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Co-author Rusty Tucker

What 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

What could possibly go wrong when drill pipe and a delivery ticket are sent to a well location? Well …

The facts

In Knight Oil Tools v. Rippy Oil Company, Knight rented drill pipe to Rippy for an Eagle Ford well.  A delivery ticket represented that the pipe complied with API premium class standards. The pipe, marked with two white bands, was supposed to meet standards for API premium class pipe. Some of the pipe did not comply with the standards.

(The physical condition of used drill pipe is indicated by an industry-recognized system of colored bands, with each color representing a certain physical condition.)

The pipe broke in the hole because of what the parties agreed was fatigue. Rippy abandoned the well and an offset well was unsuccessful. Rippy sued Knight to recover damages for the lost well and Knight counterclaimed for unpaid invoices.

Partial summary judgment for the customer
Continue Reading Defective Drill Pipe+Delivery Ticket=Lawsuit

Co-author Brittany Blakey

After a trial court order, two appellate opinions, a dissent, and another appellate opinion, the tension between a well operator and an adjacent mineral owner over whether hydraulic fracturing can constitute a subsurface trespass in Pennsylvania has, for the most part, been resolved. In Briggs v. Southwestern Production Company, several points of Pennsylvania law have been confirmed:

  • Well operators may use hydraulic fracturing to drain oil and gas from under another’s property, at least in the absence of physical invasion.
  • The rule of capture does not preclude trespass liability if the operation creates a physical invasion.
  • The mineral owner’s complaint must specifically allege that the operator engaged in horizontal drilling that extended onto their property or that the operator propelled frack fluids and proppants across the property line.

Continue Reading Pennsylvania Rule of Capture Still Bars Subsurface Trespass Claim

Co-author Rusty Tucker

The 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

Co-author Rusty Tucker

With the plunge in commodity prices many formerly profitable wells are now in the red, and we don’t know for how long. This is causing non-operators to question the bona fides of the operations … and of the operator, and to search for a way out of their obligations.

The challenge: The operator is operating unprofitable wells where monthly costs exceed or barely equal revenues, making money on fixed COPAS overhead charges, and non-operators are going into the economic hole.  What can the non–operator do to stop the financial bleeding?
Continue Reading My Operator is Making Money on the Well and I’m Not. What Can I Do? Part 1.

A fellow walks into a bar in New Orleans. “What’ll it be?” “A Corona and two Hurricanes,” says he. “Here you go. That’ll be $20.20.”

Co-author Rusty Tucker

Now, on to operations in hurricane-free New Mexico. Lessons from BEPCO, L.P. v. RMTDC Operations, LLC d/b/a Total Energy Services:

  • Hire a good company man and trust him
  • Get a good expert for trial
  • Prep your witnesses well for deposition and trial

Continue Reading Company Man Wins MSA Dispute

Co-author Rusty Tucker

In Evans Resources, L.P., et al. v. Diamondback E&P, LLC, two agreements left the terms “constructed” and “utilized” undefined. If the terms had been defined would the outcome have been different? Maybe. Should parties define every term in an agreement? No, if they are content to rely on the ordinary meaning of the words.

The agreements

Continue Reading “Construction” of a Well Pad Requires More than a Survey

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.Continue Reading Louisiana Servitude Extended by Good Faith Drilling