In Bridges v. Production Operators, Inc., 2007-0648 (La. App. 4th Cir. 12/12/07),974 So.2d 54, at issue was whether the provision of fuel by customers to a compression services operator at no cost for use in powering the operator’s compressors was subject to Louisiana sales or use tax.
Continue Reading...By April Rolen-Ogden
In Mayne & Mertz, Inc. v. Excalibur, et al., the issue presented was whether damages for loss of a lease opportunity were too speculative to survive summary judgment. The case involved a claim for misappropriation of trade secrets, in this case seismic data. The landowner, Excalibur, received the data but was required to maintain its confidentiality. Mayne & Mertz claimed that Excalibur violated those terms by using the seismic to obtain lease bids from competitors of Mayne & Mertz. Mayne & Mertz sued, contending that, but for the misappropriation of the seismic, Excalibur would have granted the lease to it. No well was ever drilled, and the lease granted by Excalibur expired. Accordingly, Excalibur sought summary judgment, claiming that Mayne & Mertz could not prove the value of an undrilled mineral lease. The Court disagreed. Citing the experts’ opinions and testimony, as well as the applicable jurisprudence, the Court held that a jury could conclude that Mayne & Mertz was entitled to damages for the value of the undrilled mineral lease. The decision can be found at 2007 WL 2900510 (W.D. La.)
In Louisiana, a lawsuit is generally deemed abandoned when the parties fail to take any step in its prosecution for three years. This rule is operative without any formal order. La. Code Civ. P. art 561. However, Act 361 of 2007 extended the period for abandonment to five years where (1) the action was initiated prior to August 26, 2005, and was not previously declared abandoned under the general three year period, and (2) the party proves that the failure to take a step in the prosecution or defense of the suit was caused by or was a direct result of Hurricanes Katrina or Rita. The revision became effective July 9, 2007. Click here to read the Act.
By Dana Douglas
The Louisiana First Circuit Court of Appeal recently held that an operator is not responsible for payment of a non-operator's royalties and overriding royalties before payout. In Gulf Explorer, LLC v. Clayton WIlliams Energy Inc., 2007 WL 1651090 (La. App. 1st Cir. 6/8/07), the operator completed a well that was plugged and abandoned without reaching payout. A non-participating working interest owner sued, asking the court to declare that its royalty and overriding royalty owners were entitled to their share of production. Louisiana Revised Statute 30:10 provides that the party drilling a well can recover a non-participant's share of expenses from production, but also provides that royalty and overriding royalty owners shall receive the portion of production due them. The court held that, because La. R.S. 30:10 allows the drilling party to recover from the tract, while royalty obligations arise from a lease, the operator had no obligation to pay royalties before it recouped its expenses from production. Thus, the non-participant was responsible for payment of its royalty and overriding royalty payments.
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.
Boldrick v. BTA Oil Producers, No. 11-06-00029-CV, 2007 WL 865811 (Tex. App.—Eastland March 22, 2007).
The Eleventh Court of Appeals of Texas recently affirmed a District Court ruling granting summary judgment to BTA Oil Producers (BTA) on the basis that that the joint operating agreement (JOA), which governed the assignment of an overriding royalty interest to Plaintiff/Appellant, specifically provided guidelines for payments owed on an overriding royalty interest created by a non-consenting party. As BTA’s actions were consistent with the JOA, the court upheld the decision that no funds are due to Boldrick until the non-consent penalty provisions of the JOA are fully recouped and BTA itself receives payment for production from the well at issue.
Continue Reading...In Seagull Energy E & P, Inc. v. Railroad Comm'n, No. 03-0364, 2007 WL 1299163 (Tex. May 4, 2007), the Texas Supreme Court affirmed a decision by the Austin Court of Appeals upholding the Railroad Commission of Texas' authority to regulate both drilling and production of commingled oil and/or gas deposits and to treat commingled deposits as one reservoir. The petitioner, who unsuccessfully sought a permit from the Commission to reopen a shut-in well to produce from one of three discontinuous, lenticular gas sands in a field, argued that the permit it sought was a drilling permit rather than a production permit, and thus the Commission lacked authority to deny it. The petitioner also asserted that the Commission's denial of the permit amounted to an unconstitutional taking of gas in the sand from which the well would produce. The Court rejected these arguments, holding that the Commission has broad authority to regulate commingled oil and gas. The Court also concluded that a mineral owner's property interest in its fair share of minerals on and under its property does not extend to specific oil and gas beneath its property and is in any event subject to the state's police power to conserve and develop natural resources.
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.
By Jonathan A. Hunter
In Weyerhaeuser Co. v. A. D. Hinton, No. 07-30117 (5th Cir., May 1, 2007), the Fifth Circuit upheld a decision by the Federal District Court for the Western District of Louisiana rejecting a challenge to a group of mineral servitudes created in 1971. The plaintiff landowner, Weyerhaeuser Company, asserted that a series of formal "acknowledgments" executed by its corporate predecessor to interrupt prescription were part of an attempt to create fifty-year mineral servitudes in violation of Louisiana law. In a Memorandum Ruling, the district court held that the challenged acknowledgments fully complied with Louisiana Mineral Code articles 54 and 55; accordingly, the acknowledgments interrupted prescription running against the mineral servitudes. Weyerhaeuser Co. v. A. D. Hinton, et al., No. 06-0272 (W.D. La., Dec. 29, 2006, Walter, J.). On May 1, 2007, the Fifth Circuit heard oral argument on Weyerhaeuser’s appeal. That same day, the Fifth Circuit issued its per curiam decision upholding the district court’s ruling. Click here to view the ruling.
At its April 11 lease sale, the Louisiana Department of Natural Resources will offer four offshore tracts, one in the Grand Isle area and three in the Main Pass area. The Department will also offer 17 tracts in waters that the state designates as inland. Six tracts are in the Chandeluer Sound area, two will cover portions of the Chandeleur Sound, and nine will be offered in the Main Pass area.
For more information, visit the Department's website here.
United States Senators have introduced three new bills that may impact offshore drilling:
Senators Byron Dorgan, D.-N.D., and Larry Crais, R-Idaho, have introduced the Security and Fuel Efficiency Energy Act 2007, S. 875. The legislation would allow offshore drilling in the Eastern Gulf of Mexico to as close as 45 miles off the coast of Florida. The bill, currently before the Senate Finance Committee, would also allow an inventory off the coast of Virginia, North and South Carolina and Georgia, which could lead to more offshore drilling there as well.
Senator Mel Martinez of Florida has also introduced S. 876, which would amend the Cuban Liberty and Demoratic Solidarity Act of 1996 by denying a United States visa to any foreign agent or entity who contributes to the development of Cuba's oil exploration plan. The bill would also impose sanctions on individuals or entities who invest more that one million dollats in the devlopment of Cuba's oil and gas resources.
Senator Herb Kohl, D.-Wis. has alos introduced the Oil Industry Merger Antitrust Enforcement Act, or S. 878, which will demand evidence from merging oil and gas entities that their transaction will not harm competition.
The text of all three bills may be found at the United States Congress's website here.
On February 13, the Texas Supreme Court will hear arguments in a case involving important issues to the Texas oil and gas industry, including whether or not Texas recognizes an independent private cause of action for waste based on violations of Texas conservation laws and whether an oil and gas lessee commits waste by plugging abandoned wells with minerals remaining in the reservoir. The Court will also hear arguments on the applicability of the discovery rule and fraudulent concealment to claims by oil and gas lessors. Liskow & Lewis attorney Butch Marseglia submitted an amicus curiae brief on behalf of The Texas Oil & Gas Association. For a copy of TxOGA’s brief, click on the following link Amicus Curiae Brief of TXOGA - Received: 10/16/2006 .
In the continuing dispute between federal offshore lessees and the Department of the Interior over missing price threshold provisions in 1998 and 1999 federal oil and gas leases, MMS announced today that it has signed agreements with BP, ConocoPhillips, Marathon Oil Company, Shell, and Walter Oil and Gas Corporation.
In BHP America Petroleum Co. v. Burton, 549 U.S. — (2006), the Supreme Court resolved a legal issue that has been at the center of federal royalty litigation for twenty years: viz., whether 28 U.S.C. § 2415(a), which imposes a 6-year statute of limitations for Government “every action for money damages … founded upon any contract,” applies to administrative royalty payment orders issued by the Minerals Management Service (MMS). The Court held that it does not. Read more . . .
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