Characterization of Natural Gas as Personalty Defeats Plea to Jurisdiction Based on New Mexico Real Property
Judge Bill Whitehill
Decided March 28, 2025
Mem. Op.
Jurisdiction & Remand
In Targa Northern Delaware LLC v. Franklin Mountain Energy 2 LLC, Division 1 of the Business Court denied a plea to the jurisdiction in a breach-of-contract dispute over natural gas deliveries, holding that the case concerned severed natural gas (personalty) rather than subsurface mineral interests (realty) in New Mexico. The court concluded that any effect on New Mexico real property ownership was merely incidental and collateral to the core issue of which party first materially breached its contractual delivery obligations.
Court Staff Summary
Denying a plea to the jurisdiction in a case about an alleged breach of contract concerning natural gas deliveries from New Mexico to Texas, where the movant argues that the case is about real property interests in New Mexico (natural gas still in the ground in New Mexico), but the non-movant argues that it is about severed personal property (natural gas produced in New Mexico) delivered to Texas with only incidental implications for the real property in New Mexico.
The Jurisdictional Challenge
Defendants Franklin Mountain Energy 2, LLC and Franklin Mountain Energy, LLC (now known as Coterra Energy Operating M LLC and Coterra Energy Operating F LLC, respectively) filed a Second Amended Plea to the Jurisdiction, asserting that the Business Court of Texas lacks subject matter jurisdiction because "this case is about who owns natural gas in the ground in New Mexico, which is real property, and this court lacks jurisdiction to decide that dispute."
Plaintiff's Position
Plaintiff Targa Northern Delaware, LLC, a midstream company operating natural gas gathering and compression facilities, countered that the court has subject matter jurisdiction because "its sole cause of action seeks damages for defendants' alleged failure to deliver severed natural gas, which is personalty, and Texas has jurisdiction to resolve that contract breach claim even if the result may have collateral effects regarding New Mexico real property." The dispute arose under an Amended and Restated Gas Gathering, Processing and Purchase Agreement effective June 1, 2021, between the parties—Targa as a midstream operator and the Franklin Mountain entities as upstream oil and natural gas exploration and production companies.
The Court's Analysis: Severed Gas vs. Subsurface Gas
The Business Court of Texas, 1st Division, denied the plea to the jurisdiction, holding that "the seminal issue is who materially breached the contract first regarding the delivery of severed natural gas." The court explained the remedial framework: "If defendants did so, recovering damages is plaintiff's remedy. But if plaintiff did so, defendants' remedy is for the court to order plaintiff to release its rights regarding the subsurface gas, which is realty."
The court emphasized the distinction between the primary dispute and any collateral consequences:
In short, this case will factually decide who first materially breached its duty regarding the delivery of severed natural gas. Any subsequent effect that decision may have on the ownership of native natural gas in New Mexico is incidental and collateral to that outcome. Therefore, this court has jurisdiction to resolve the prior material breach dispute.
Significance for Business Court Jurisdiction
The decision illustrates how the Business Court characterizes disputes for jurisdictional purposes when contractual performance may have implications for real property interests. By focusing on the nature of the primary claim—breach of a duty to deliver severed natural gas—rather than potential downstream effects on subsurface mineral ownership, the court asserted jurisdiction over what it deemed fundamentally a contract dispute involving personalty. The ruling demonstrates the court's willingness to exercise jurisdiction even when resolution of the contract claim may have "incidental and collateral" effects on real property interests located outside Texas.