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Energy & the Law

Category Archives: Lease Disputes

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A Little-Used Doctrine Saves a Lease

Posted in Lease Disputes

Would this scenario keep you up at night? Your lease does not produce from May through August because a leak in a heater-treater makes it impossible or impractical to produce the well. Problems such as access to the site during rainy weather make repairs difficult. You are beyond the primary term. The top- lessee lurks. The Lease “If at the expiration of the primary term… Continue Reading

Freedom to Contract Prevails in New Mexico

Posted in Lease Disputes

Co-author  Alexandra Crawley                                             Is freedom to contract a good thing for everybody?  First Baptist Church of Roswell v. Yates Petroleum Corp. says yes, and confirms that the public policy in New Mexico is freedom to contract. In this case, it was to avoid the Proceeds Payment Act requirement for payment of interest on well proceeds once a legal determination is made that a payee is… Continue Reading

CO2 is Good

Posted in Lease Disputes, Royalty Disputes

… in the right places. Co-author Mark Bohon In French vs. Occidental Permian, Ltd. the Texas Supreme Court held that costs associated with injection of carbon dioxide into a reservoir in a tertiary recovery operation were properly deducted from royalties. This case reflects court’s awareness of improvements in oil recovery created by new technology, in this case CO2… Continue Reading

Are Personal Injury Damages Available in a Nuisance Case?

Posted in Hydraulic Fracturing, Lease Disputes

Co-Author Maryann Zaki As promised, on May 22, today’s post is a study of the personal injury issues raised by the defendants in Parr v. Aruba. You will find a more detailed analysis here. In this post we raise the question and discuss what the parties believe the answer should be. The Havner Hurdle Merrell Dow Pharmaceuticals, Inc. v. Havner established hurdles to a… Continue Reading

A Cost-Free Royalty Clause That Works – Part Two: The Override

Posted in Lease Disputes, Royalty Disputes

Co-author Travis Booher Welcome to part two of the hair-splitting decision in Chesapeake Exploration, L.L.C. v. Hyder. See our prior post about the basic facts. More Facts In addition to their cost-free royalty clause for wells on the leased premises, the Hyders also received an overriding royalty interest on wells drilled from pads located on the leased… Continue Reading

A Cost-Free Royalty Clause That Works – Part One

Posted in Lease Disputes, Royalty Disputes

Co-author Travis Booher Chesapeake Exploration, L.L.C. v. Hyder is another hair-splitting Texas decision about “cost-free royalties”.  The Facts The Hyder family executed a lease covering 1,037 acres. Chesapeake drilled 22 wells on the leased premises. The Hyders believed their lease provided for a “cost free” royalty; that is, no post-production deductions. Chesapeake deducted post-production costs, and the Hyders sued… Continue Reading

Mixed Result in a Louisiana Legacy Pollution Case

Posted in Lease Disputes, Pollution

Co-author Ann Weissmann The Dietz family sued several lessees for injunctive relief and restorative damages arising out of leases on two non-contiguous tracts in Acadia Parish. In Dietz, et al. v. Superior Oil Company, et al  the trial court granted the lessees’ dilatory exceptions of prematurity and improper cumulation and dismissed the plaintiff’s suit without… Continue Reading

A Favored-Nations Clause Gone Awry

Posted in Lease Disputes

Co-author Alexandra Crawley Oh, how a simple Favored-Nations clause in an oil and gas lease can get complicated, with large financial consequences! In BP America Production Company v. Zaffirini, BP paid Solis a $1,300 per acre bonus for a lease covering 30% of the mineral estate and agreed that if paid a more favorable bonus or royalty term with… Continue Reading

Haynesville Shale Fraud Judgment Reversed

Posted in Lease Disputes

Co-author Brooke Sizer Vestiges of the early Haynesville Shale land rush remain. Imagine: The lease is about to expire. Lessee (Mecom) offers lessor (Henderson) $90 per acre for an extension, telling him, “I could extend for two more years without consent so I’m giving you free money.” He explains his intention to drill more Cotton… Continue Reading

Lessee: Beware the Automatic Termination Clause

Posted in Lease Disputes

The fellow on the right is after your lease. The result in Cabot Oil & Gas Corporation v. Healey, LP was so bad for the lessee I’m going directly to … The Takeaways Landmen: First, when offered a lease with automatic termination language, run away like you’re chased by an Obamacare Navigator who hasn’t undergone a background check, especially… Continue Reading

Deduction of Post-Production Costs from Gas Royalties – Another Lesson

Posted in Lease Disputes, Royalty Disputes

Consider this while celebrating the resurrection of Big Tex: When a lease prohibits post-production cost deductions, can a lessee deduct those costs from a lessor’s royalty? Yes, says Potts v. Chesapeake Exploration, L.L.C. In a market value lease, where lessee sells the gas “at the well” and the court applies the netback approach to calculating market value, the lessee is entitled… Continue Reading

Unrecorded Override Assignment Trumps the Public Records Doctrine

Posted in Land Titles, Lease Disputes, Operating Agreements

Lawyers and landmen are taught that a document affecting real or immovable property not recorded in the public records means nothing to a stranger. Like O. J.’s quest for the real killer, lower premiums after the Patient Protection and Affordable Care Act, and the present I would have given my wife except I forgot our… Continue Reading

Old Rules Are Learned Anew in Louisiana Servitude Case

Posted in Land Titles, Lease Disputes

Occasionally in my litigation experience I’m reminded of time-honored rules of law.  Often I’m pleased, sometimes I’m not. So it was, I assume, for the parties in Midnight rilling, LLC v. Triche et al .The Rules In Louisiana law, operations and production of minerals sufficient to interrupt prescription of a mineral servitude for nonuse within a unit can interrupt the running… Continue Reading

When Is the Client Liable for the Acts of the Independent Landman?

Posted in Lease Disputes

Co-author Brooke Sizer PanAmerican Operating Inc. v. Maud Smith Estate highlights the perils of working through independent landmen:  maintaining enough control to be sure the work is done as you like it, but also wanting authority to disavow his actions should you desire.  PanAmerican hired an independent contractor, Wormser, to obtain oil and gas leases from mineral… Continue Reading

Several Lessons for Louisiana Royalty Owners

Posted in Lease Disputes

Ross et al v. Enervest Operating, L.L.C. et al has several teachable moments for Louisiana royalty owners.  “Nice to Meet You” is Not a Demand Under the Louisiana Mineral Code, a lessee is entitled to written notice from the lessor that royalties are due. The court concluded that such a notice must be more than a notification that the… Continue Reading

When Is a Notice-Of-Assignment Clause Not Effective?

Posted in Land Titles, Lease Disputes

A provision in a contract, no matter how unequivocal, does not always trump the law. The oil and gas lease allowed assignments, but no change or division in ownership of  the land or royalties would be binding on the lessee until the acquiring party had furnished lessee with the instruments constituting his chain of title from the original lessor. Jones v. Clem says… Continue Reading

Lessor is Not Entitled to Royalty on Hedging Profits

Posted in Lease Disputes

A Louisiana lessee does not owe its lessor royalties based on hedging profits, said a federal district court in Cimarex Energy Co. v. Chastant. Cimarex, the lessee, hedged its gas contracts and didn’t pay its lessor, Chastant, earnings from the hedge. As the court described it, hedging involves buying and selling financial positions as a strategy… Continue Reading

Judicial Ascertainment Clause Trumps Automatic Termination of a Louisiana Lease

Posted in Lease Disputes

Other than say, $8.00 crude, the recent national election, or a top-five recruiting class by your most-reviled gridiron enemies, few events are as likely to work an operator into a worst-case-scenario frenzy as a lease termination claim. Lessors love ‘em, of course! The question of the day: In a head-to-head contest between a Louisiana statute and language… Continue Reading

Mineral Lessors Introduced to Commercial Paper

Posted in Lease Disputes

 By Jonathan Nowlin The difference between a “draft” and a “check” is explained in Jackson v. Pride Oil & Gas Properties, Inc., a Louisiana case. To the lessor,they might look and feel the same, but in reality they aren’t. “Draft” is a general term for an instrument that directs one person or entity to pay… Continue Reading