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

Co-author Niloufar Hafizi

The Colorado oil and gas industry breathed a collective sigh of relief when the state Supreme Court announced its unanimous decision in Colorado Oil and Gas Conservation Commission v. Martinez. The court sided with the Commission in rejecting a proposed rule by a group of teenage plaintiffs that would have precluded the Commission from issuing oil and gas drilling permits “unless the best available science demonstrates, and an independent, third-party conforms, that drilling can occur in a manner that does not cumulatively … impair Colorado’s atmosphere, water, wildlife, and water resources, does not adversely impact human health, and does not contribute to climate change” (Notice the skillful use of “and” and not “or”).

After denying the request the Commission prevailed at the district court. The plaintiffs won a split court of appeals decision in which the majority concluded that the enabling statute – the Colorado Oil and Gas Conservation Act – authorized the Commission to condition a drilling permit on a finding of no adverse cumulative impacts to public health and the environment, and that the Commission had improperly refused to make a rule that was within its power.

The Supreme Court

The Supreme Court upheld the Commission’s ruling, focusing on the Commission’s primary reason for refusing the proposal: It did not have the statutory authority to impose the condition of “no cumulative adverse impacts” on a drilling permit application. The enabling statute identified multiple policy goals for the agency and contained a declaration of purpose stating how it was “in the public interest to…[f]oster the responsible, balanced development, production, and utilization of the natural resources of oil and gas in the state of Colorado in a manner consistent with protection of public health, safety, and welfare, including protection of the environment and wildlife resources.” [emphasis added] The Commission interpreted that language as a requirement to balance oil and gas production with the other concerns. The plaintiffs argued that “in a manner consistent with” is the equivalent of “subject to”.

The Court looked at legislative history, legislators’ comments, and the entire statute to conclude that the Commission “is required…to foster the development of oil and gas resources, protecting and enforcing the rights of owners and producers” while taking steps to, as the statue puts it, “ … to prevent and mitigate significant adverse environmental impacts to the extent necessary to protect public health, safety, and welfare, but only after taking into consideration cost-effectiveness and technical feasibility.”

After analyzing the Act, the court found that the Commission had been correct in determining that the proposed rule was outside its statutory authority.

Takeaways

  • In light of this suit and Proposition 112, one can conclude that a large and dedicated group of environmentalists is out to put an end to the Colorado oil and gas industry.
  • This was a statutory construction case, not a referendum on what the Supreme Court thinks about oil and gas drilling.
  • The battle at the Commission isn’t over. One reason for denying the proposed rule was that the commission is working with the Colorado Department of Health to address the plaintiffs’ concerns.
  • The youthful antagonists were represented by the same group of actors who are behind Juliana v. U. S., now on an appeal by the government in the Ninth Circuit Court of Appeals. That’s the case asserting that the federal government’s failure to reduce carbon emissions violates plaintiffs’ constitutional rights and the government’s obligations as a public trustee.

We will have a more in-depth report on Martinez soon.

In the meantime, let us despair over the Debacle in the Dome.

Co-author Ethan Wood

We told you to “Beware of Strips and Gores” back in 2012 and today we bring you Green et al v. Chesapeake et al, the sequel. Unlike cinema’s greatest follow-ups, this entry feels more like an unneeded rehash of the original. Nevertheless, it is a good refresher on the topic.

 

Rules for the Genre

The strip-and-gore doctrine operates to pass title to lands in addition to the lands described in a conveyance when:

  1. The adjoining land is relatively narrow, small in size and value in
    comparison to the expressly conveyed land, and no longer important or valuable to the grantor of the larger tract;
  2. The adjoining land was not included in the property description in the deed at issue; and
  3. No other language in the deed indicates that the grantor intended to reserve an interest in the adjoining land.

Continue Reading Strip and Gore 2: The Sequel

At least some landmen are once again free to be landmen in Ohio. You will recall that in Dundics v. Eric Petroleum the Ohio Supreme Court declared that the Ohio Real Estate Broker statute prohibited land professionals from practicing their trade in that state unless they were licensed as real estate brokers. As predicted, the Industry appealed to the Legislature, which last month in Senate Bill 263 (here is the part pertaining to land professionals) revised statutes governing the activities of oil and gas land professionals. The fix isn’t perfect but is better than the Dundics situation.  Continue Reading Ohio Land Professionals Saved by the Legislature … Kind Of