Amer. Natural. Res. LLC v. Eagle Rock Energy Partners, LP, Oklahoma Supreme Court, June 14, 2016, 2016 Okla LEXIS 68

The Oklahoma Supreme Court determined that an agreement giving a party the right to participate in all future wells on unleased lands within a specified area without a time limit violated the rule against perpetuities. The Oklahoma Constitution provision is identical to the Texas provision.

The rule against perpetuities provides that a future grant must vest, if at all, within a life in being at the creation of the interest plus 21 years. Encore and ANR entered into a letter agreement, one of the provisions of which was for ANR to have the right to participate in all future wells drilled at any time within the area of mutual interest whether or not the parties held a current lease. ANR contended that 17 wells were drilled within the area of mutual interest without giving ANR the right to participate. Another issue was whether LLC’s life qualified for the “life in being” to which the 21 years would be added.

The Court held that such a provision did violate the rule against perpetuities and that only lives of natural persons could be used. Therefore, the term, without such a life being identified, was 21 years and the provision was void under the rule.