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

By Collette Ross

The Louisiana legislature has amended Louisiana Revised Statute § 44:104(E) to allow a notice of a mineral lease to be recorded for public records purposes instead of the full lease.  Filing a memorandum or extract of a mineral lease was formerly permitted by Louisiana Revised Statute § 9:2721.1, but that section was repealed on July 1, 2006.  The current legislation resolves this problem. As to mineral leases, in addition to other requirements under § 44:104, the notice shall include the primary term of the lease and any additional period during which the lease may be maintained by the payment of rentals. The amendment of § 44:104(E) took effect on June 18, 2007.  Click here to view the Act amending this statute.

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The Eastern District of Louisiana recently held that insurance claims for damage to a Gulf of Mexico production facility will not support federal court jurisdiction under the Outer Continental Shelf Lands Act.  Accordingly, the district court remanded the case of LLOG Exploration Co. v. Certain Underwriters at Lloyd's, 2007 WL 854307 (E.D. La. 3/16/07), to state court for lack of federal jurisdiction.  LLOG sued its insurers for property damage and business interruption losses to several Gulf of Mexico production facilities resulting from Hurricanes Katrina and Rita.  The insurers removed to federal court, asserting federal jurisdiction under the OCSLA, which provides that “the district courts of the United States shall have jurisdiction of cases and controversies arising out of, or in connection with ... any operation conducted on the outer Continental shelf which involves exploration, development, or production of the minerals, of the subsoil and seabed of the outer Continental Shelf, or which involves rights to such minerals.”  43 U.S.C. § 1349(B)(1).  The insurers argued that the case affected the production of minerals because LLOG sought recovery under its business interruption coverage for loss of production during the period of recovery from the storms.  Judge Livaudais ruled that OCSLA jurisdiction was unavailable because “[t]he insurance coverage dispute does not affect or alter the progress of production activities on the OCS, nor does it threaten to impair the total recovery of federally owned minerals from the OCS.”  Click here to view the opinion.

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In preparation for hurricane season, which began on June 1, the Minerals Management Service has established a web site that brings together extensive hurricane-related information and resources. The web site is designed to describe and explain improvements instituted since Hurricane Season 2005, when Hurricanes Katrina and Rita cut a destructive path through the Gulf of Mexico, Louisiana and Mississippi. These operational enhancements focus on personnel safety, environmental protection, and energy security, and include reporting procedures for offshore operators.  These practices were developed in collaboration with industry and many of the new requirements have already been implemented.  The website will be updated throughout the season with all available information regarding hurricane activity related to Gulf of Mexico energy operations.  Click here to visit the site.

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By Jonathan A. Hunter

MMS has announced proposed amendments to its deep gas royalty relief regulations under the Energy Policy Act of 2005. The proposed rule, “Royalty Relief – Ultra-Deep Gas Wells on Outer Continental Shelf (OCS) Oil and Gas Leases; Extension of Royalty Relief Provisions to OCS Leases Offshore of Alaska, 1010–AD33,” would extend existing deep gas royalty relief provisions to more OCS leases, provide additional royalty relief for certain wells on OCS leases in the Gulf of Mexico (GOM), and expand authority to grant royalty relief to leases offshore of Alaska.  The proposed rule extends deep gas royalty relief to GOM leases in 400 meters of water (up from the current limit of 200 meters), and would increase the royalty suspension volume to 35 Bcf for qualifying ultra-deep wells at least 20,000 feet total vertical depth subsea  in less than 400 meters of water.  The additional relief will only be available in years when the annual NYMEX natural gas price is at or below $4.47/MMBtu expressed in 2006 dollars.  MMS will accept comments on the proposed rule through July 17, 2007.  Click here to read the Notice.

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By Jonathan A. Hunter

MMS has issued a proposed notice scheduling Central Gulf of Mexico Lease Sale 205 for October 3, 2007.  This will be the first  sale in the newly configured Central Gulf of Mexico Planning Area, and is the first Central GOM sale to be held in MMS’ 2007 – 2012 Outer Continental Shelf Oil and Gas Leasing Program.  The proposed sale includes approximately 5,000 unleased blocks, covering over 28.5 million acres, and ranging from 3 to 210 miles offshore.   Click here for information on obtaining the proposed notice of sale.

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