In Texas Crude Energy, LLC v. Burlington Resources Oil & Gas Company, LP, the Thirteenth Court of Appeals held that an operator that consents to a proposed well under a standard AAPL-form Joint Operating Agreement (JOA) cannot later refuse to drill because it has come to view the operation as imprudent. The decision marks where an operator’s discretion ends and its express contractual obligations begin. With the Texas Supreme Court declining review of Burlington’s petition on June 8, 2026, the decision stands, providing an opportunity to consider its broader implications.

The Dispute

Burlington served as operator under a 1982 AAPL-form JOA covering the Sugarloaf Prospect Area in South Texas. Over several years, the non-operators proposed 44 wells, and every party, including Burlington, elected to participate in each one. Despite that consent, Burlington declined to begin drilling shortly before each ninety-day commencement deadline expired, citing its judgment that the operations would be imprudent. As a result, dozens of wells to which every party had consented went undrilled, and the non-operators contend they lost the production and value those wells would have generated.

Burlington defended on two grounds. First, it argued that the exculpatory clause in Article V.A of the JOA, which requires the operator to “conduct all such operations in a good and workmanlike manner” and limits its liability to losses caused by gross negligence or willful misconduct, gave it discretion to decline operations it considered imprudent. Second, it argued that the JOA’s resubmittal provision, which requires a party that still wishes to drill to resubmit the proposal “as if no prior proposal had been made,” was the non-operators’ exclusive recourse and barred any breach of contract claim.

The trial court sided with Burlington on both points. The Thirteenth Court of Appeals disagreed.

The Court’s Analysis

The appellate court’s decision rests on three holdings.

Consent creates a mandatory duty to commence. Article VI.B.1 of the JOA provides that when all parties elect to participate, the operator “shall, within ninety days after expiration of the notice period of thirty days, actually commence the proposed operation and complete it with due diligence.” The court held that “shall” imposes a mandatory duty, not a discretionary one. As a practical matter, the operator’s opportunity to decide whether an operation should go forward closes when the election period ends.

The prudent operator standard governs operations, not the decision to commence. Burlington argued that the exculpatory clause allowed it to decline any operation a reasonably prudent operator would not undertake. The court rejected that reading. Citing the Texas Supreme Court’s analysis in Reeder v. Wood County Energy, LLC, the Thirteenth Court explained that this JOA’s exculpatory clause reaches only “such operations” in the contract area, a narrower scope than clauses that cover an operator’s “activities” generally. Consistent with pre-Reeder authority construing “such operations” clauses, the court held that the exculpatory clause does not shield an operator from liability for refusing to perform a mandatory contractual duty. Burlington’s reading, the court reasoned, would stretch the clause to cover the threshold decision on whether to proceed at all, a result the contract’s plain language does not support.

The resubmittal provision is a procedural path, not a damages shield. Perhaps Burlington's most aggressive argument may have been that resubmittal was the exclusive remedy for an operator’s failure to commence. The court disagreed. The resubmittal provision tells a party that still wants to drill what to do next; it says nothing about extinguishing the claims of parties that no longer wish to proceed and instead seek damages. Because the JOA contains no language making resubmittal an exclusive remedy, the court held that the non-operators could pursue breach of contract claims, including damages for lost production value and working-interest returns, whether or not they ever resubmitted.

Key Takeaways

• Consent triggers a binding obligation. Once all parties elect to participate in a proposed operation under the 1982 AAPL form (or a form with similar language), the operator must commence it. The prudent operator standard governs how operations are conducted, not whether a consented-to operation begins.
• The operator’s discretion is real—but it must be exercised at the election stage. An operator with doubts about a well’s prudence must act on them when it makes its election, not after it has consented and the commencement deadline approaches.
• Resubmittal is not an exclusive remedy. The option to resubmit a proposal neither cures the operator’s breach nor forecloses a damages claim. Non-operators that choose not to resubmit may still pursue damages.