Targa Northern Delaware v. Franklin Mountain Energy 2 (n/k/a Conterra Energy Operating M)

FILED IN
BUSINESS COURT OF TEXAS
BEVERLY CRUMLEY, CLERK
ENTERED
3/28/2025

2025 Tex. Bus. 12

The Business Court of Texas,
1st Division

TARGA NORTHERN §
DELAWARE, LLC, Plaintiff §
v. §
§ Cause No. 24-BC01B-0001
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

═══════════════════════════════════════
MEMORANDUM OPINION
═══════════════════════════════════════

[¶ 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
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 OPINION, PAGE 2
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 OPINION, PAGE 3
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 OPINION, PAGE 4
• “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 OPINION, PAGE 5
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 OPINION, PAGE 6
• 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 OPINION, PAGE 7
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 OPINION, PAGE 8
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 OPINION, PAGE 9
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 OPINION, PAGE 10
release as far back as 2022.33

II. DISCUSSION

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 OPINION, PAGE 11
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 OPINION, PAGE 12
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 OPINION, PAGE 13
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 OPINION, PAGE 14
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 OPINION, PAGE 15
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 OPINION, PAGE 16
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 OPINION, PAGE 17
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 OPINION, PAGE 18
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 OPINION, PAGE 19
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 OPINION, PAGE 20
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. BUS. & 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 OPINION, PAGE 21
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 OPINION, PAGE 22
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 OPINION, PAGE 23
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 OPINION, PAGE 24
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. CONCLUSION

[¶ 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

MEMORANDUM OPINION, PAGE 25
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Case Contacts

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