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Devon Energy Production Company, L.P. v. Sheppard is a royalty dispute between several lessees, Devon Energy Production Co., L.P., et. al., and several lessors, Michael A. Sheppard, et. al., concerning a novel royalty term that may have a huge impact on the way oil and gas royalties are paid in the future.  See 13-19-00036-CV, 2020 WL 6164467, at *12 (Tex. App.—Corpus Christi Oct. 22, 2020, pet. filed).  The novel term, referred to as an “add-back” or “add-to-proceeds” provision, requires any deductions to the sale of production to be added back to the proceeds in order to determine the appropriate royalty base.  The lessors argue that under this term, the deductions in the lessees’ sales contracts attributable to the buyers’ post-transfer costs must be added to the gross proceeds in order to establish a royalty base above the gross proceeds.  The lessees disagree, countering that the clear intent of the provision is merely to prohibit the deduction of their own post-production costs, not the post-transfer costs of the buyers.  The lessors won in the trial court; the court of appeals affirmed.  Now the case is before the Texas Supreme Court, with a recently submitted amicus brief containing the argument that could turn the tides back in the lessees’ favor. …
Continue Reading New Developments in Shocking Case Before the Texas Supreme Court Regarding Construction of Novel Oil & Gas Royalty Term

The United States Fifth Circuit Court of Appeal vacated the entire DOL Fiduciary rule in a split decision on March 15, 2018, U.S. Chamber of Commerce v. DOL, No. 17-10238 (5th Cir. 3/15/2018).  Two other circuits have upheld the DOL rule (the Tenth and the District of Columbia Circuits).  This ruling will not become immediately applicable as it is subject to rehearing and appeal to the Supreme Court.  Accordingly, advisers should continue to follow applicable DOL fiduciary rule policies and procedures.  It may be several months before whether we know the impact of this decision.
Continue Reading Fifth Circuit Throws Out DOL Fiduciary Rule

On September 2, 2016, the Texas Supreme Court agreed to review three oil and gas cases involving issues pertinent to the industry and land and mineral owners.

  1. BP America Production Company v. Red Deer Resources, LLC

In BP America Production Company v. Red Deer Resources, LLC, the lessee of a top lease, Red Deer, sued the lessee of the base lease, BP, contending that the prior lease had terminated due to a cessation of production in paying quantities.  …
Continue Reading Texas Supreme Court Agrees to Review Three Oil and Gas Cases in 2016

The dispute between Governor John Bel Edwards and Attorney General Jeff Landry over the retention of several private attorneys to represent the State of Louisiana, through the Department of Natural Resources (“LDNR”) in coastal loss litigation has taken a new twist.  These lawsuits were filed by several parish governments alleging dozens of oil and gas companies caused marsh loss by operations that violated state-issued coastal use permits and related permitting requirements. …
Continue Reading Attorney General Finds Governor’s Contract for Legal Services Not Approvable, Unacceptable, Illegal, and Unconstitutional

In recent years, offshore companies have witnessed a marked uptick in the number of enforcement actions undertaken by the Bureau of Safety and Environmental Enforcement (BSEE).[1]  Operators face more BSEE inspections, Incidents of Non-Compliance (INCs), and civil penalties than ever before.  Meanwhile, the average penalty amount has grown.  For example, in 2014 the agency imposed a civil penalty of $1,230,000—an unprecedented figure in the history of the BSEE civil penalty program. BSEE has also begun to target offshore contractors, who, until recently, have not faced exposure to agency enforcement actions.  See Island Operating Co., Inc., 186 IBLA 199 (2015).  Together, these developments will undoubtedly lead to more litigation and a higher cost of doing business on the Outer Continental Shelf.

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Continue Reading Offshore Companies Face Surge in BSEE Enforcement Actions and Penalties

The first of 40 coastal permitting lawsuits to proceed to disposition has been dismissed for failure to exhaust administrative remedies.

In a ruling released today, Judge Enright of the 24th JDC for Jefferson Parish dismissed The Parish of Jefferson v. Atlantic Richfield Company, finding that the statutory scheme at issue provided administrative channels to investigate and resolve alleged permit violations, and thus those remedies must be exhausted before the plaintiffs could pursue civil damages through the courts.
Continue Reading First Parish Coastal Zone Lawsuit to Proceed to Decision Falls for Failure to Exhaust Administrative Remedies

By Michael A. Mahone, Jr.

The Louisiana Mineral and Energy Board is currently reviewing an incentive proposal that would offer a “royalty relief incentive” on new drilling leases along the Louisiana coast. Specifically, the proposal would offer royalties for a period of three years for wells drilled to a depth of fifteen thousand feet along…

By Kelly Becker

Federal Judge Ginger Berrigan issued a comprehensive Order and Reasons addressing and granting a series of motions to dismiss filed by oil and gas company defendants, and individual executive officer defendants, all of which were pending in the consolidated federal court Bonvillain Terrebonne Parish ad valorem tax suits. The Court gave Assessor…

By Elisabeth Lorio Baer

Kivalina, Alaska, an Inupiat Eskimo village of 400 inhabitants perched on a barrier island north of the Arctic Circle, is bringing suit against two dozen fuel and utility companies, including ExxonMobil and Shell Oil, accusing them of helping to cause the climate change that it alleges is accelerating the island’s erosion.

By Michael A. Mahone, Jr.

In U.S. Commodity Futures Trading Commission v. Dizona, the United States Court of Appeals for the Fifth Circuit recently considered allegations by the United States Commodity Futures Trading Commission that a natural gas trader had attempted to manipulate the price of natural gas by knowingly delivering false and inaccurate price…