Courts Address Exculpatory Clause in Joint Operating Agreement
Two recent federal district court decisions have reached differing results in considering the scope of exculpatory clauses in JOA disputes. In PYR Energy Corp. v. Samson Resources Co., 470 F. Supp. 2d 709 (E.D. Tex. 2007), the court found itself bound to follow Fifth Circuit precedent set in Stine v. Marathon Oil Co., 976 F.2d 254 (5th Cir. 1992), which held JOA exculpatory language limiting operator liability to situations of gross negligence of willful misconduct applicable to all good faith actions undertaken by the operator under the JOA, including performance of its contractual duties. By contrast, in Forest Oil Corp. v. Union Oil Co., 2006 WL 905345 (D. Alaska Apr. 7, 2006), the court followed the Tenth Circuit and refused to require a showing of gross negligence or willful misconduct in holding an operator liable for breach of contract regarding its duties to charge for NORM disposal.
