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

By Robert L. Theriot

In EOG Resources Inc. v. Chesapeake Energy Corp., No. 09-30362, __ F.3d __ (5th Cir. 4/29/10), the Fifth Circuit reinstated EOG's contractual claim against Chesapeake under the parties' joint operating agreement (JOA).  EOG claimed that Chesapeake had unilaterally drilled three wells in the parties' pooled mineral leases in Bossier Parish, Louisiana, without first obtaining EOG's written consent as required by their JOA.  The trial court dismissed EOG's claim, finding the contractual claim was barred as an impermissible "collateral attack" on the orders of the Louisiana Commissioner of Conservation, because the Commissioner had approved Chesapeake's application to drill the wells as alternative unit wells for the pooled zones.  On appeal, the Fifth Circuit reversed and vacated.  It found that EOG's contractual claim was not barred as a collateral attack on the Commissioner's orders and remanded for a determination of EOG's claims.  The author represented EOG in the trial court and on appeal.

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By Matthew Simone

On January 6, 2010, the Secretary of the Interior, Ken Salazar, announced plans to reform the nation’s policy on oil and gas development in an effort to shift from the Bush Administration’s “anywhere, anyhow” policy. The goals of this reform are to improve environmental protection and to reduce costly litigation and protests. Under the reformed policy, the Bureau of Land Management (BLM) will provide more detailed environmental review prior to leasing oil and natural gas resources. Secondly, the BLM will make forums available for public involvement in the development of Master Leasing and Development Plans prior to leasing areas where intensive new oil and gas development is anticipated. The new policy will also include a comprehensive parcel review process taking a site-specific approach to individual lease sales, which will include public participation, interdisciplinary review of available information, and visits to parcels when necessary to supplement or validate existing data. Lastly, Secretary Salazar’s reforms will provide guidance regarding the use of categorical exclusions (CXs) established by the Energy Policy Act of 2005 which allows the BLM to streamline the environmental review process for certain oil and gas exploration and development activities. The new policy will require more extensive environmental review on CXs when the BLM is presented with “extraordinary circumstances.” Secretary Salazar also created the Energy Reform Team which is charged with implementing the new policies and helping other agencies to coordinate and manage public energy resources in the future.

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By Leta Seletzky:

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. 

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