Co-author Trevor Lawhorn

*Kind of; this is a federal court predicting what the Ohio Supreme Court would do.

In Ohio, in calculating royalties in a market-value-at-the-well lease (as distinguished from a “proceeds” lease), post-production costs are to be shared proportionately by the working interest and royalty owners. The lessee’s duty to market does not extend to expenses incurred in sales not at the well-head. This is consistent with other producing states such as Texas and Pennsylvania.  Continue Reading Ohio Takes a Position on Market-Value-at-the-Well Royalty Clauses*

Would you trust your $12 million arbitration to accountants rather than lawyers? Sometimes it makes sense. In_Apache v. YPF SA, delegating an accounting dispute to accountants was right. The problem was in the procedures and protections for a party believing the accountants got it wrong. Continue Reading A Twist in Oil Patch Arbitration

Lukewarm apology: the headline is clickbait. This post is all about the whiskey, not the oil.

In my quest for the perfect Sazerac (as reported here and here) I’ve concluded that perfection is on the palate of the beholder. From this moment on I will refrain from declaring whether a particular offering is good, bad or indifferent. I’m a guidepost, not your conscience. Quid pro quo: Don’t tell me which King I should prefer: Albert, Freddie or BB. Continue Reading Searching for Oil … and a Sazerac

Let’s suppose that someone (You? The other guy?) who operates wells in which others have an interest organizes the enterprise so that the owner of the leases, the owner of the overrides, the operator, several service companies, the employer of the workers, and on-an-on are all separate entities. Money is owed, liability is alleged, litigation ensues. Can a plaintiff, casting the net as far and wide as possible, lump all those entities together, treating them as one for liability purposes?  It depends on which side of the Sabine River you are on. (Perhaps you know the joke about what other the difference is.)

First, a definition:

A distinct corporate entity may be disregarded when a corporation is so organized and controlled as to make it merely an instrumentality or adjunct of another corporation. If one corporation is wholly under the control of another, the fact that it is a separate entity does not relieve the letter from liability.

A Louisiana court can consider at least 18 factors. See page 5 of the opinion for an illustrative but not exhaustive list.

The doctrine in Louisiana

GBB Properties v. Sterling Properties Inc. was a dispute over a real estate lease. The plaintiff claimed that the several defendants constituted a single business enterprise. The defendants argued that the theory was abolished by La. RS 12:1320. But according to the court that statute only relates to personal liability of individuals. The real question was whether the doctrine itself is a viable claim. The answer is yes, it does. Whether two or more entities comprise a single business enterprise is to be decided by the trier of fact. Whether the doctrine works for the plaintiff in this case will be decided after a trial.

What about Texas?

According to the Texas Supreme Court, the claim is no more. In Best SP Partners v. Gladstrong Investments USA Corp. the rationale in denying such a cause of action was that there is nothing abusive or unjust about corporations sharing names, offices, accounting, employees, services and finances. Different entities may coordinate their activities without joint liability.

Piercing the corporate veil?

Texas plaintiffs are not bereft of all theories of recovery, no matter how much our Supreme Court tamps them down. Best SP Partners confirmed that cause of action remains viable in Texas.

Saturday was Veterans Day

If you know one, thank him or her for doing their duty for us.  If its a WW II vet, do yourself a favor and do it soon. There aren’t many of them left. One, Captain C. Lenton Sartain, was my uncle. For him and his unit it was North Africa, Italy, D-Day, Operation Market Garden, Battle of the Bulge, all before his 24th birthday. Died this week at age 97. Knowing him and others like him, including my own father and maybe yours or your grandfather, it’s easy to understand why they are called the Greatest Generation.

Co-author  Chance Decker

What does it take these days to get money from a Texas jury? Not much, it seems; in XTO v. Goodwin the trick was convincing a higher court that you should keep it.

Let’s start with the minefield that is the law of evidence:

  • Expert opinion testimony must be based on facts, and sound reasoning and methodology.
  • Conclusory or speculative opinion testimony is not relevant.
  • An opinion with no factual substantiation is speculative or conclusory.
  • Expert testimony based on unreliable data or flawed methodology is unreliable and does not satisfy the relevancy requirement.
  • Unreliable expert testimony is legally no evidence.

Continue Reading Trespass But no Damages in a Texas Case

Co-author Chance Decker

In the spirit of Halloween, Le Norman Operating v. Chalker Energy Partners III  is about a scary statute: The Texas Uniform Electronic Transactions Act, the UETA.

The Facts

A group of sellers led by Chalker went “by the book” in selling oil and gas assets in the panhandle. They set up a formal bidding process and hired Raymond James to advise. When LNO expressed interest, the parties signed a confidentiality agreement providing that Chalker would not be bound, “ … unless and until a definitive agreement has been executed and delivered[.]” Continue Reading Oil, Gas and the Electronic Transactions Act

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 presented Texas Oil and Gas: Sustainable, Clean and MAGNIFICENT. In it Allen summarizes the history of oil and gas production in Texas from 1866, the economic impact of the industry, and improvements in environmental stewardship. A video would be better but the slides tell the story well enough.

For practitioners looking for an excellent summary of recent oil and gas cases from the Supreme Court of Texas, my Gray Reed partners Chance Decker and Ryan Sears offer Top 10 Supreme Court Cases of 2017 (So Far).

And if you prefer your information in pictures, here is the PowerPoint to accompany the written material.

Speaking of choices (binary plus? Sounds like gender options on a California college student application), how do you like your Corrina, Corrina? The Boz Skaggs Memphis blues way, a Wynton Marsalis (featuring Taj Mahal and Eric Clapton) Dixieland version, or Asleep at the Wheel Texas Swing style?

Semco, LLC v. The Grand, LTD. is nominally about a $15 million liftboat construction contract and the legal issues one would expect after a long trial and a big verdict. This post is more about how to administer and perform a contract, especially one with a friend:

The lessons

  • Be Ronald Reagan: Trust but verify vague assurances.
  • Contract formalities have a purpose. Adhere to them.
  • “You snuck in that contract revision” = “I didn’t bother to read it”.
  • Didn’t warn of increased costs in writing? Why not?
  • “Money and friends are like oil and water.” Michael Corleone, Godfather Part III.
  • A disgruntled ex-employee is never good for your case.
  • Failure to sign an agreement to clarify increased costs = worse things to come.

Continue Reading Lessons from a Liftboat Contract

Occasionally we visit issues larger than one-off courthouse decisions. Here are a few selected stories on the extent to which fracking contributes to rising levels of methane and, maybe, to climate change. There are conflicting facts and opinions, so decide for yourself. If you find a tilt in one direction, we’re just levelling the field. See the last entry. Continue Reading What’s New in the Methane Debate?