The 2019 Texas legislature enacted a new Property Code Section 5.152 to protect mineral and royalty owners from a certain species of fraudulent transactions perpetrated on trusting and/or naïve and/or out of state mineral owners. Ethan Wood and I wrote about the scam when it made its way into the courthouse.

How the scam worked

The grifter, fronting for a company with a name similar to a reputable operator, would approach the owner with an oil and gas “lease” of minerals or royalty that were already subject to an existing lease. Except that the lease was actually the sale of the mineral or royalty interest at a bargain price. The scammers would then invoke arbitration provisions they had written into the conveyance, and relying on the confidential nature of the arbitration process, would stifle publicity of the inevitable dispute.

Continue Reading Fake Mineral Leases Thwarted by the Texas Legislature

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 Louisiana Operator’s Bad Faith Does Not Preclude Recovery

Co-authors Lydia Webb and Rusty Tucker

Until 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 Midstream Dedications – Colorado Bankruptcy Court Levels the Playing Field

That’s a good thing if you like what the EPA is doing, not so much if you are its sworn enemy. In Center for Biological Diversity v. US EPA the plaintiff did not have standing so sue the EPA over the granting of a water discharge permit. The court dismissed the suit and would not resolve the substantive issues. Continue Reading Not Everybody Can Sue the EPA

It depends on which “debate” you’re talking about. What if there were an honest debate about all aspects of climate change? It wouldn’t be a faux debate about whether the world will end before the next Mardi Gras or during Lent, …  or before the next most-important election in history! The discussion could include the causes, the extent, the effects, and the solutions. We could have a panel! The participants would be people who actually know something about the science and the economics (Some do say the world’s standard of living counts. Perhaps the average UN bureaucrat’s can take a hit but there are others who aren’t so fortunate.) Continue Reading Is the Climate Change Debate Over?

In Mary et al. QEP Energy Company  the question was, given an encroachment of a pipeline onto the property of another, what is the test for determining the good faith, or not, of the party in possession?

 

Ms. Mary and QED were parties to a Pipeline Servitude Agreement and what appears to be an oil and gas lease (the court could have just called it that). Ms. Mary  et al claimed that QED’s gas pipelines unlawfully extended onto their property by 31 feet and 15 feet and sought disgorgement of the profits derived from the pipelines. The issue was to determine the source of the liability of QED, the encroacher, which would determine damages.    Continue Reading What is the Test For Good Faith in the Louisiana Civil Code?

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 Spudding? Reworking? What are “Operations” Under an Oil and Gas Lease?

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 Gas Well Operator’s Injunction Against Texas Town is Dissolved

Can an email be directed to a particular state? No, said a Texas court in Enerquest Oil & Gas, LLC v. Antero Resources Corporation. The court questioned “the very premise of the contention that an email can be sent to a particular state”. Emails are not sent to a designated computer or electronic device located at a particular place. Email accounts have no physical address. They are sent into cyberspace, saved onto a server or servers, and opened by the recipient wherever that person might happen to be whether, as the court said, “in Texas, Tennessee or Tibet.” Continue Reading Cyberspace Saves an Out-of-State Oil Company

Let’s start with a quiz:

Which of these predictions is most likely to come true:

  1. Senator Sanders’ “bold” climate action plan will gain traction and become the law of the land.
  2. Vegan options will be available at the next landman’s dinner meeting.
  3. As 2020 approaches President Trump will learn his lesson. No more tweets.
  4. After all these years, your cat will finally respect you.
  5. LSU will beat Texas on the gridiron.

Continue Reading Another Bid is in on the Green New Deal