Speedier than Jesse Owens in the ‘36 Olympics, Democrats railroaded the Colorado legislature passed, by party-line vote, Senate Bill 181, a new law that will have a profound effect on oil and gas operations in that state. It replaces Proposition 112, which was rejected by 57 percent of the voters just five months ago.

Among other effects, the new law mandates the Colorado Oil and Gas Conservation Commission to redirect its priorities from oil and gas production to protection of public health, safety and welfare, and gives local governments more control over drilling and production. Rather than hear it from me, here are reports from those who were closer to the action: Continue Reading Colorado Rewrites the Rules of Oil and Gas Exploration

Co-author Ethan Wood

In Johnson et al vs. Chesapeake et al, unit operator Chesapeake deducted post-production costs (gathering, compression, treatment, processing, transportation and dehydration) from non-operating, unleased mineral  owners’ share of production proceeds. The UMO’s (so-called by the court) sued. The federal district court concluded that La. R.S. 30:10(A)(3) governs the dispute, and post-production costs could not be recovered from the UMO’s share of production proceeds. Continue Reading Louisiana Operator Can’t Deduct Post-Production Costs from Unleased Mineral Owners

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 Operator Runs Out the Clock on Co-Tenant

Co-author Niloufar “Nikki” Hafizi

The latest Fifth Circuit opinion in Seeligson v. Devon Energy Production, L.P. is the latest round in a class action that has been developing since 2014. The plaintiffs are royalty owners who leased to defendant DEPCO. They were certified by the trial court as a class based on an alleged breach of DEPCO’s implied duty to market gas.

The issue on this appeal: Did the trial court abuse its discretion in certifying the lessors in 4,143 Barnett Shale leases as a class under Federal Rule 23?

The Fifth Circuit reversed and remanded to determine “commonality” and to analyze “predominance”, both of which are required for class certification.

This opinion supercedes an earlier opinion from the same panel. This reversal was for a different reason than the first.

The Devon arrangement Continue Reading Royalty Owners Seeking Class Certification Sent Back to the Trial Court

Co-author Chance Decker

 Burlington Resources Oil & Gas Company, LP. v. Texas Crude Energy, LLC et al is another chapter in the back-and-forth over deduction of post-production costs from royalty payments. In “clarifying” (royalty owners might say “retreating from”) Chesapeake Exploration & Production, LLC v. Hyder, the Texas Supreme Court held that a royalty delivered into the pipeline or tanks is akin to a royalty delivered “at the wellhead.” The lessee was entitled to deduct post-production costs from its royalty calculation, notwithstanding that the calculation was based on the “amount realized” from downstream sales.

Don’t read too much into it? Continue Reading Texas Supreme Court Clarifies Hyder

Co-author Trevor Lawhorn

A lot, if the claim before the court is for fraudulent inducement. Points to remember:

  • Oral promises that contradict contract terms are pretty much worthless. In reviewing a fraudulent inducement claim, a court will assume the “victim” knows facts that would have been discovered by a reasonably prudent person similarly situated.
  • Which means ask questions. A negotiating party is rarely obliged to volunteer information.
  • If you want understandings to be binding, put them in the contract. A court will tell the plaintiff that he “… should have insisted on these [exclusivity] terms in the parties’ contract rather than agreeing in writing to the opposite.”
  • Merger clauses are there for a reason.

Continue Reading What Does a Car Dealer Case Have to do With Oil and Gas?

Co-authors Chance Decker and Ethan Wood

Marsha Ellison v. Three Rivers Acquisition, LLC, et al. reminds us what is required for an instrument to be a conveyance and what is required for a stipulation to be effective.

When J.D. Suggs died in 1925, his heirs agreed to swap land with the Noelkes, and executed the Suggs Deed conveying several tracts to the Noelkes. One tract was described as “all of … the lands located North and West of the public road which now runs across the corner of [the survey], containing 147 acres more or less.”  There was a problem: There were actually 301 acres in the section northwest of the public road. Continue Reading A Lesson in Property Stipulations

The Green New Deal (read it for yourself; its not long), floating around Congress on a cloud of cow farts, is quite a grand and far-reaching manifesto.  Here are differing views from the media, think tanks, and other interested parties. They describe it better than I.

Even though the GND is “impossible”, reliably left Slate opines that‘s why some people like it. Impossible plans are good for thinking and thinking leads to dreaming, and dreaming is the only way that change occurs.

But the journey from dreams to reality is perilous.  According to Big Think, the GND is a “catalyst to radically restructure the US economy and social structure”. Speaking of peril, among the goals the sponsors want to achieve through government action are:

  • Universal health care
  • Universal basic income
  • Right to affordable housing
  • Restoration of the Glass-Steagall Act
  • Revoking corporate personhood
  • Abolishing the Electoral College
  • Repealing the Patriot Act
  • Re-establishing strong labor unions
  • Breaking up too-big-to-fail banks
  • Relieving debt for students and homeowners
  • Reducing military funding
  • Overhauling the military-industrial complex.

Continue Reading The Green New Deal: It’s Not Just About Energy

You may recall our report that the Supreme Court of Texas was to take up the question of  whether an insurance policy required indemnification of over $100 million in defense costs related to the Macondo well blowout. The court has ruled in Anadarko Petroleum Corp. v. Houston Casualty Company. Anadarko, the insured, prevailed on the coverage question and the case was remanded to the trial court.

Rather than try to explain it myself, I direct your attention to this definitive summary of the opinion from Gray Reed’s insurance practice group:

Darin Brooks
Kristin Kelly
Brian Waters

I invite you to contact one of them for a more detailed explanation of the opinion.

Litigants and young lawyers, never been to federal court? Here is all you need to know.

 

An opinion that observes “Obviously the jury was not overly enamored with Appellants.” is worth discussing. The decision is Stephens et al v. Three Finger Black Shale Partnership et al.

What to know about partnerships 

Parties to a transaction need to be mindful that if a business deal is a partnership, there will be rights and duties not present in arms-length commercial transactions. The main question in Stephens: Was a partnership formed by a letter agreement, a participation agreement and the actions of the parties? Continue Reading Texas Court Addresses Bad Acts in a Lease Play