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Energy & the Law

Category Archives: operations

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Oil Industry Custom and the Model Form JOA: A Debate

Posted in Contract Disputes, Operating Agreements, operations

We begin with an existential question: “The philosophy behind all of the model form agreements is that aggressive drilling under the JOA should be promoted and rewarded. Agree or disagree? That was an issue in Talisman Energy v. Matrix Petroleum.  It was not resolved, but the decision is worth your attention because the court enjoined… Continue Reading

Operator – Don’t Get Burned by Paying an Insolvent Contractor

Posted in Land Titles, operations, Title Issues

MEMORANDUM From: Legal Department To: Accounts Payable Re: What we learned from Shell Western E&P, Inc. v. Pel-State Bulk Plant, LLC ________________________________________________________________________ Just received notice of a Texas subcontractor’s mineral lien? DO NOT continue to pay the contractor. He hasn’t paid the subcontractor. Think you owe nothing on the well on which the lien will… Continue Reading

Control-of-Well Insurance: The Words of the Policy Control

Posted in Litigation, operations

Gemini Insurance Company at al v.  Drilling Risk Management Inc construed control-of-well and redrill/extra-expense provisions in an insurance contract. The question and the rule The question was whether an insurance policy covered post-blowout expenses (see facts below), and whether each blowout constituted a separate “occurrence”? If so, there would be two deductibles. The rule is… Continue Reading

Texas Comptroller Prevails in Tax Exemption Claim

Posted in operations, Taxation

A fight over the Texas sales tax drew industry-wide attention when the trial judge commented from the bench that he was inclined to exempt purchases of casing, tubing, pumps and related services from Texas state sales tax. His actual ruling denied the relief sought by the taxpayer. In Southwest Royalties v. Hegar, the Texas Supreme Court agreed…. Continue Reading

Your MSA is in Place – Now What?

Posted in Contract Disputes, operations

Are you an operator who hires contractors on location, … a contractor who hires subcontractors, … the party to be indemnified for injuries to the other party’s employees? This post is for you. Salas v. Allen Keller Company One, LLC, is not about master service agreements, but it is instructive. Want to avoid responsibility for… Continue Reading

Hydrocarbon Exposure Dismissal Affirmed

Posted in operations, Pollution

You might recall previous entries discussing Parr v. Aruba (here is one) – a suit for personal injuries from oilfield pollution (and a $2.9MM verdict for the plaintiffs). Not all similar suits have the same result. You could liken Cerny v. Marathon Oil and Plains Exploration & Production to a game of legal dodgeball.  The “ball… Continue Reading

You Own the Oil. Do You Own the Rock?

Posted in Land Titles, operations

Riddle: What’s the difference between a hydrocarbon molecule and the underground structure which the molecule inhabits? Answer: In Texas, you can own one and not the other, according to Lightning Oil Co. v. Anadarko E&P Onshore LLC. Dueling Estates This was a subsurface trespass case between lessees on two adjacent mineral estates. The Cutlass lease, owned by Lightning, is a severed… Continue Reading

Listen to the Words In the Injunction Battle

Posted in Litigation, operations

If it’s an injunction you want, some words are your friend and others aren’t. For example: “Imminent” = friend “Might” = not friend “Likely” = friend “Could” = not friend “Irreparable” = friend “Money damages” = not friend In Lightning Oil Company v. Anadarko E&P Offshore, LLC, the surface and 1/6 of the minerals of the… Continue Reading

Avoid the Oral Agreement

Posted in operations

Cresson SWD Services, L.P. vs. Basic Energy Services, L.P. is a warning about the perils of an oral agreement for a risky downhole procedure. Cresson hired Basic to make improvements on a saltwater disposal well by deepening the injection zone, inserting a liner, and cleaning out the hole to 8,600 feet. The Claims Cresson’s claim: Basic did not complete the well to 8,600 feet as… Continue Reading