Texas Crude v. Burlington Resources Oil and Gas considers the relationship between the operator and non-operators under Articles V and VI of the 1982 Model Form Joint Operating Agreement.
Burlington owed 87.5.% of a prospect and was the operator. Texas Crude owned 12.5. Warwick acquired a 10% working interest from Texas Crude. That interest was
In Steelhead Midstream Partners, LLC v. CL III Funding Holding Company, LLC, the Texas Supreme Court authorized a pipeline owner’s breach-of-contract claim—alleging a co-owner used foreclosure to avoid cost-sharing obligations under a joint operating agreement. The claim was not an impermissible collateral attack against a judgment allowing a foreclosure because the
The message in RSM Production Corporation v. Gaz du Cameroun SA: According to the federal Fifth Circuit, an arbitration tribunal’s construction of a contract and the arbitration rules governing the dispute “hold, however good, bad, or ugly.” Translation: Good for one party, bad or ugly for the other, just like the courthouse.
RSM was
Can the Texas lessee perpetuate his oil and gas lease by “constructive participation” in wells drilled by another? Under the facts in Cromwell v. Anadarko E&P Onshore, LLC, the answer is no.
Cromwell and Anadarko’s wells
In 2009 Cromwell obtained the Ferrer and Tantalo leases covering small fractional interests in several sections. Anadarko owned working
One of the questions raised in 1776 Energy Partners, LLC v. Marathon Oil EF, LLC was whether Marathon as operator could apply revenues owed to non-operator 1776 under one joint operating agreement to satisfy unpaid debts owed on another. Unfortunately, we don’t have an answer. (FWIW, this is the same “1776”
In TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico LLC. the Supreme Court of Texas resolved the chaos created by conflicting dispute resolution regimes in three contracts for ownership and operation of an offshore unit and gathering system. The essential question: Did the parties agree that an arbitrator, rather than the courts
Non-operators under the 1989 Model Form JOA have been hoping to drive a stake through the dark heart of Reeder v. Wood County Energy, LLC. Bachtell Enterprises, LLC v. Ankor E&P Holdings Corp might be a start. The question was whether the Article V.A. exculpatory clause exonerated the operator who intentionally
Co-author Justin CowanDoes a former working-interest owner of a well bear continuing responsibility for a defective gas line despite having conveyed its ownership interest? The line was constructed by the former owner as operator of record, and it received a fee as operator. (One could assume there was a RRC Form P-4 on file
Co-author Rusty TuckerWhat is the standard of care imposed by the Model Form JOA on the well operator? Crimson Exploration Op., Inc. v. BPX Op. Co. gives us the answer, and it is no surprise.
Background
Under a Model Form JOA, BPX as operator and Crimson and other non-operators drilled the McCarn A1H well. After a problem that prevented further drilling the parties agreed to plug and abandon the well.
BPX billed Crimson for its proportionate share of drilling expenses; Crimson refused to pay. In BPX’s suit to recover Crimson’s share of costs, Crimson asserted the affirmative defense of prior material breach by BPX’s failure to act as a prudent operator in drilling the well. Crimson argued the standard of care was a “reasonably prudent operator” while BPX relied on the exculpatory clause in Art. V.A of the JOA that excused liability unless BPX acted with gross negligence or willful misconduct.
Continue Reading Well Operator Protected by the Model Form JOA
Co-author Rusty TuckerThe threat: You, the operator, are operating unprofitable wells where monthly costs exceed or barely equal revenues, making money on the fixed COPAS overhead charges. Your non-operators are going into the economic hole and they don’t like it.
Yesterday we presented options for the non–operator to stop the financial bleeding. Today we anticipate responses available to the operator.
Yesterday’s caveats still apply.
Continue Reading My Operator is Making Money … Part 2, The Operator’s Response