operations

Subscribe to operations

Quick answer: It depends on what the lease says.  Last week featured a tug-of-war between a producer and the community in which it operates; this week in HJSA No. 3 LP v. Sundown Energy LP  it’s the producer and the lessor.

HJSA owns the mineral estate under 30,540 acres in Ward County, Texas. Sundown is the lessee. After six years the lease could be maintained only as to individual tracts from which there was production in paying quantities and as to other tracts only if Sundown was engaged in a “continuous drilling program”.

Dueling lease provisions (emphasis mine)

Paragraph 7B says:

The first such continuous development well shall be spudded in on or before the sixth anniversary of the Effective Date, with no more than 120 days to elapse between completion or abandonment of operations on one well and the commencement of drilling operations on the next ensuing well.

Paragraph 18 is a 90-day temporary cessation clause that defines drilling operations as:

“ … actual operations … (spud-in with equipment capable of drilling to Lessee’s objective depth); reworking operations, including fracturing and acidizing; and reconditioning, … “.…
Continue Reading

In Town of Flower Mound v. Eagle Ridge Operating LLC, an operator’s injunction against enforcement of a local ordinance was dissolved. EagleRidge operates gas wells in the Flower Mound. A Town ordinance prohibits work on gas wells (other than drilling) at times other than between 7 a.m. and 7 a.m. Monday through Friday and certain times on Saturday.

EagleRidge tried to avoid enforcement of the ordinance by: …
Continue Reading

Co-author Lydia Webb

Nabors Offshore Corp. v. Whistler Energy II LLC  is the rare bankruptcy case where the outcome was consistent with the realities of operating in the oil patch rather than the artificial constraints of the Bankruptcy Code. The Fifth Circuit balanced the debtor’s interest in minimizing the costs of administering its estate with a counterparty’s economic interest in its property sitting idle in the debtor’s possession. The counterparty was not made to eat the costs for the time its equipment sat unused after rejection of their contract.  …
Continue Reading

Co-authors Ethan Wood and Chance Decker

Less than a year ago, we discussed the “Unanswered Questions” left in the wake of Devon Energy Prod. Co., LP v. Apache Corp. (which did answer the question, “Who is a ‘Payor’ Under the Texas Natural Resources Code?”). We asked:

“But if the non-participating working interest owner is not paying royalties—what is keeping the lease alive? Absent pooling of the leases or a JOA, the non-participating working interest owner cannot rely on the operator’s actions to perpetuate its leases. A sly operator can obtain top leases from the non-participating working interest lessors and run out the clock on those leases …”

In Cimarex Energy Co. v. Anadarko Petroleum Corp., the operator did just that … …
Continue Reading

Co-author Chance Decker

It’s a tale as old as the oilfield: A non-operator doesn’t pay joint interest billings, operator sues, non-payer claims the expenses were unwarranted and the operator was negligent—no, grossly negligent—for incurring them in the first place. Welcome to OBO, Inc. v. Apache Corporation et al. Despite a creative argument by non-operator OBO that contract operator Apache didn’t have authority to charge JIB’s in the first place, OBO must pay.

The facts…
Continue Reading

No, at least not in Dimmit County, Texas, under the facts of In Re: Wood Group PSN, Inc. et al. Twenty-nine contractors and producers were sued by Dimmitt County for damaging a 6.9 mile long non-asphalt county road by their trucks, heavy equipment and other oilfield traffic. Twenty-two moved to dismiss the case. The trial court, in its sound discretion while no-doubt mindful of who votes and where his paycheck comes from, denied the motions. The appellate court reversed. …
Continue Reading

Co-author Niloufar  “Nikki” Hafizi

The 2012 Macondo Well blowout and Deepwater Horizon rig explosion gave rise to a slew of lawsuits. Our subject today is one of them. In Houston Casualty Company v. Anadarko Petroleum Corp. the Beaumont court of appeals construed an insurance policy’s excess liability coverage provision. At stake was whether Underwriters had to indemnify Anadarko for over $100 million in defense costs. In an opinion much-decried by energy companies, the court thought not.

The Texas Supreme Court will review the decision, so let’s look at what the court of appeals said. …
Continue Reading

Co-author Paul Yale

Issues surrounding the legality of allocation wells in Texas have been percolating for some time, and lately we’ve heard of potential litigation. So, what’s the fuss about? The results in Klotzman (a Texas Railroad Commission dispute) and Spartan et al v. EOG (a district court case) didn’t resolve the legal questions. Both settled before a ruling. Browning Oil Company v. Luecke provided theoretical underpinnings but didn’t go far enough.

Why does the controversy exist?…
Continue Reading

Welcome to the binary edition, where you have a choice: An informative and engaging stroll through the history of the oil and gas business in Texas, or a wonkish and also informative legal analysis.

First, at the recent summer meeting of the Texas Independent Producers and Royalty Owners, TIPRO (and Drilling Info) president Allen Gilmer …