In a decision that could have far-reaching implications, the United States Supreme Court issued a June 10 opinion holding that California’s wage-and-hour laws do not apply to workers on oil and gas platforms located in open water on the Outer Continental Shelf. The plaintiffs in Parker Drilling Management Services, Ltd. v. Newton, were offshore rig workers who filed a class action asserting that their employer violated California’s minimum wage and overtime laws by failing to pay them for stand-by time while they were on the drilling platform. Both parties agreed that the platforms were governed by the Outer Continental Shelf Lands Act (“OCSLA”), but they disagreed regarding whether the California’s wage-and-hour laws were incorporated into OCSLA and therefore applicable to workers on the platform.
Continue Reading Supreme Court Holds State Wage and Hour Laws are Inapplicable to Offshore Drilling Platforms
Louisiana Mineral Law
Motion to Remand Granted in One Coastal Zone Management Act Case But Federal Appellate Options Remain Viable
On May 28, 2019, United States District Judge Martin Feldman issued a sixty-four page Order and Reasons which granted motions to remand filed by Plaquemines Parish and the State of Louisiana in The Parish of Plaquemines v. Riverwood Production Co., et al. That case is one of forty-two Coastal Zone Management Act (“CZMA”) cases that were removed to Federal court in May 2018. Those cases generally allege that more than 200 oil and gas companies violated Louisiana’s State and Local Coastal Resources Management Act of 1978 (“SLCRMA”) by either failing to obtain or violating state coastal use permits. The cases were removed to Federal court by Defendants pursuant to 28 U.S.C. § 1442 (the federal officer removal statute) and 28 U.S.C. § 1331 (the federal question statute) on the basis that Plaintiffs’ claims (1) implicate wartime and national emergency activities undertaken at the direction of federal officers, and (2) necessarily require resolution of substantial, disputed questions of federal law. In response, Plaintiffs filed motions to remand. In those motions, Plaintiffs argued that (1) the removal was not timely because Defendants had notice of the grounds alleged in the removal notice more than thirty days before the cases were removed, (2) the Defendants could not satisfy the elements of the jurisdictional test for “federal officer” removal jurisdiction, and (3) Defendants could not satisfy the test for substantial federal question jurisdiction set forth by the United States Supreme Court.
Liskow Obtains Victory for the Oil and Gas Industry in the Louisiana Third Circuit
In a victory for the oil and gas industry, the Third Circuit rendered a decision rejecting attempts by the Louisiana Department of Revenue to impose severance taxes on crude oil production based on index pricing. The Third Circuit reaffirmed that severance taxes should be based on the “gross proceeds” obtained in an arm’s length sale at the lease. The Department had sought additional severance taxes from numerous Louisiana producers that sold crude oil in arm’s length sales at the lease. The contracts provided that the sales price of the crude oil was based on index pricing, less an amount sometimes designated as a “transportation differential” or simply as a deduction. The Department argued that this “differential” or deduction must be “disallowed” when computing severance taxes, effectively imposing severance taxes on the index pricing. The Louisiana Board of Tax Appeals, faced with numerous cases raising this same issue, heard a “test case” involving Avanti Exploration, LLC. The BTA held that the Department’s theories were invalid, and severance tax properly was based on the actual “gross receipts” received by the producer in an arm’s length sale. In a decision issued on April 17, 2019, the Louisiana Third Circuit Court of Appeal affirmed, holding that, pursuant to the Louisiana Constitution, the severance tax statutes, and the Department regulations, in the absence of any “posted field price,” severance taxes must be based on the actual “gross receipts” received by the producer in an arm’s length sale at the lease.Continue Reading Liskow Obtains Victory for the Oil and Gas Industry in the Louisiana Third Circuit
Western District of Louisiana Holds that Unit Operators May Not Recover Post-Production Costs from an Unleased Mineral Owner’s Share of Production Proceeds
On March 21, 2019, the U.S. District Court for the Western District of Louisiana held that a unit operator may not recover post-production costs from an unleased mineral owner’s share of production proceeds in Allen Johnson, et al. v. Chesapeake Louisiana, LP.[1] The dispute in Johnson involved a group of unleased mineral owners (“UMOs”) who filed suit against a unit operator for deducting a litany of post-production costs against their share of production proceeds from an oil and gas unit in the Haynesville Shale.[2]
The UMOs argued that La. R.S. 30:10 governed whether a unit operator may deduct post-production costs against UMO’s share of production proceeds.[3] The argument, however, was one of exclusion. The UMOs argued that La. R.S. 30:10 contains the exclusive list of any costs that could be properly charged against a UMO’s share of production proceeds. Therefore, because post-production costs were not expressly listed in La. R.S. 30:10(A)(3), the UMOs argued that such expenses were not recoverable from a UMO’s share of production.[4] In opposition, the unit operator contended that La. R.S. 30:10 was inapplicable to the case because the costs outlined in the statute comprised only pre-production and production costs. The operator argued the statute was never intended to address post-production costs.[5] As a result, the unit operator claimed that the statute did not forbid deductions for post-production costs against a UMO, but instead those costs were properly authorized under the general principles of unjust enrichment and co-ownership.[6]Continue Reading Western District of Louisiana Holds that Unit Operators May Not Recover Post-Production Costs from an Unleased Mineral Owner’s Share of Production Proceeds
Haynesville shale gas production is increasing again; Will Haynesville-related litigation increase again, too?
In August 2018, dry natural gas production from the Haynesville shale averaged 6.774 billion cubic feet per day, which is the highest daily Haynesville production average since September 2012 when production averaged 6.962 billion cubic feet per day. August 2018 was not an anomaly. Instead, this year, the Haynesville has seen steady increases in production since January when production averaged 5.293 billion cubic feet per day. Although the recent Haynesville production increases are a positive sign for the Louisiana energy industry, the August 2018 daily production average is still below the previous Haynesville peak production average, which was 7.403 billion cubic feet per day in January 2012. However, if the current trend continues, the Haynesville could approach its prior peak production average in early 2019.
Continue Reading Haynesville shale gas production is increasing again; Will Haynesville-related litigation increase again, too?
Louisiana’s Third Circuit (Again) Affirms the Applicability of the Subsequent Purchaser Doctrine to Mineral Leases
While oil and gas company-defendants—and several courts alike—have deemed the applicability of the subsequent purchaser doctrine to mineral leases a settled issue of law, plaintiff-landowners have continued to argue otherwise. In a unanimous opinion issued July 18, 2018 in Grace Ranch, LLC v. BP America Production Company, et al., the Third Circuit not only provides yet another example of the uniform application of the doctrine in cases involving mineral rights under Louisiana law, but expressly and thoroughly rejects the numerous arguments on which plaintiffs-landowners have continued to rely.
Continue Reading Louisiana’s Third Circuit (Again) Affirms the Applicability of the Subsequent Purchaser Doctrine to Mineral Leases
The Coastal Zone Management Act Litigation Removed to Federal Court (Again)
On or about May 23, 2018, several Defendants in the Coastal Zone Management Act (“CZMA”) Litigation filed Notices of Removal in 42 lawsuits filed against 212 oil and gas companies by six different parishes (Plaquemines, Jefferson, Cameron, Vermilion, St. Bernard, and St. John the Baptist), removing the cases to federal court. The timing of the removal was based on Plaintiffs’ expert report, which was produced on April 30, 2018. In their Notices of Removal, Defendants allege that Plaintiffs’ expert report purportedly identifies state “permitting violations,” which revealed for the first time in the CZMA Litigation that Plaintiffs’ claims primarily attack activities undertaken before the state permitting law at issue was effective and that were instead subject to extensive and exclusive federal direction, control, and regulation.
Continue Reading The Coastal Zone Management Act Litigation Removed to Federal Court (Again)
Louisiana Supreme Court’s reversal of Gloria’s Ranch clarifies calculation of damages for unpaid mineral royalties, provides relief for holders of security interests in mineral rights
The Louisiana Supreme Court’s reversal of Gloria’s Ranch, L.L.C. v. Tauren Exploration, Inc., hands a victory to financiers of oil and gas operations and settles a long-running controversy over the amount of damages available for failure to pay mineral royalties.
The Gloria’s Ranch trial court held two mineral lessees and a mortgagee (Wells Fargo) solidarily liable for more than $20 million in damages resulting from failure to release a mineral lease in North Louisiana. The Second Circuit affirmed the finding of solidarity on the basis that Wells Fargo became an owner of the mineral lease because it “controlled the bundle of rights that make up ownership, i.e., the rights to use, enjoy, and dispose of the lease.” However, a vigorous dissent warned that the majority’s “control theory” to impose solidarity between a mortgagee and a mineral lessee could have “[d]evastating economic repercussions” for the lending industry, and “[s]erious and harmful impact on the oil and gas industry.”Continue Reading Louisiana Supreme Court’s reversal of Gloria’s Ranch clarifies calculation of damages for unpaid mineral royalties, provides relief for holders of security interests in mineral rights
Louisiana Third Circuit Issues Decision on the Procedure for Settlements in Cases Governed by Act 312
In a decision issued today, the Louisiana Third Circuit Court of Appeal issued the first appellate court opinion addressing the procedure for approval of settlements in cases governed by Act 312 (La. R.S. 30:29). Britt v. Riceland Petroleum Corp., is a “legacy” lawsuit in which landowners sued Riceland Petroleum Company and BP America Production Company—the current and former operators on a certain tract of plaintiffs’ property. Riceland and BP ultimately chose to settle all of the claims that Plaintiffs brought against them, and as part of the settlement they agreed to remediate the landowners’ property to the necessary state standards. The settling parties then complied with the express mandates of Act 312 as they: (1) provided notice of the settlement to the Department of Natural Resources (“LDNR”) and Attorney General (“AG”); (2) allowed the LDNR at least thirty days to review the settlement and provide any comments to the trial court; and, (3) sought and obtained the trial court’s approval of the settlement.
Continue Reading Louisiana Third Circuit Issues Decision on the Procedure for Settlements in Cases Governed by Act 312
Louisiana Supreme Court Upholds Expropriation of Commercial Venture
In a decision announced this week, the Louisiana Supreme Court ruled on the constitutionality and method of compensation for the expropriation by a governmental body of property owned by an ongoing commercial venture. In St. Bernard Port, Harbor & Terminal District v. Violet Dock Port, Inc., LLC, the St. Bernard Port, Harbor & Terminal District (the “Port”), a government-owned public cargo facility, sought to expand its operations along the Mississippi River. The Port unsuccessfully negotiated the purchase of 75 acres of property owned by Violet Dock Port, Inc., LLC (the “Landowner”) which utilized the property to layberth and service oceangoing ships for the United States Navy. The Port subsequently expropriated the property under the quick-take expropriation provisions of LA. R.S. 19:141, et seq., for a purported compensation of $16 million.
Continue Reading Louisiana Supreme Court Upholds Expropriation of Commercial Venture