement is (i) a covenant running with the
subject Interests within the Dedicated Acreage and (ii) binding on FME and
its successors in interest.18
• 	The parties are to record in the appropriate property records a
written memorandum identifying the Dedicated Acreage.19
15 Art. 2.5(a) (Permanent Release).
16 Art. 2.8.
17 Art. 2.5(c). 	Article 2.5(c) also applies to “Force Majeure” events, but force majeure
events are not implicated at this point.
18 Art. 2.7.
19 Art. 2.9. The Agreement’s terms are more detailed than these summaries, but the details
are not necessary to resolving FME’s plea to the jurisdiction.

MEMORANDUM O PINION, P AGE 7
• 	The parties agree that a redacted part of the Agreement required
Targa to provide certain additional facilities related to FME’s delivery of
Committed Gas to additional Release Points.
[¶ 9] 	According to FME, Targa was unable to “accept full volumes of
natural gas that [FME] attempted to deliver.”20 So, in June 2022, April 2024,
and May 2024, FME asked for either a temporary or permanent release of
Targa’s interest in the affected gas volumes so that Targa’s interest would
revert to FME.21
C. Procedural Background
[¶ 10] 	On September 3, 2024, Targa sued FME alleging that FME
breached the Agreement by “failing . . . to deliver Committed Gas to Targa as
required by the Agreement,” and its failure and refusal to do so constitutes a
material 	breach of the 	Agreement.22 Targa’s requested 	relief included
(i) actual damages, (ii) attorneys’ fees, (iii) pre and post-judgment interest, (iv)
20 PTJ at 9 (emphasis added); SAP ¶s 13–14.
21 PTJ at 9–11.
22 Plaintiff’s Original Petition (Pet.) ¶s 11 (emphasis added), accord ¶ 15. Targa carries that
allegation through to SAP ¶s 12, 17.

MEMORANDUM O PINION, P AGE 8
court costs, and (v) all other relief to which it is entitled.23
[¶ 11] 	Seven weeks later, FME sued Targa in New Mexico seeking
declarations that Targa’s breach “entitled FME to a permanent release of the
affected volumes of gas in place . . . meaning Targa is no longer entitled to own
such real property interests and FME is now the rightful owner of said
interests free and clear of any ownership or rights by Targa.”24
[¶ 12] 	That same day, FME filed here a plea to the jurisdiction, special
appearance, 	motion 	to 	transfer 	venue, 	and 	answer 	subject 	to 	special
appearance. They also sought to file exhibits to their plea to the jurisdiction
under seal. They later withdrew their special appearance, motion to transfer
venue, and motion to seal.
[¶ 13] 	FME’s answer pleads a general denial, denies certain alleged
venue facts, and asserts nine affirmative defenses by name only, including
failure to perform conditions precedent and prior material breach.
[¶ 14] 	On January 24, 2025, Targa filed an amended petition, asserting
the same contract breach cause of action alleging FME’s failure to deliver
23 Pet. at Prayer.
24 PTJ Ex. 5 (FME’s New Mexico DJ Action), ¶ 27.

MEMORANDUM O PINION, P AGE 9
Committed Gas and requesting the same remedies.
[¶ 15] 	Four days later, FME withdrew its original plea, and filed a
public “Amended Plea to the Jurisdiction” asserting that from the beginning
Targa was unable to accept full gas volumes that FME attempted to deliver,
which resulted in flaring and curtailment of oil production.25 FME further
asserted that it thrice sent Targa letters asking it to (i) permanently or
temporarily release gas interests impacted by Targa’s alleged performance
failures and (ii) provide a form FME could file in the real property records.26
[¶ 16] 	Targa filed its SAP on February 11, 2024, again asserting the
same contract breach cause of action and seeking the same relief.27
D. Parties’ Arguments
[¶ 17] 	FME argues that this court lacks subject matter jurisdiction over
this case because it is a real property dispute involving mineral interests
located exclusively in New Mexico.28 FME further urges that the “parties’
core dispute is whether Targa retained any interest in the gas, including gas
25 Defendants’ January 28, 2025, Amended Plea to the Jurisdiction at 9.
26 Defendants’ January 28, 2025, Amended Plea to the Jurisdiction at 9–11.
27 See generally SAP.
28 PTJ at 5.

MEMORANDUM O PINION, P AGE 10
still in the ground and not yet produced, such that [FME] w[as] obligated to
deliver it.”29
[¶ 18] 	Targa responds that the Agreement separately conveys (i) FME’s
interest in gas in place under the acreage, which is a real property interest
(Committed Gas Interest), and (ii) gas produced from the acreage, which is a
personal property interest (Committed Gas).30 Targa adds that this case only
concerns the latter, and it is immaterial that FME also conveyed to Targa an
interest in the gas in place.31
[¶ 19] 	FME replies that Targa’s right to produced gas derives solely
from its interest, if any, in gas in place in New Mexico.32 Accordingly, FME
argues that to resolve the parties’ claims and defenses, the court will need to
adjudicate a real property dispute—namely whether Targa ceased being the
rightful owner of interests in real property when FME requested a permanent
29 PTJ at 5.
30 Targa’s Response to Amended Plea to the Jurisdiction (Opp.) at 7–8.
31 Opp. at 16–17.
32 FME’s Reply in support of Amended Plea to the Jurisdiction (Reply) at 2–3.

MEMORANDUM O PINION, P AGE 11
release as far back as 2022.33
II. 	D ISCUSSION
A. Plea to the Jurisdiction
[¶ 20] 	A plea to the jurisdiction is a procedural vehicle to challenge a
trial court’s subject matter jurisdiction. 	Texas Dep’t of Parks and Wildlife v.
Miranda, 133 S.W.3d 217, 232 (Tex. 2004) (sovereign immunity challenge).
Whether a court has subject matter jurisdiction is a question of law. 	Vernco
Constr., Inc. v. Nelson, 460 S.W.3d 145, 149 (Tex. 2015).
[¶ 21] 	A plea to the jurisdiction concerns individual causes of action,
such that a court may dismiss a cause of action over which it lacks subject
matter jurisdiction while retaining other causes of action over which it has
jurisdiction in a multi-cause of action case. 	Texas Highway Dep’t v. Jarrell,
418 S.W.2d 486, 488 (Tex. 1967). Thus, courts focus on the cause of action,
not “the case.”
[¶ 22] 	When a plea challenges pleadings, courts determine whether the
pled facts demonstrate the court’s jurisdiction to hear the cause. 	Miranda,
133 S.W.3d at 226. In that context, courts construe the pleadings liberally in
33 Reply at 3–4.

MEMORANDUM O PINION, P AGE 12
the pleader’s favor and look to the pleader’s intent. 	Id. Courts deny pleas if
the pleading alleges facts demonstrating subject matter jurisdiction. Id.
[¶ 23] 	However, courts must consider relevant evidence when needed
to resolve jurisdictional issues. 	Id. at 227. 	But the court need not consider
extraneous evidence here because Targa’s second amended petition and the
Agreement suffice to resolve FME’s plea.
B. The Local Action Doctrine
[¶ 24] 	In 1810, the United States Supreme Court established the
American principle that a court exercising equity jurisdiction may order
persons 	within 	the 	court’s 	personal 	jurisdiction 	to 	execute 	documents
affecting land beyond the court’s territorial jurisdiction, because the decree
acts on the person and not the land. Massie v. Watts, 10 U.S. 148, 160 (1810).
[¶ 25] 	Thus, it is well-settled that Texas courts lack subject matter
jurisdiction to adjudicate title to real property interests located outside of
Texas. 	Holt v. Guerguin, 106 Tex. 185, 188–89, 163 S.W. 10, 12 (1914);
Trutec Oil And Gas, Inc. v. W. Atlas Int’l, Inc., 194 S.W.3d 580, 583–84 (Tex.
App.—Houston [14th Dist.] 2006, no pet.) (interests in Nigerian oil and gas

MEMORANDUM O PINION, P AGE 13
leases).
[¶ 26] 	But it is equally well-settled that a Texas court can order persons
within its jurisdiction to execute documents that effect title to property located
in other states or countries. 	Holt, 163 S.W. at 189; Phoenix Energy, Inc. v.
Breitling Royalties Corp., No. 05-14-01153-CV, 2014 WL 6541259, *1–2 (Tex.
App.—Dallas Oct. 17, 2014, no pet.); In re Elamex, S.A. de C.V., 367 S.W.3d
891, 897–98 (Tex. App.—El Paso 2012, no pet.). 	In those situations, the
court’s decree is made effectual by whatever coercive effect the rendering
court’s decision may have over the defendant, for example, contempt or
collateral estoppel. 163 S.W. at 189.
[¶ 27] 	The determining issue is (i) whether the court must first resolve
an issue involving title to realty in another state before awarding the
claimant’s requested relief or (ii) whether the effect on 	that realty is an
incidental consequence of granting that relief. 	See Coughran v. Nunez, 127
S.W.2d 885, 887–88 (Tex. Comm’n App. 1939, opinion adopted) (county
court lacked jurisdiction to restrain interference with pipeline); Merit Mgt.
Partners I, L.P. v. Noelke, 266 S.W.3d 637, 647–48 (Tex. App.—Austin 2008,
no pet.) (determining whether lease applied a predicate to cause of action to

MEMORANDUM O PINION, P AGE 14
recover attorneys’ fees).
[¶ 28] 	That is,
If the right of recovery in a suit depends, at least in part, upon
the title to land, but there is no real dispute between the parties
over the question of title, the question of title is incidental.
Merit Mgt., 266 S.W.3d at 648; see also In re Elamex, S.A. de C.V., 367 S.W.3d
at 898 (“A lawsuit involves the adjudication of title to real property if title is
not involved in a merely incidental or collateral way, but is actually involved
as the basis, as well as the measure of right of any recovery”).
C. Severed natural gas is personal property.
[¶ 29] 	At common law, native natural gas is real property that becomes
personal property when produced. Hill v. Enerlex, Inc., 969 S.W.2d 120, 122
(Tex. App.—Eastland 1998, pet. denied) (citing Humble Oil and Refining Co.
v. West, 508 S.W.2d 812, 817 (Tex. 1974); Lone Star Gas Co. v. Murchison, 353
S.W.2d 870, 879 (Tex. Civ. App.—Dallas 1962, writ ref’d n.r.e) (“There can
be no doubt that gas which has been produced is personal property.”).
[¶ 30] 	In West, the supreme court discussed Murchison’s reasoning and
reiterated that severed gas is personalty.34 508 S.W.2d at 817–18. Thus, since
34 Murchison discusses the reasons for treating severed natural gas as personalty based on
improved knowledge concerning subsurface oil and gas reservoirs. 353 S.W.2d at 876–78.

MEMORANDUM O PINION, P AGE 15
at least West, the Texas Supreme Court has recognized the common law
principle that severed natural gas becomes personal property and remains
personal property even if it is injected into a storage reservoir. 	See, e.g., id.;
Hill, 969 S.W.2d at 122.
[¶ 31] 	Texas’s Business and Commerce Code embodies the common
law rule as applied to contracts for the sale of natural gas to be severed by the
seller:
A contract for the sale of minerals or the like (including oil and
gas) or a structure or its materials to be removed from realty is
a contract for the sale of goods within this chapter if they are to
be severed by the seller but until severance a purported present
sale thereof which is not effective as a transfer of an interest in
land is effective only as a contract to sell.
Tex. Bus. & Comm. Code § 2.107(a).
[¶ 32] 	The Official Comments emphasize that minerals that “are to be
severed by the seller” are contracts for the sale of goods—and not to be
considered contracts affecting land and thereby implicating all problems of the
statute of frauds, the recording, land rights, or other laws concerning real
property interests. 	Id., Official Comment 1.
[¶ 33] 	Professor William Hawkland explained that § 2.107 “mediates
the line between personal property, i.e., goods, and real property.” 1 Hawkland

MEMORANDUM O PINION, P AGE 16
UCC Series § 2-107:1. He further explained that the transition occurs when
the seller severs the natural gas and thus identifies it to the contract. Id. This
dividing line is needed to determine when contracts dealing with natural gas
are real property subject to real property laws like the statute of frauds, and
when it is personal property subject to Article 2. See id.
[¶ 34] 	Here, the Agreement requires FME to sever and sell Committed
Gas to Targa and deliver it to Targa at designated Receipt Points:
Sale of Committed Gas. From and after the Effective Date and
for the Term, [FME] agrees to sell and deliver to [Targa] all
Committed Gas produced from the Dedicated Acreage, and
[Targa] agrees to purchase from [FME] at the Receipt Points
each Day all Committed Gas delivered by [FME], in each case,
subject to and otherwise in accordance with the other terms and
conditions of this Agreement.35
[¶ 35] 	That is, the Agreement required FME to deliver severed natural
gas to Targa at specific locations so that Targa could process and ultimately
sell the gas to third parties.36 So, Article 2.3 has the appearances of a § 2.107
sale of goods contract.
[¶ 36] 	Further, FME’s plea concedes that FME is to sever and deliver
35 Art. 2.3 (emphasis added).
36 See PTJ at 6.

MEMORANDUM O PINION, P AGE 17
the gas by asserting that FME had to flare gas and curtail oil production due to
Targa’s alleged inability to accept full volumes of natural gas that FME
attempted to deliver.37
[¶ 37] 	Moreover, it is undisputed that FME is the mineral interest
lessee and the producer that severs the gas from the ground.38 It is also
undisputed that FME “produce[s] the gas. 	And then they contract with
midstream companies like Targa to take the gas, gather it, process it, put it in
place so they can then go to market.”39
[¶ 38] 	Separately, the parties agree that midstream companies also
want a conveyance like the separate Committed Gas Interest (gas in place),
which conveys a real property interest, to protect themselves should the
property get sold or the producer go bankrupt and attempt to reject the
contract, which causes the midstream to lose the gas source.40 See generally,
In re Sabine Oil & Gas Corp., 550 B.R. 59, 65–68 (Bankr. S.D.N.Y. 2016)
(Debtor permitted to reject dedication of severed natural gas because it was
37 PTJ at 9.
38 Feb. 27, 2025, Rough Tr. at 10–11 (Tr.).
39 Tr. at 11.
40 Tr. at 12, 28–29.

MEMORANDUM O PINION, P AGE 18
not a covenant running with the land.).
[¶ 39] 	Finally, Targa’s sole cause of action seeks to recover damages
for 	FME’s 	alleged 	failure 	to 	deliver 	severed 	Committed 	Gas 	per 	the
Agreement.41 Conversely, FME posits that Targa’s right to Committed Gas
derives from FME’s conveyance of Committed Gas Interests to Targa that,
according to FME, Targa was required to release as far back as 2022 due its
failure to accept FME’s gas.42
D. Realty v. Personalty
[¶ 40] 	The court asked the parties to brief Business and Commerce
Code § 2.107’s application here. 	Targa argued that whether that statute
applies is not determinative because its sole cause of action concerns FME’s
alleged failure to deliver severed natural gas, and severed natural gas is
personal property under both the common law and § 2.107.43
[¶ 41] 	On 	the 	other 	hand, 	FME 	argues 	that 	the 	Agreement’s
predominant purpose is the conveyance of natural gas in the ground; thus, the
41 SAP at 6–9.
42 Reply at 4.
43 Plaintiff’s Supplemental Brief Related to Defendants’ Amended Plea to the Jurisdiction,
passim.

MEMORANDUM O PINION, P AGE 19
dispute is one regarding real property.44 That is, according to FME the
Agreement requires Targa to construct infrastructure and provide gathering
and processing services for gas produced from the dedicated interests.45 FME
further argues that, “[a]lthough the Agreement also provides for the sale of
ʻCommitted Gas’ ʻattributable to’ those interests, by definition Committed
Gas is only gas produced from real property in which Targa has an interest.”46
Thus, FME urges that the Agreement is predominantly one for the exchange of
real property interests for services.47
E. FME Cases
[¶ 42] 	FME further argues that Texas courts consistently hold that gas
dedication agreements are real property transactions and that § 2.107 and the
common law severed gas rule do not apply.48 However, those cases reflect the
accepted point that minerals in place are realty. Hill, 969 S.W.2d at 122. None
of them included a conveyance for severed gas (i.e., Committed Gas) separate
44 Defendants’ Supplemental Brief on the Applicability of UCC Chapter 2, passim (FME
Supp. Br.).
45 FME Supp. Br. at 5.
46 FME Supp. Br. at 5.
47 FME Supp. Br. at 5.
48 FME Supp. Br. at 14–16.

MEMORANDUM O PINION, P AGE 20
from a conveyance of gas in place (i.e., Committed Gas Interests).
1. 	American Refining, Kinder, and Guffey.
[¶ 43] 	In American Ref. Co. v. Tidal W. Oil Corp. the court concluded
that a fair construction of the contract at issue shows that the parties “were
dealing with the gas in place,” meaning realty. 264 S.W.335, 339 (Tex. Civ.
App.—Amarillo 1924, writ ref’d). While FME goes on to rely on the opinion’s
statement that severing gas from the ground “does not, as a general rule,
change its character from real to personal property,” id. at 340, the supreme
court rejected that premise no later than in West. 508 S.W.2d at 817–18.
[¶ 44] 	In U.S. Pipeline Corp. v. Kinder the court affirmed a judgment
cancelling a contract for failure to comply with the statutes of frauds and
conveyances. 	609 S.W.2d 837, 839–40 (Tex. Civ. App.—Fort Worth 1980,
writ ref’d n.r.e.). 	The operative language referred to gas that “may be”
produced 	in 	the 	future, 	which 	the 	court 	concluded 	refers 	to 	currently
unproduced gas. 	Because unproduced gas is realty, the statute of frauds
negated the contract. Id.
[¶ 45] 	Likewise, Guffey v. Utex Expl. Co. concerned “the sale of gas in
place, which is part of the real estate,” and therefore an oral contract failed the

MEMORANDUM O PINION, P AGE 21
statute of frauds. 376 S.W.2d 1, 4 (Tex. Civ. App.—San Antonio 1964, writ
ref’d n.r.e.).
[¶ 46] 	These cases discuss a variety of other cases where courts
reached apparently conflicting results. These conflicts concerning when a gas
sale contract concerns the sale of realty or personalty illustrate why the
legislature adopted a bright line rule in Business and Commerce Code § 2.107
for 	distinguishing 	whether 	such 	contracts 	involve 	realty 	rather 	than
personalty. 	See TEX . B US. & COMM. CODE , § 2.701; Official Comment 1 to
§ 2.107; 1 Hawkland UCC Series § 2-107:1.
2. 	In re Sanchez.
[¶ 47] 	FME’s reliance on In re Sanchez Energy Corp., 631 B.R. 847
(Bankr. S.D. Tex. 2021) is misplaced as it supports Targa. Sanchez does so by
holding that contracts granting covenants running with the land, which are
non-rejectable real property interests, may also contain other executory
promises of future performance that are not real property interests that debtors
may reject. 	Id. at 859–61. 	The same analysis applies here where the
Agreement contains (i) a conveyance of interests in the Committed Gas
Interests and 	(ii) a 	separate agreement for 	the 	sale 	of 	FME’s severed

MEMORANDUM O PINION, P AGE 22
Committed Gas. 	The former involves a conveyance of realty, but the latter
does not. See id.
3. 	Trutec
[¶ 48] 	Finally, FME’s reliance on Trutec is misplaced.49 Specifically,
FME argues that “[ j]ust like Targa, Trutec argued that its claim was for
personal property because it sought produced oil.”50 However, that court
concluded that Trutec’s core complaint was that it had been “wrongfully
deprived of its interest in [an] oil producing license,” which was an interest in
real property, and that Trutec had “no claim to the oil . . . unless it owns the
real property mineral rights.” 	194 S.W.3d at 585, 590. 	The present case
differs from Trutec because the Agreement contains a distinct dedication of
severed Committed Gas to Targa separate from the real property interest in
Committed Gas Interests.
F. Which party materially breached first is the pivotal issue.
[¶ 49] 	It is undisputed that (i) Article 2.1 has two main components:
the dedication and conveyance of Committed Gas Interest (real property) to
49 PTJ at 15–16; Reply at 7–8; Tr. at 14–15.
50 Reply at 8.

MEMORANDUM O PINION, P AGE 23
Targa and a separate agreement for FME to sever gas under the Committed
Gas Interests and deliver that Committed Gas (personal property) to Targa at
specific points;51 (ii) there are no real property law issues regarding the
dedication’s terms, effects, or validity because Targa concedes those points;
and (iii) FME’s remedy if it wins is for the court to order Targa to provide a
permanent release for affected Committed Gas Interests, see Mustang Pipeline
Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (prior material
breach excuses counterparty’s duty to further perform).
[¶ 50] 	Thus, the pivotal issue is which party first materially breached
the 	Agreement’s 	delivery 	duties: 	FME 	for 	failing 	to 	deliver 	required
Committed Gas to Targa, or Targa for refusing to provide a permanent release
of its interests because it did or could not accept the Committed Gas? That
dispute centers on the personal property Committed Gas and only collaterally
and incidentally implicates the real property Committed Gas Interests.
[¶ 51] 	FME’s New Mexico complaint does not change this result. FME
does not allege that Targa lost its ownership in any real property interest as far
51 The court need not decide at this point whether the common law or § 2.701 provides the
controlling principle because the result is the same either way.

MEMORANDUM O PINION, P AGE 24
back as 2022.52 Instead, FME seeks declaratory relief that “Targa is no longer
entitled to own such real property interests” and that title should be quieted
in favor of FME today.53 Nor could FME argue otherwise as Article 2.5(c)
provides that “the sole and exclusive remedies at law and equity” available to
it if Targa fails to accept Committed Gas is to obtain a release under Articles
2.4 or 2.5(a), which FME concedes never occurred.54,55 So, FME puts the cart
before the horse by arguing its defense to Targa’s claims deprives the court of
jurisdiction. Merit Mgt., 266 S.W.3d at 648.
[¶ 52] 	So, Coughran v. Nunez controls FME’s Plea because (i) any effect
that a favorable finding for Targa might have regarding 	New Mexico real
property interests would be collateral and incidental to this court’s judgment
52 Opp. at 4.
53 PTJ Ex. 5, ¶ 52 (emphasis added).
54 Opp. at 9–11.
55 FME cautions that “a court may not weigh the merits in deciding subject matter
jurisdiction.” 	Reply at 6 (citing Trutec, 194 S.W.3d at 584). 	However, the cases upon
which that citation depends make clear that the rule is intended to protect plaintiffs, not
defendants. As the supreme court stated in Bland Independent School District v. Blue, “the
proper function of a dilatory plea does not authorize an inquiry so far into the substance of
the claims presented that plaintiffs are required to put on their case simply to establish
jurisdiction.” 	34 S.W.3d 547, 554 (Tex. 2000). 	The court cannot ignore the plain
language of the Agreement and the admitted fact that no permanent release was ever
provided by Targa to FME. 	Therefore, the plain conclusion is that Targa still holds the
rights and interests originally conveyed to it.

MEMORANDUM O PINION, P AGE 25
and (ii) a resulting judgment against Targa will have a coercive effect on it.
127 S.W.2d at 886–88; Merit Mgt., 266 S.W.3d at 647–48.
III. 	C ONCLUSION
[¶ 53] 	For these reasons, the court signed its March 21, 2025, order
denying FME’s Second Amended Plea to the Jurisdiction.
BILL WHITEHILL
Judge of the Texas Business Court,
First Division
SIGNED: March 28, 2025

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Status as of 3/28/2025 11:35 AM CST
Case Contacts
Name
David W.Jones
Timothy S.McConn
Garrett S.Brawley
Samantha Richey
Bonnie C.Fraase
Jared LeBrun
Business Court 1B
Audrey Hendricks
Alyssa Smith
BarNumber Email
djones@beckredden.com
tmcconn@yettercoleman.com
gbrawley@beckredden.com
srichey@yettercoleman.com
bfraase@yettercoleman.com
jlebrun@yettercoleman.com
BCDivision1B@txcourts.gov
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asmith@yettercoleman.com
TimestampSubmitted
3/28/2025 11:28:47 AM
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3/28/2025 11:28:47 AM
3/28/2025 11:28:47 AM
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3/28/2025 11:28:47 AM
3/28/2025 11:28:47 AM
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Status
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