In Petro-Chem Operating Co., Inc. v. Flat River Farms, L.L.C., the Louisiana Second Circuit addressed issues affecting the creation and preservation of mineral servitudes and payment of court costs in a concursus action. In the case, an operator initiated a concursus action seeking to resolve ownership interest in minerals underlying property on which it was operating. The dispute as to ownership arose because of questions as to: (1) whether or not a notarial act of correction could be used to perfect a mineral reservation in agreements that did not initially include language effecting such a reservation and (2) whether or not inclement weather or the failure to timely obtain a permit could serve as obstacles sufficient to suspend the prescription of nonuse from running against a mineral servitude under Louisiana Mineral Code article 59. Furthermore, the Second Circuit addressed the proper procedure for the payment and taxation of court costs upon the resolution of a concursus action. In its decision, the Court made the following conclusions, which are discussed more fully below:
- A notarial affidavit of correction cannot be used to correct the omission of a mineral reservation in a sale of immovable property;
- Inclement weather and failure to timely obtain a permit do not constitute “obstacles” sufficient to suspend the prescription of nonuse from running against a mineral servitudes under Louisiana Mineral Code article 59; and
- Court costs in a concursus action must be paid from the money deposited into the registry of the Court pursuant to Louisiana Code of Civil Procedure article 4659, but the trial court still retains discretion to later tax costs among the parties as it deems fit under Code of Civil Procedure article 1920.
A. The Use of Notarial Acts of Correction to Correct the Omission of a Mineral Reservation in a Sale of Immovable Property
Petro-Chem involved a concursus action seeking to resolve the ownership of minerals underlying two tracts of land in Bossier Parish, Louisiana. The first tract, which covered 63 acres, was transferred through a series of agreements including an act of exchange and a subsequent cash sale in 2007. However, these agreements did not contain language providing for a mineral reservation to the tract’s original owner. In an attempt to resolve this issue, the parties sought to correct the omission via a notarial act of correction to the original agreement as opposed to a new separate agreement. The parties to the agreements ultimately challenged the effectiveness of the notarial acts and set the stage for the Second Circuit’s analysis of whether or not a notarial act of correction could be used to correct the omission of a mineral reservation in a sale of immovable property.
In its decision, the Court found that the failure to include a mineral reservation in a transfer of immovable property was a substantive error, and as a result, a notarial act of correction, which may only correct clerical errors, may not be used to later perfect a mineral reservation. In its analysis, the Court first looked to the pertinent language of La. R.S. 35:2.1, which governs notarial acts of correction:
A. (1) A clerical error in a notarial act affecting movable or immovable property or any other rights, corporeal or incorporeal, may be corrected by an act of correction executed by any of the following:
(a) The person who was the notary or one of the notaries before whom the act was passed.
(b) The notary who actually prepared the act containing the error.
The Court then applied La. R.S. 35:2.1’s language to the notarial acts of correction at issue in the case and stated:
Determination of this issue is dependent upon the intention of the legislature in allowing for the correction of an authentic act already filed in the conveyance records by merely subsequently filing an affidavit of correction completed by the notary before whom the act was passed. Here, it is clear from the language of the statute that a notarial affidavit of correction may correct only a “clerical error.” By definition, a clerical error is an error in writing or copying a document. A reservation of mineral rights is a substantive change, because the addition of a reservation of mineral rights would change the effect of the document in regard to the real rights held by the parties to the act. Therefore, the trial court did not err in ruling, as a matter of law, a notarial affidavit of correction cannot be used to correct the omission of a mineral rights reservation in a sale of land, since reservation of real rights is a substantive issue which implicates the thought process and intention of the parties to the transaction.
The Second Circuit’s decision in regard to this issue does not represent a departure from the viewpoint that most in the oil and gas industry have towards notarial acts of correction. Nonetheless, it does serve as a reminder that when a party recognizes an omission or mistake in an instrument affecting mineral rights, a party should not immediately opt for an easy fix via a notarial act of correction. Instead, a party should determine whether or not the omission/mistake is merely clerical or substantive in nature, and based on that determination, evaluate the proper legal form for any curative instrument.
B. Inclement Weather and Failure to Obtain Permits as Obstacles Sufficient to Suspend the Prescription of Nonuse from Running Against Mineral Servitude Under Louisiana Mineral Code Article 59
The other tract at issue, which involved a mineral servitude created in favor of Max and Barbara Bernadette Hart (“Harts”) set the stage for the Court’s analysis of whether or not inclement weather or the failure to obtain a permit constituted obstacles sufficient to suspend the running of prescription of nonuse. On March 4, 1993, the Harts executed a cash sale deed transferring an undivided 3/4 interest in a 707 acre tract to Flat River Farms, LLC (“Flat River”). Under the agreement, Flat River became the surface owner but the Harts retained ownership of the minerals via the mineral servitude created by the transaction. In the following years, Flat River and Larry Lott of Lott Company, LLC (collectively “Lott”) granted warranty easements to the U.S. Department of Agriculture (“USDA”) in 1999 and 1998, respectively, over the surface of the property subject to the Harts’ mineral servitude. Several years later, the Harts entered into a mineral lease with Spanoil Exploration with a three-year primary term that would conclude on May 9, 2004, even though the Harts’ mineral servitude would expire on March 3, 2004 if not used.
In 2002, Petro-Chem, the operator, initiated proceedings to create a compulsory unit encompassing a portion of the minerals subject to the Harts’ mineral servitude. Petro-Chem then requested that the surface owner, Lott, obtain a Compatible Use Authorization (“CUA permit”) from the USDA, which would be required before the spudding of Petro-Chem’s proposed unit well on December 17, 2003. The CUA permit was obtained on January 20, 2004. However, Petro-Chem, who had not engaged in another activity sufficient to interrupt prescription, did not spud the proposed unit well until March 28, 2004—25 days after the Harts’ Servitude expired on March 3, 2004. Prior to spudding the well, the operator faced weather delays and was required to obtain a CUA permit. As a result, certain claimants in the concursus action argued that the servitude did not expire because the inclement weather and permit issues were obstacles under Mineral Code article 59, which provides that:
[i]f the owner of a mineral servitude is prevented from using it by an obstacle that he can neither prevent nor remove, the prescription of nonuse does not run as long as the obstacle remains.
In regards to the weather, claimants arguing that the servitude did not expire noted that the operator needed to build a road to its proposed wellsite. However, road construction was delayed because the spoil bank, upon which the road was to be constructed, had very soft soil due to increased rainfall in early 2004 that prevented construction. In addition, the operator was unable to move a drilling rig onto the wellsite due to weather in February 2004, and as a result, the operator had to pay standby time for the rig. However, the Court found that these reasons did not constitute obstacles for several reasons. First, it recognized that the operator was familiar with the terrain and the potential for delays. Second, the operator had testified its “drop dead date” to spud its well was in May 2004 and that, had it realized servitude maintenance issues existed, the well could have been spudded in time. After considering this evidence, the Court found that weather delays can be anticipated. As a result, it found that bad weather is not an obstacle under Mineral Code article 59.
Finally, the Court rejected the argument that the need for a CUA permit created an obstacle. In support of this argument, certain claims argued that the USDA easement requiring the CUA permit was equivalent to placing a fence and locked gate to prevent access to a servitude, which has been recognized under Mineral Code article 59 as an obstacle. However, the Court recognized that the operator routinely obtained permits as part of its operations. In addition, it noted that CUA permits were “not unlike” other permits required to drill a well and that the surface owner of the property requiring the permit promptly assisted the operator in obtaining a permit. For this reason, the Court found on de novo review that “getting a permit is an ordinary part of oil exploration, did not result in unusual delay, and did not create the kind of obstacle contemplated by [Mineral Code article 59].”
The Court’s ruling in this regard provides guidance for operators and servitude owners facing servitude expiration, in that, if delays occur because of something that is readily foreseeable or part of the typical actions and challenges that a party must perform or face when utilizing a servitude, it is not an obstacle under Mineral Code article 59. Therefore, the Second Circuit’s decision underscores the need for operators and servitude owners to be mindful of the deadlines and activities affecting their servitude, and in situations where delays occur, be diligent in ensuring that a servitude is used as common tasks or foreseeable reasons for delays do not constitute obstacles under Mineral Code article 59.
C. Payment of Court Costs in Concursus Actions
Finally, the Second Circuit clarified the procedure for payment and taxation of court costs in concursus actions under Code of Civil Procedure article 4659, which provides that:
When money has been deposited into the registry of the court by the plaintiff, neither he nor any other party shall be required to pay any of the costs of the proceeding as they accrue, but these shall be deducted from the money on deposit. The court may award the successful claimant judgment for the costs of the proceeding which have been deducted from the money on deposit, or any portion thereof, against any other claimant who contested his right thereto, as in its judgment may be considered equitable.
In all other instances, the court may render judgment for costs as it considers equitable.
In Petro-Chem, the prevailing parties challenged the applicability of article 4659 and argued that court costs should be paid by the unsuccessful parties pursuant to the wide discretion granted to trial courts in taxing costs under Code of Civil Procedure article 1920. In support of their argument, the prevailing parties relied on article 1920, which generally addresses taxation of court costs, and argued that prevailing parties’ recovery in a concursus should not be diminished by the payment of funds from the concursus deposits. In opposition, the unsuccessful claimants argued that article 4659 is a limitation on the vast discretion granted to trial courts to tax costs under article 1920.
The Court rejected the prevailing parties’ argument and found that article 4659 controls in instances where funds are deposited into the registry of the court through a concursus action. In its reasoning, the Court recognized that despite article 1920’s general application, “where the law specifically provides a procedure for payment of costs, the trial court does not have the discretion to tax costs otherwise.” The Court then noted that article 4659 is an example of a specific procedure of payment for costs in the realm of concursus actions. However, the Court did recognize that article 4659 still grants trial courts the discretion to tax the court costs, which were deducted from the deposited funds, against any claimant who contested the successful claimants’ right to the funds as the Court deems equitable. As a result, the Court ultimately held as follows:
Louisiana C.C.P. 4659 does not take away the trial court’s discretion to assign costs equitably as provided for in La. C.C.P. art. 1920. However, art. 4659 merely states that in a concursus proceeding, when money has been deposited in the registry of the court: first, court costs will be paid from the money deposited into the registry, and after court costs have been paid the trial court may award costs to the prevailing parties or assign costs however it deems equitable.
The Second Circuit’s textual interpretation of Article 4659 effectively forecloses the application of Article 1920 in concursus actions prior to the payment of court costs from the registry of the court. Given the fact that oil and gas operators often utilize concursus actions in disputes over mineral proceeds/royalties, the Court’s application of Article 4659 ensures that operators can continue to rely on the deposit of funds as satisfying not only their financial obligation to concursus claimants but also to the Court. In addition, the decision still provides successful claimants with an avenue whereby they may recover costs from those parties that unsuccessfully challenged their claim.
*Associate, Liskow & Lewis, B.A., University of Georgia, 2009. J.D., Paul M. Hebert Law Center, Louisiana State University, 2012. Any views expressed herein are my own and do not necessarily reflect the views of Liskow & Lewis and/or its clients. Furthermore, it is the author’s intention to provide the information contained herein in an objective fashion that presents the practical effects of particular legal decisions without any commentary as to whether a particular decision is legally correct or sound policy.
 See 51, 212 (La. App. 2 Cir. 3/1/17). As of the date of publication, the delays for appeal of the Court’s decision in this matter have not run.
 See id. at 7-12
 See id. at 12-16.
 See id. at 16-19.
 See id. at 14.
 See id. at 11.
 See id. at 18.
 See id. at 4-5.
 See id. at 5.
 See id. at 5-6.
 See id. at 6.
 See id. at 12-16. It is important to note that the Second Circuit also addressed questions related to a subsequently executed acknowledgement by one of the parties challenging the effectiveness of the notarial act of correction. However, the Court did not discuss this issue because it involved questions of material fact.
 See id. at 12-13.
 Id. at 14.
 See id. at 1-2.
 See id. at 2.
 See id.
 See id.
 See id. at 2-3.
 See id.
 See id. at 3.
 See id. at 7-12.
 See id. at 7-8 (citing La. Rev. Stat. § 31:59 (2017)).
 See id. at 9.
 See id.
 See id. at 10. In this respect, the parties claiming this was an obstacle argued that one is only required to unsuccessfully attempt to access a servitude to show the existence of an obstacle. See id.
 See id.
 See id.
 See id.
 See id. at 10-11.
 See id. at 11.
 See id. (citing Hall v. Dixon, 401 So. 2d 473 (La. App. 2 Cir. 1981)).
 See id. at 16-19.
 See id. at 16-17. Article 1920 is the general rule under the Code of Civil Procedure governing the taxation of court costs. It states, in pertinent part, that “[e]xcept as otherwise provided by law, the court may render judgment for costs, or any part thereof, against any party, as it may consider equitable.
 See id.
 See id.
 See id. at 17-19.
 Id. at 17.
 See id. at 18-19.
 Id. at 18.