Case Law Update: TEP Rocky Mountain, L.L.C. v. Record TJ Ranch Ltd. Partnership

This suit was brought out of an assignment of a Surface Use Agreement {SUA) from WPX Energy Rocky Mountain, LLC {WPX RM) to Moriah Powder River, LLC {Moriah). As the SUA included “consent to assign” language, WPX RM sent Appellee Record TJ Ranch Limited Partnership (TJ Ranch), the surface rights owner under the SUA, a letter seeking its consent to sell and assign WPX RM’s assets, interests and obligations under the SUA to Moriah. TJ Ranch did not return the consent form due to a lack of information available on Moriah, but the sale proceeded to close 2015. Moriah later defaulted on their SUA payments and subsequently signed a forbearance agreement that stated if it failed to make timely payments, TJ Ranch could terminate the Forbearance Agreement and recover from Moriah and its predecessors-in-interest all sums owed under the SUA for the years 2017-2020. Moriah defaulted again on their payments in 2020 and TJ Ranch sought to recover lost payments and damages from Moriah, WPX RM, and related parties, arguing in part that it never consented to the Moriah assignment.

The Supreme Court of Wyoming considered whether TJ Ranch unreasonably withheld its consent of assignment from WPX RM. They found that TJ Ranch did not, because the consent letter that TJ Ranch received stated that WPX RM had already entered into an agreement to sell its assets, so TJ Ranch reasonably believed that it could not do anything about the assignment. The court also noted that TJ Ranch was only given five days to respond to the consent letter and that WPX RM did not provide any relevant information as to who Moriah was and its financial state. They believed that five days to respond to the consent letter was too short of a time period to require response, and that WPX RM was required to provide TJ Ranch with a reputable operator with proven financial capabilities to perform the duties under the SUA.