In Litel Explorations, LLC v. Aegis Development Co., LLC, 21-0741 (La. App. 3 Cir. 4/6/22), –So. 3d–, the Louisiana Third Circuit denied the LDNR’s claims for recovery of over 6.3 million dollars in emergency costs from prior operators of an orphaned well. The Court held that, when the LDNR spends monies from the Oilfield
For nearly three years, unit operators in Louisiana have waited to see whether the Western District of Louisiana would change course or double down on its March 2019 decision in Johnson v. Chesapeake. In the original Johnson decision, the district court sent shockwaves across the oil and gas industry in Louisiana by finding that post-production costs were not properly deductible against proceeds owed to unleased mineral owners. In the wake of that decision, at least two putative class actions were filed against the largest producers in the Haynesville Shale, and operators have been flooded with demands and suits from unleased owners who relied on Johnson to contest the validity of post-production cost decisions from unleased interests.
Continue Reading Long-Awaited Victory on the Proper Deductibility of Post-Production Costs from Unleased Mineral Owners – The Western District of Louisiana Reverses Course in Johnson v. Chesapeake and Self v. BPX
Louisiana Revised Statutes 30:103.1 et seq. have been heavily litigated in recent years, but there are only a handful of reported decisions interpreting these statutes. Many of these decisions involve whether a party complied with the strict notice requirements contained in the statutes. B.A. Kelly Land Company, L.L.C. v. Aethon Energy Operating, L.L.C., 25
In recent years, there has been an increase in litigation relating to the unleased owner reporting requirements contained in La. R.S. 30:103.1 and the penalty imposed in La. R.S. 30:103.2. There are few cases interpreting these statutes. However, the existing authority recognizes that even if an operator fails to comply with such reporting requirements, an unleased owner must provide sufficient notice under La. R.S. 30:103.1 and 103.2 before the statutory penalty may be imposed. The recent non-final interlocutory ruling in Limekiln Development, Inc. v. XTO Energy, Inc.,[1] provides yet another data point in an otherwise barren area of Louisiana law about the notices required under this statutory scheme in order to properly place operators on notice and to potentially impose the penalty of La. R.S. 30:103.2.
Continue Reading United States Western District of Louisiana Issues Opinion on Notice Required Under La. R.S. 30:103.1 and 103.2 to State a Plausible Claim for Relief
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]
In Gloria’s Ranch, L.L.C. v. Tauren Exploration, Inc., the Louisiana Second Circuit upheld a trial court’s ruling that the holder of a security interest in mineral leases was solidarily liable for damages under the Louisiana Mineral Code stemming from its mineral lessees/mortgagors’ actions.[1] In the case, a landowner sued its mineral lessees for: (1) failure to provide a recordable act evidencing the expiration of a mineral lease under Mineral Code articles 206-209 and (2) failure to pay royalties under Mineral Code articles 137-140.[2]
Continue Reading Louisiana Second Circuit Finds Holder of Mortgage Encumbering a Mineral Lease Solidarily Liable with Mineral Lessees for Damages Under the Louisiana Mineral Code
On June 2, 2017 the Louisiana Second Circuit Court of Appeal affirmed a trial court’s judgment cancelling a mineral lease under Mineral Code article 140 and provided further clarity on a production in paying quantities analysis under Louisiana Mineral Code article 124.[1] The dispute in Gloria’s Ranch, L.L.C. v. Tauren Exploration, Inc., arose from a 2004 mineral lease covering nearly 1,400 acres in Sections 9, 10, 15, 16, and 21, Township 15 North, Range 15 West, in Caddo Parish.[2] The lease was granted by Gloria’s Ranch, L.L.C. (“Gloria’s Ranch”) to Tauren Exploration, Inc. (“Tauren”) and contained a three year primary term as well as a horizontal and vertical Pugh clause.[3] Tauren subsequently assigned a 49% interest in the lease to Cubic Energy, Inc. (“Cubic”).[4]
Continue Reading Louisiana Second Circuit Provides Clarity on Production in Paying Quantities and Affirms Lease Cancellation Under Mineral Code Article 140 for Failure to Pay Royalties
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.[1] 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[2] 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.[3]
Continue Reading Louisiana Second Circuit Addresses: (1) Creation of Mineral Servitudes Via Notarial Acts of Correction; (2) Obstacles Suspending the Prescription of Nonuse from Running Against Mineral Servitudes; and (3) Payment of Court Costs in Concursus Actions
On March 24, 2017, the Louisiana Supreme Court declined to consider the Louisiana Third Circuit Court of Appeal’s decision in XXI Oil & Gas v. Hilcorp.[1] The Third Circuit’s decision involved the interpretation of Louisiana’s well cost reporting regime under La. R.S. 30:103.1-103.2 (collectively referred to herein as “the Statutes”) with respect to: (1) the parties entitled to receive reporting under La. R.S. 30:103.1 and (2) the scope of penalties under La. R.S. 30:103.2 that may be imposed against a unit operator, who fails to provide sufficient well cost reports.[2] For now at least, the Court’s decision to deny writs in XXI Oil & Gas effectively leaves unit operators subject to increased reporting obligations under La. R.S. 30:103.1 and more expansive penalties under La. R.S. 30:103.2 in situations where they fail to provide adequate reporting.[3]
Continue Reading Louisiana Supreme Court Denies Writ Application in XXI Oil & Gas v. Hilcorp
In Gladney v. Anglo-Dutch Energy, L.L.C., the Third Circuit addressed the question of whether or not a mineral lessee must pay its lessor full lease-basis royalties for production undertaken during the effective period of a conditional allowable but prior to the effective date of a unit order.[1] In the case, the Plaintiffs granted a mineral lease to the Defendant-Lessee that provided for a 1/5 royalty in 2009.
Continue Reading Louisiana Third Circuit Addresses Payment of Royalties in Situations Involving Production Under a Mineral Lease Pursuant to a Conditional Allowable Prior to Unitization