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SpaceX and oil company in legal battle over 24 acres of land near Starship facility

SpaceX and several Texas energy companies are tangled in a legal battle over a barren strip of land near the commercial space company’s Starship production facility outside Brownsville.

The feud finds multiple parties tussling over who owns what rights to the property, threats of criminal trespass charges and allegations of theft and attempted extortion — all over 24 acres that’s worth $24,210, according to tax records.

Set against the backdrop of property values skyrocketing with SpaceX’s rapid development in the area, the matter stretches back to 2017.

It moved into court in October, when Dallas Petroleum Group LLC filed a lawsuit in district court in Cameron County. It alleges Sanchez Midstream Partners of Houston broke the terms of a 2017 purchase agreement, worth $6.25 million, for various oil and gas leases that included two wells on a 24-acre tract adjacent to the SpaceX facility.

The two inactive wells are called La Pita 2R and 3. As part of the larger transaction, Sanchez asked Dallas Petroleum “to assume plugging and abandonment liability for two wells on the 24.21-acre tract,” Jordan Farrar, a Dallas petroleum attorney, said in an e-mail response to questions. In exchange for assuming the liability, he said, “Sanchez offered to include the 24.21 acre surface for consideration.”

Sanchez Oil and Gas Corp., an affiliate of Sanchez Midstream, owned the acreage. During negotiations “an employee of (Sanchez Oil and Gas) represented to (Dallas Petroleum) that the 24 Acres was included as part of the ‘property’ in the sale in order to offset the plugging and abandoning costs for the wells,” according to the complaint.

Dallas Petroleum’s principal has testified that the Sanchez representative said, “One day, (Dallas Petroleum) could sell the 24.21 acres to SpaceX,” according to Farrar.

But Sanchez Oil and Gas wasn’t listed in the real estate documents and Dallas Petroleum says that omission has been costly. The documents, including the conveyance, assignment and bill of sale, list SEP Holdings IV, another entity controlled by Sanchez Midstream.

Cameron County land records show a bill of sale for the wells, equipment, permits, easements, contracts and records associated with the land between SEP Holdings and Dallas Petroleum, while the county’s tax records list Sanchez Oil and Gas as the landowner.

Farrar argues that the documents show the “title to the surface” belongs to Dallas Petroleum. He added, “County Appraisal District records do not always accurately reflect the ownership in the property records.”

In mid-February, Sanchez Midstream changed its name to Evolve Transition Infrastructure. The company declined to comment. The case has also ensnared a web of affiliated companies including Sanchez Midstream Partners Limited and General Partnerships, Sanchez Oil and Gas Corp., SpaceX real estate acquisition firm Dogleg Park LLC, and the space company’s oil and gas exploration company, Lone Star Mineral Mineral Development LLC.

In May 2020, SpaceX leased the acreage from Sanchez Oil and Gas.

According to Dallas Petroleum’s complaint, “SpaceX and/or (Sanchez Oil and Gas) have created an entity entitled Lone Star Mineral Development, LLC” to lease the mineral estate under the land. The Texas Railroad Commission shows that Lone Star acquired the 806-acre La Pita oil and gas lease.

Dallas Petroleum believes it owns the land Sanchez is trying to sell to the SpaceX entity. It’s seeking clear title to the 24 acres, or its value as damages, Farrar said. He declined to state a specific dollar amount being sought.

Sanchez denies the allegations. It argues the Dallas Petroleum deal never included the land’s surface rights. For their part, SpaceX and Dogleg Park attorneys have said the lawsuit is “attempting to interfere with the lease and purchase agreement between (Sanchez Oil and Gas) and Dogleg Park LLC.”

Dogleg Park, the SpaceX real estate company, has been gobbling up property around Boca Chica and Brownsville since the space firm landed in South Texas. It named itself a third-party to the case in November.

The SpaceX entity said Dallas Petroleum “has no right, title, or interest in the 24 acres, yet it has trespassed and attempted to unlawfully exercise control over the property” by installing locks on the access gate. The filing continues that Dogleg Park decided to purchase the land in September.

It said the 2017 agreement between Dallas Petroleum and SEP Holdings IV has “nothing to do with the 24-acre surface estate.” Dallas Petroleum, it said, claimed ownership “for the sole purpose of extorting money from SpaceX and its affiliate Dogleg Park.”

Both Sanchez and SpaceX have threatened Dallas Petroleum President Matt Williams and company employees with trespassing charges. In a July 9 letter to Williams, an attorney for the space firm, David Asmus, wrote, “SpaceX will not accept any interference with its surface rights.”

SpaceX did not respond to a request for comment.

Farrar said aerial photos show others are using the land and that Dallas Petroleum property was removed without permission. A Dallas Petroleum official believes someone unlawfully tested the two wells and removed company equipment including tanks, stairs, catwalks and separators from the land.

Dallas Petroleum filed a theft report with the Cameron County Sheriff, but hasn’t heard from the department since Jan. 25. Sheriff Eric Garza said he was looking into the case’s status, but had not responded to questions prior to the print deadline.

The Texas Railroad Commission conducted a hearing Jan. 22 to consider a change of operator request on the La Pita gas leases from Dallas Petroleum to Lone Star Mineral Development, according to an agency spokesperson. The record closed March 22, and the judge has 90 days to render a verdict.

As of Thursday, there was no future hearing on the 445th District Court docket for this case.

Brandon Lingle writes for the Express-News through Report for America, a national service program that places journalists in local newsrooms.

Read More: SpaceX and oil company in legal battle over 24 acres of land near Starship facility

2021-05-27 18:33:53

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