Elon Musk Fights For Gas Wells In Texas To Drill Fuel For Mars Rockets
Space Exploration Technologies Corp. (SpaceX) stood down from its first rideshare mission of 2021 earlier today as weather conditions at the United States Space Force's Cape Canaveral Space Force Station in Florida did not permit the company's Falcon 9 with a record payload of 143 satellites to liftoff. Yet, as SpaceX manages an aggressive launch cadence with its workhorse Falcon 9, the company's got its eyes set on the future as it continues to develop the Starship launch vehicle platform for interplanetary missions.
Now, as SpaceX chief Elon Musk has officially moved to Texas, his company is head to head against a privately held oil and gas exploration and production company Dallas Petroleum Group, LLC (DPG). The dispute is centered around SpaceX's access to wells in Cameron County, Texas for Methane, which will fuel Starship's full-flow staged-combustion Raptor engines.
This dispute, which is currently being evaluated by the Texas Railroad Commission and the 445th District Court of Cameron Country involves the possession of two wells located in a 24-acre area in Cameron County, with SpaceX's land acquisition affiliate Dogleg Park and Dallas Petroleum each claiming that they have the sole rights for using the wells.
SpaceX Waits As Hearing For Transfer Of Methane Wells For Starship Nears
The dispute started in May last year when Dogleg secured the right to operate the two wells (2R and 3) following which DPG locked the well site and stopped Dogleg from entering. It also sued both Dogleg and three other companies for both infringing its rights and for not recognizing that it is the sole owner of the 24 acres of land surrounding these wells.
Prior to the SpaceX affiliate securing the rights, DPG had in fact entered into a purchase and sale agreement (PSA) with Texas-based Sanchez Midstream Partner, LP. The PSA document had explicitly stated that "Sanchez Midstream Partners, LP, including its related entities and affiliates [EMPHASIS ADDED]" would sell their rights to the property that was the subject of the document to DPG.
However, the 'hoodwinkery' (if we must use such a term) took place in the Conveyance, Assignment and Bill of Sale document that the PSA required Sanchez Midstream to execute. This document was entered into by SEP Holdings IV, LLC, another company affiliated with Sanchez Midstream and also operating from Texas. But it did not include the 'related entities and affiliates' clause highlighted above. This, as you'll see, turned out to work in SpaceX's favor more than two years later when Dogleg Park entered the picture.
Did Lack Of Due Diligence From DPG's End Tilt Tables In SpaceX's Favor?
As it turned out, the record title of the 24 acres under dispute was in fact held by a third entity dubbed as Sanchez Oil & Gas Corporation (SOG) who shares its address in Texas with Sanchez Midstream. So while as a Sanchez Midstream affiliate SOG was bound by the PSA, the fact that the Conveyance document did not explicitly contain the aforementioned 'affiliates' clause, SOG was able to conduct additional deals for the land and the wells.
The first of these deals took place in May last year when Dogleg leased the land from SOG, and the second took place in September when it entered into an agreement to purchase the land. Following the May deal, DPG went ahead and denied Dogleg access to the land and proceeded to file a Lis Pendens (suit pending) notice for the property.
It was in this notice that it explicitly mentioned SOG as the land's latest owner - a fact that Dogleg points out in its countersuit against DPG.
While Dogleg allegedly secured the surface estate to the land from SOG, the mineral estates have been secured by another SpaceX affiliate Lone Star Mineral Development, LLC. Lone Star has shared a plethora of lease documents with the TRC including those that mention these mineral estates as well. This sharing came in response to the Commission pointing out that Lone Star did not share any evidence for its right to operate the properties that DPG claims to own.
The RRC asked Lone Star to provide these documents after the company complained to the regulator that the RRC Form P-4 which certifies the transfer of operator from one entity to another were not being signed by DPG. In this complaint, the SpaceX affiliate also states that it has acquired, "oil and gas leases covering in excess of 79% of the mineral interest" of wells 2R and 3.
SpaceX Affiliate Secures More Than 79% Of Crucial Mineral Rights For Drilling In Cameron County
So while Dogleg's ownership of the surface interests of the land took place via the agreement with SOG, the mineral interests were acquired by Lone Star - who is now pressing the RRC to grant it operational right to the wells as well. For the uninitiated, in Texas law mineral rights hold precedence over surface interests, so at the surface (forgive us) it appears that SpaceX is in quite a strong position.
While neither the court documents nor the lease documents or the RRC complaint state that the minerals from the wells will be used for Starship, Lone Star's attorney Tim Geroge's statements made before the RRC in yesterday's hearing for his company's complaint confirm that this will be the case. Mr. George confirmed that Lone Star will extract methane from the ground, and given that the Raptor engine uses this as its fuel, the rest is self-explanatory. Now that the hearing is complete, RRC Judge Jennifer Cook will deliver a decision at her discretion which will then have to be approved by the commission's commissioners.
The Cameron Country court is set to hear the case next month and the future of SpaceX's plans to drill on these lands unencumbered will be clear once both the court and the RRC reach their decisions. For its part, SpaceX continues to refine the Starship SN9 prototype ahead of a highly anticipated test flight that might take place next week according to Mr. Musk. Should this happen successfully, then it will be the second high altitude test flight for Starship, with the last one having taken place in December, following which the SN9 prototype suffered an accident and delayed a quick successive test.
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