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

By Jacob Credeur

A recent article in the Shreveport Times indicates that payouts from the Haynesville Shale formation are leaving even the biggest players surprised. Even though Petrohawk Energy, Chesapeake, and other producers are scaling back production activity nationally because of reduced demand for natural gas, many producers are ramping up their activities in North Louisiana. The early reports from wells there indicate production levels up to ten times higher than wells in other productive gas fields. According to the Louisiana Department of Natural Resources, Petrohawk had the top producing well in the state for the month of December with roughly 713.4 million cubic feet of production. With numbers like those it is no surprise that some companies are placing in excess of 50% of their 2009 budget into the shale play.
While some of the numbers and production being reported out of the Haynesville Shale are staggering, many in the industry warn that development will remain slow without an upturn in the markets and increase demand for natural gas.
For more on the article, see http://www.shreveporttimes.com/article/20090317/NEWS01/903170315
 

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By Everard Marseglia:

Last Friday, the Supreme Court of Texas issued decisions in two companion cases, No. 05-1076; Exxon Corp., et al. v. Emerald Oil & Gas Co., et al. (“Miesch”), and No. 05-0729; Exxon Corp., et al. v. Emerald Oil & Gas Co. (“Emerald”). Butch Marseglia, counsel in Liskow & Lewis’s Houston office, submitted a brief for the Texas Oil & Gas Association (“TxOGA”) as amicus curiae.

 

In Emerald, the Court held that Section 85.321 of the Texas Natural Resources Code creates a private cause of action, but it does not extend to a subsequent lessee against a prior lessee for damages to the subsequent lessee’s interest. Because the plaintiff Emerald owned no interest in the mineral leases when the prior lessee allegedly damaged the interest, the plaintiff lacked standing to assert the cause of action the Court recognizes under section 85.321. The Court also held that Emerald also lacked standing to bring a claim against its prior lessee based on negligence per se.

 

In Miesch, the Court held that statutory and common law waste, negligence per se, negligent misrepresentation, and tortious interference claims against the former lessee were time-barred. The Court also held that no evidence supported the lessors’; claim for breach of development claims under the oil and gas lease. Finally, the court affirmed the court of appeals’ judgment, for different reasons, reversing the trial court’s directed verdict with respect to fraud claims based on allegedly misrepresentation in Railroad Commission plugging reports filed by the former lessee, and remanded that claim to the trial court for further proceedings.

Click here for a link to the Miesch decision.

Click here for a link to the Emerald decision.

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By Katie Cambre

As reported in the Louisiana Mid-Continent Oil & Gas Association Daily News Summary, a federal auction of drilling tracts in the central Gulf of Mexico drew far fewer bids at much lower prices than during past auctions, and analysts attributed the decline to a poor economy and new energy policies proposed by President Barack Obama.

The lean sale directly affects Louisiana, which shares with Alabama, Mississippi, and Texas revenue from an area of the Gulf, which accounted for 5.8 million acres included in the auction.

Still, analysts and federal officials called the sale a success, pointing to fierce competition for several different areas.

For further information, see http://www.nola.com/business/t-p/index.ssf?/base/money-2/1237441027220440.xml&coll=1
 

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By Marie Carlisle

In Sun-Key Oil Co., Inc. v. Ernest Cannon & Moncrief Minerals P’ship, L.P., the Eleventh Court of Appeals in Eastland affirmed the District Court’s judgment granting summary judgment in favor of a lessor’s lease termination claim based on cessation of production and denying Sun-Key Oil Company’s motion for summary judgment on its affirmative defense of adverse possession stating that Sun-Key had failed to present detailed evidence establishing its use of the property and the elements of its adverse possession claims. The Court of Appeals referenced the Texas Supreme Court’s decision in Natural Gas Pipeline Co. of Am. V. Pool, 941 S.W.2d 910 (Tex. 1997), in stating the standard for summary judgment evidence regarding issues related to adverse possession.

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By Emma Hinnigan

U.S. oil and natural gas producing companies should not receive federal subsidies in the form of tax breaks because their businesses contribute to global warming, U.S. Secretary Timothy Geithner said when speaking to Congress on March 4, 2009. Geithner explained, “we don’t believe it makes sense to significantly subsidize the production and use of sources of energy that are dramatically going to add to our climate change. We don’t think that’s good economic policy and we think changing those incentives is good for the country.” The Secretary’s comments, made when speaking to the Senate Finance Committee on the proposed budget, reinforced the Obama administration’s stance that new U.S. energy policy will focus on promoting renewable energy sources and rely less on traditional fossil fuels. The proposed budget would levy an excise tax on oil and gas produced in the Gulf of Mexico, which is expected to raise $5.3 billion from 2011 to 2019. However, the tax will only affect companies currently using a loophole to avoid paying royalties on the energy supplies they drill. Those already paying royalties would get a tax credit. Senator John Cornyn of Texas criticized the proposed tax, saying it will hurt independent energy companies who provide a large share of U.S. oil and gas supplies.
For more information, go to
http://uk.reuters.com/article/oilRpt/idUKN0454844120090304
 

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By Jason Johanson

On Friday, March 6, 2009, Interior Secretary Ken Salazar stated that the agency is considering an appeal to the United States Supreme Court of the decision in Kerr-McGee Oil & Gas Corp. v. U.S. Department of the Interior, __ F.3d __, 2009 WL57883 (5th Cir. Jan. 12, 2009), in which the Fifth Circuit held that Interior had violated Section 304 of the Deep Water Royalty Relief Act by imposing "price threshold" requirements that reduce a lessee's royalty suspension volume below statutory minimums. Secretary Salazar also discussed Interior's comprehensive review of the agency's royalty management program, which may lead to an overhaul of the organizational structure of the Minerals Management Service. For more, please click here.

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By Natalie Barletta

In Retamco Operating, Inc. v. Republic Drilling Co., the Texas Supreme Court holds that Republic Drilling, a California company, established minimum contacts with Texas by acting as the transferee of certain oil and gas interests. Retamco Operating sued Paradigm Oil in a Texas district court over unpaid oil and gas royalties. The trial court entered a $16 million default judgment against Paradigm. While the litigation was pending, however, Paradigm assigned to Republic certain oil and gas interests located in Texas. Retamco sued Republic for violating the Uniform Fraudulent Transfer Act (UFTA), arguing that the transfers from Paradigm were fraudulent and led to Paradigm’s insolvency and subsequent inability to satisfy the judgment. Republic filed a special appearance, arguing that it was not subject to personal jurisdiction in Texas. The Supreme Court held that Republic established minimum contacts with Texas when it purposefully availed itself of the privileges of conducting business in Texas and because Republic’s alleged liability arose from those contacts.

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By Kevin Connolly

On an issue of apparent national first impression, the Houston Court of Appeals, in XTO Energy Inc. v. Smith Production Inc., 14-07-0069-CV, 2009 WL 442003 at *1 (Tex. App.—Houston [14th] 2009, no pet. h.), held that once a party to a Joint Operating Agreement (“JOA”) timely and properly provides notice to a proposing party as to whether it elects to participate in the cost of a proposed operation, then that party may not change its election, even if it seeks to do so within the thirty day election period and regardless of whether the other parties have materially changed their positions in reliance on the initial selection.  The Court reached this holding based on the wording of the applicable JOAs, which were both based on the American Association of Petroleum Landmen Model Form Operating Agreement 610-1982.

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