The question in Cannisnia Plantation, LLC v. Cecil Blount Farms, LLC was whether a well was drilled in good faith in order to interrupt the running of prescription on a Louisiana mineral servitude.
The Mineral Servitude
If you conduct your business where they don’t have the Mardi Gras, the nutria, or the King of Zydeco, be mindful that in Louisiana there is no “mineral estate” that lives in perpetuity. Instead, there is the mineral servitude. See Mineral Code Article 21: “ … the right of enjoyment of land belonging to another for the purpose of exploring for and producing minerals and reducing them to possession and ownership.” Among the modes of extinction of mineral servitudes is prescription for nonuse for 10 years.
The servitude owner’s predicament
Blount sold the property to Cannisnia on June 28, 1996, and reserved one half of the minerals. He had 10 years to use it or lose it and did not take decisive action for the first nine years to extend the servitude. The well in question was plugged and abandoned on April 21, 2006. In 2014 Cannisnia sued Blount claiming the servitude prescribed because the well was not drilled in good faith in order to interrupt the running of prescription.
What’s required under Article 29?
To meet the test under Mineral Code Art. 29 for whether operations meet the good faith standard to interrupt prescription, the operations must be:
- commenced with a reasonable expectation of discovering and producing minerals in paying quantities at a particular point or depth,
- continued at the site chosen to that point or depth, and
- conducted in such a manner that they constitute a single operation although actual drilling or mining is not conducted at all times.
The court discussed the non-exclusive list of “Indigo Factors” in evaluating the question of good faith sufficient to interrupt prescription:
- geology of the drilling site and surrounding area based on prior wells and seismic data;
- the expertise and experience of the geologists and engineers and oilmen;
- depth overview of the available technology
- depth overview of the available geology;
- timing of the lease and its terms;
- expenses incurred in the operation;
- permit applications;
- types of testing performed;
- analysis of formations encountered during drilling;
- keeping of well logs;
- the time put into drilling;
- depth drilled;
- size of pipe used.
The owner of the dominant estate (Blount, the servitude owner) had the burden of proving that he had made use of the servitude during the period of time required for the accrual of prescription.
The court examined the history of this servitude, leasing and other activity by Blount and Cannisnia, and the substantially conflicting fact and expert testimony at trial. Because, as the court stated, the good faith analysis is “inextricably connected with, although not wholly decisive of, the factual situation presented”, there is no need to dwell on the unique facts in this case to understand its meaning.
After evaluating the testimony and applying the Indigo factors, the appellate court concluded that the trial court did not commit manifest error in finding that Blount has met its burden of proof to establish that the well was drilled in good faith.
What it means
Among other lessons, these come to mind:
- Servitude owner, be vigilant in protecting your rights. The remainderman wants to return those minerals to where they belong – with him and the surface.
- Given the long cycle of price swings, its never too early to do what one can to preserve the servitude.
- Servitude owner, consider the shortcomings in Blount’s efforts to extend the servitude. They were successful but it was close.