The Energy Law Blog : Energy Lawyer & Attorney : Liskow & Lewis Law Firm : Gulf Coast, Offshore

By Jessica Gladney

The Fifth Circuit recently reversed the district court’s grant of partial summary judgment in Dore Energy Corp. v. Prospective Investment & Trading Co. Ltd., No. 08-30186 (5th Cir. 5/28/09). The dispute in Dore centers on the interpretation of a 2002 settlement agreement between the parties to certain mineral leases in Cameron Parish. Dore Energy Corp. filed suit in 2000 against the lessees of a 1927 mineral lease seeking to cancel underdeveloped portions of the lease. The parties reached a settlement agreement on January 28, 2002, in which the lessees agreed to release their interest in all of the mineral lease except for three specified sections of land, referred to as the “Retained Area.” The settlement agreement provided that three years after the agreement, the portions of the Retained Area that were not then in “producing units” would be released. The agreement also imposed an obligation on the parties to attempt to negotiate in good faith the size and extent of the producing units before instituting a proceeding before the Louisiana Commissioner of Conservation to settle any disputes.

On January 28th, 2005, only one of twenty-five existing wells in the Retained Area was still producing from the depth identified in its unit designated by the Commissioner of Conservation. In March 2005, Dore sent letters to the lessees demanding that they surrender the lease to all acreage other than that related to the one well producing at the unit designation depth. The lessees offered to negotiate with Dore regarding the shape and configuration around the wells, to include wells that had been recompleted into shallower zones than those specified in unit designations, but Dore instead filed suit in September 2005 seeking enforcement of the settlement agreement. The district court granted Dore partial summary judgment, finding that since only one well was producing at its unit designation depth and no voluntary units had been formed between 2002 and 2005, only one well in the Retained Area constituted a “producing unit.” The district court therefore canceled the lease on the rest of the Retained Area, effective January 28, 2005.

The Fifth Circuit determined the provision in the settlement agreement that required the parties to negotiate in good faith as to the size and extent of producing units before pursuing a determination from the Louisiana Commissioner of Conservation was not subject to the three-year time limit. Since no time limit for this provision was provided by the agreement, the obligation must be performed within a reasonable time. The Fifth Circuit remanded the case to the Western District of Louisiana for a determination as to whether the lessees breached the settlement agreement by failing to institute negotiations within a reasonable time. While recognizing that the agreement may have been breached, the court emphasized specific performance as a potential remedy and expressly stated, “The remedies available under Louisiana law and by these pleadings for such a breach do not include forfeiture.”
 

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By Marie Carlisle

On May 28, 2009, the Fifth Circuit decided In the Matter of: Lease Oil Antitrust Litigation, case no. 08-40230, reversing the District Court’s denial of the State of Texas’ motion to intervene in a matter concerning unclaimed settlement money from the oil antitrust action. The Fifth Circuit found that Texas met the requirements to intervene as it presented a timely motion, demonstrated an interest in the litigation which was direct and substantial and would be impaired without intervention, and that Texas’ interest was not represented by any of the existing parties.   The appeal stemmed from a 1999 settlement in a class action where the Plaintiffs claimed oil companies were not paying the fair market value of oil at the well. After distribution of settlement checks to members of the class who could be located, $4,638,283 in funds remained and were owed to class members who could not be located, but whose last known addresses were in the State of Texas. The District Court decided to distribute the funds to a third party, under the doctrine of cy pres. The State of Texas was not a party to these hearings. On December 12, 2007, the district court approved the cy pres distribution but, anticipating an intervention and appeal by the State, set the funds aside rather than immediately distributing them. On January 11, 2008, Texas filed a motion to intervene and a motion to reconsider with the district court. Both motions were denied and Texas then appealed the denials to the Fifth Circuit, arguing that it should have been granted leave to intervene in the district court. The Fifth Circuit reversed the district court, finding that Texas met the requirements for intervention as of right—it filed a timely motion, presented a direct and substantial interest in the litigation which would be impaired absent intervention, and had demonstrated that its interests were not represented by the existing parties.
 

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By Jessica Gladney

In Thomas v. Mobil Oil Corp., No. 2008-0541 (La. App. 4 Cir. 3/31/09), the Fourth Circuit affirmed the trial court’s denial of class certification against the defendants, Exxon Mobil Corporation and Chalmette Refining, L.L.C. The proposed class consisted of approximately 7,000 claimants from Algiers and St. Bernard, and the plaintiffs alleged personal injury and property damages from emissions of petrochemical facilities operated by the defendants over a fourteen-year period. The claims forms submitted did not specify dates that claimants allegedly suffered from any of the alleged damages, and the trial court concluded that the claims among the purported class members varied so greatly that the putative class representatives could not adequately represent the class. The Fourth Circuit recognized that the Louisiana Supreme Court’s holding in Ford v. Murphy Oil, U.S.A., Inc., 1996-2913 (La. 9/9/97), 703 So. 2d 542 was controlling and affirmed the trial court’s holding denying class certification. The court noted that the wide variances in geographic location, claimed exposure, and types and degree of damages claimed by the putative class members demonstrated that the claims were too individualized and the certification of the class should therefore be denied.

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"Coastal Parishes v. Big Oil" is the name of the website addressing the lawsuit just filed in federal court against Burlington & LL&E, for property taxes on equipment that is in onshore coastal waters as well as offshore waters within the three mile territorial limit. This lawsuit was filed by the Terrebonne Parish assessor claiming that the "big oil" companies committed fraud on their property tax reporting forms (the "LAT" forms) by (1) using a fraudulently low "replacement-cost-new-less-depreciation" values for equipment; (2) omitting certain pieces of equipment entirely; and (3) reporting certain wells as shut-in or stripper wells when they were, in fact, producing. The attorneys say that they have assessors from other parishes on board and that this is the first of many lawsuits to come against "Big Oil."

The link below is to the website established by the attorneys for the assessors. The complaint can be found on that website. It seeks (1) back taxes for some 10 years; (2) penalties for fraud; and (3) civil RICO penalties against the individual employee responsible for the LAT forms. It also contains complaints against LIOGA and the Louisiana Tax Commission, although neither is named in the complaint.
 

For more information, contact Robert Angelico, Jim Exnicios, or Cheryl Kornick.

www.paytaxesoil.com.

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By Kelly Becker 

The Louisiana legislature is currently considering House Bill 758 which would allow the Attorney General to pay up to a twenty-five percent contingency fee to outside attorneys to represent the State in litigation. Several industry groups, including the Louisiana Association of Business and Industry and the Louisiana Oil and Association, oppose the bill on the basis that it would lead to “frivolous” suits and target certain industries within the State. In the past, the State hired outside counsel to pursue claims for allegedly underpaid royalties and severance taxes and paid those outside lawyers on a contingency basis. Challenges were often raised to the contingency fee structure in those cases as violating the Louisiana Supreme Court’s decision in Meredith v. Ieyoub, 96-1110 (La. 9/9/97), 700 So. 2d 478, which held that through the terms of those contingency fee contracts, the Attorney General unconstitutionally usurped legislative authority by alienating to outside counsel State-owned property – a portion of any funds recovered in the litigation.

For more information on the proposed legislation, see www.nola.com/business/t-p/index.ssf/base/money-2

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By Jacob Credeur

The Caddo Parish Commission is preparing for a public hearing on May 21 where it is set to discuss proposed drilling regulations for operators in the Haynesville Shale. The commission is working on the set of ordinances in committee discussions and is seeking to acquire public input before taking action. The proposed regulations, as they currently stand, would cover everything from dust abatement, vibrations, odors, and noise to use of public water supplies and pipeline installation. Caddo Parish Attorney Charles Grubb has stated the intent of the proposed ordinances is to make certain that when drilling is done in populated areas “it is done in such a way that we don't lose quiet, peaceful possession of our property,”

For more information see: http://www.shreveporttimes.com/article/20090429/NEWS01/904290359/1060
 

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By Jessica Gladney

In Center for Biological Diversity v. U.S. Department of the Interior, the United States Court of Appeals for the District of Columbia Circuit issued a ruling on April 17, 2009 vacating the Department of the Interior’s statutorily-mandated five-year offshore oil and gas leasing program for the period 2007-2012. The five-year leasing program included an expansion of lease offerings in the Beaufort, Bering, and Chukchi Seas off the coast of Alaska. Suit was filed against the Department of the Interior by the Center for Biological Diversity and by Alaska native and environmental groups who challenged the leasing program on various environmental grounds. The D.C. Circuit (which has exclusive jurisdiction over a legal challenge to the five-year leasing program) rejected many of the petitioners' claims, but upheld the challenge based on a finding that "the [Leasing] Program's environmental sensitivity rankings are irrational." Accordingly, the court vacated the leasing program and remanded the program to Interior for reconsideration.

To view the entire opinion, please click here.

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By Natalie Barletta

The Texas Supreme Court in, In re Gulf Exploration, LLC, No. 07-0055 (Tex. Apr. 17, 2009), addresses when mandamus relief is available in connection with an order compelling arbitration. In this case, several working interest owners sued Great Western Drilling, their operator, claiming an opportunity to participate in wells drilled by Great Western. The working interest owners moved to compel arbitration pursuant to the terms of the arbitration clause contained in their joint operating agreements. The trial court granted the motion to compel and Great Western sought mandamus relief in the court of appeals. The appellate court held that the trial court “clearly and indisputably” abused its discretion and conditionally granted mandamus relief.
The primary issues before the Supreme Court were: (1) whether the appellate court had jurisdiction to review the trial court’s order compelling arbitration; and, if so, (2) whether the appellate court erred in vacating the trial court’s order on the ground that the claims were outside the scope of the arbitration clause. The court stated the general rule that there can be no immediate appeal of an order compelling arbitration if the order merely stays the underlying litigation. However, an appeal may be taken if the underlying case is dismissed. Here, the trial court merely stayed the case pending arbitration; therefore, there was no final judgment from which to appeal.
The court continued, however, stating that even though an order is not reviewable by interlocutory appeal, mandamus review is not necessarily precluded. The party seeking mandamus relief must show that it has no other adequate remedy by appeal. The adequacy of an appeal is determined on a case-by-case basis by balancing the benefits and detriments of arbitration. Because both federal and state arbitration acts exclude immediate review of an order compelling arbitration, the balance tilts “strongly against mandamus review.” In this case, the court found that there were no counterbalancing legislative mandates indicating that the legislature weighed in on one side of the balance. The court did not reach the issue of whether the claims fell outside the arbitration clause, but even assuming that the claims were not within the arbitration clause, Great Western failed to show that its appellate remedy following arbitration is inadequate. The court directed the appellate court to vacate its judgment, reinstating the trial court’s order compelling arbitration.
 

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 By Andrew Wooley:

The Supreme Court of Texas issued a decision on rehearing in Entergy Gulf States, Inc. v. Summers April 3, 2009. The court’s original unanimous decision in August 2007 that a Texas premises owner can be a statutory employer for workers’ compensation purposes produced a great deal of political heat and a flurry of amicus briefs; so much so that the court departed from its normal practice and entertained oral argument on the motion for rehearing.

On rehearing, three justices joined in the opinion of the court; three justices concurred in different parts of the court’s opinion (two of them writing separate concurring opinions), and three justices dissented from the court’s decision and opinion. The court’s holding, however, did not change. 

In this workers’ compensation case, we decide whether a premises owner that contracts for the performance of work on its premises, and provides workers’ compensation insurance to the contractor’s employees pursuant to that contract, is entitled to the benefit of the exclusive remedy defense generally afforded only to employers by the Texas Workers’ Compensation Act. . . . We hold that the exclusive remedy defense for qualifying general contractors is, likewise, available to premises owners who meet the Act’s definition of “general contractor,” and who also provide workers’ compensation insurance to lower-tier subcontractors’ employees. Because we conclude that Entergy Gulf States, Inc. meets the definition of “general contractor” under the Act, and . . . otherwise qualifies under the Act . . . it is entitled to the exclusive remedy defense against the negligence claims brought by . . . John Summers [a subcontractor’s employee]. We reverse the court of appeals’ judgment and render judgment for Entergy.

The opinion of the court and the concurring and dissenting opinions are available on the court’s web site at http://www.supreme.courts.state.tx.us/historical/040309.asp. They are also available on Westlaw at 2009 WL 884906.

A bill has been introduced in the Texas legislature to “fix” the court’s decision in Entergy, however, so premises owners are well advised to monitor the progress of Texas Senate Bill No. 2063 (http://www.legis.state.tx.us/tlodocs/81R/billtext/pdf/SB02063I.pdf) before deciding whether to revise their insurance programs and forms of agreement with maintenance, construction, and other contractors in light of the decision in Entergy.

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