Co-authors Preston Kamin and Ryan FrankelSchools are closing, major events have been cancelled, businesses are telling workers to stay home, and Texas oil and gas producers are preparing to see how the coronavirus will affect their operations.
Many oil and gas contracts – leases and JOAs for example – have force majeure clauses. The
In Chalker Energy Partners III LLC v. LeNorman Operating LLC, the Texas Supreme Court reaffirmed its belief in the sanctity of the written contract and the freedom of parties to negotiate and agree to contracts as they desire.
Chalker and other sellers wanted to sell leases in several Panhandle counties. LeNorman signed a Confidentiality
Co-author Trenton PattersonCopano Energy, LLC v. Stanley Bujnoch, Life Estate, et al. asked whether an enforceable easement had been established by email. The trial court and court of appeal said yes (here is our report), holding in favor of landowner the Bujnochs. The Texas Supreme Court reversed.
How to almost
It is no surprise to Texas Supreme Court watchers that in Energy Transfer Partners et al v. Enterprise Products Partners LP et al. the court rejected claims that the parties had created a partnership by actions that varied from the terms of written contracts. The court concluded that parties can conclusively agree that no
Co-author Ethan WoodMerry Christmas and Happy Holidays from all of us at Gray Reed! Assuming that most of you have been good this year (stay tuned for 2019’s Bad Guys in Energy to see who hasn’t), we hope Santa brought you everything on your Amazon Wish List. Our sympathies go out to those in the oilfield services industry in Texas—it looks like you got a lump of coal. In Mesa Southern CWS Acquisition v. Deep Energy Exploration Partners the Houston Court of Appeals upended the long-held view that mineral lien waivers violate public policy. Bah Humbug!
Continue Reading
In Texan Land & Cattle II, Ltd. v. ExxonMobil Pipeline Company a Texas court of appeals ruled that “oil or gas” is not limited to “crude petroleum,” but includes refined petroleum products gasoline and diesel.
The easement
Texas Land’s property in Harris County is burdened by an easement obtained by ExxonMobil from Humble Oil Company in 1919 that granted the right to lay, maintain, operate, and remove a pipeline for the “transportation of oil or gas” across Texas Land’s property. The easement does not define oil or gas.
The arguments
The sole issue was the definition of oil and gas as used in the easement. Texas Land contended that “oil and gas” granted the right to transport only “crude oil” or “crude petroleum,” but not refined products. ExxonMobil argued that “oil and gas,” as used in the early 20th century, included refined products such as gasoline and diesel.
Continue Reading
Under Louisiana law, does the operator’s bad faith preclude recovery for the non-operator’s breach of a joint operating agreement if the operator caused the non-operator to breach the JOA but did not itself breach?
Apache’s choice
In Apache Deepwater, LLC v. W&T Offshore, Inc., the litigants were parties to a JOA for operations on offshore deepwater wells. Apache proposed to use two drilling rigs or P&A three wells at a much higher cost than a vessel that had been considered for the operation. W&T contended that Apache’s proposal was for the purpose of offloading to W&T half of $1 million per day stacking costs of a bad rig contract. Apache’s AFE for the P&A using the two rigs was $81 to $104 million, which would be cheaper for them (but not in total) than the alternative. Apache’s story was that the federal regulators would not have approved the original vessel for the operation after Deepwater Horizon.
W&T declined to approve Apache’s AFE. Apache used the two rigs anyway. The work was successful and Apache billed W&T for its 49% share, or $68 million (Note to self: You can’t afford offshore operations). W&T paid $24 million, its share of the original estimate. Apache sued for breach of contract.
The ambiguous JOA
Section 6.2 of the JOA prohibited the operator from conducting any operation costing more than $200,000 without an AFE approved by the non-operator. But Section 18.4 directed the operator to conduct abandonments required by governmental authority and the risks and costs would be shared by the participating parties. No AFE was required.
Continue Reading
Co-authors Lydia Webb and Rusty TuckerUntil Monarch Midstream v. Badlands Energy, midstream companies facing rejection of their contracts in a producer’s bankruptcy were left with Abraham Lincoln’s least favorite negotiating option: If the both law and the facts are against you, pound on the table. Under Sabine (which we covered here, here, and here) gathering agreements are not covenants running with the land and can be rejected in the producer’s bankruptcy. Sabine was the only law on the books, but now a Colorado bankruptcy court has determined that a gathering agreement was a covenant running with the land.
Continue Reading
In Barrow-Shaver Resources Company v. Carrizo Oil & Gas, Inc the Supreme Court of Texas has held again, here in a consent-to-assign dispute, that a contract means what the words say, even if in negotiations a landman said something he didn’t mean, … or changed his mind later, and even if “industry custom” is to the contrary.
Continue Reading
Co-author Alexis FosterThanks to the power of the trucking lobby, the prevailing policy on the question of who wins and who loses if a carrier of goods goes unpaid favors the carrier over the broker, shipper, consignor and consignee. The rationale is that allowing shippers the benefit of carriage of goods without compensating the carrier would eventually cripple the shipping industry and the economy. Thus, the carrier will be paid, irrespective of the carrier’s failure to collect from the shipper or consignee or payment by one of the other parties to another.
The Bill of Lading
Continue Reading