It’s often helpful when courts are asked to construe joint operating agreements. Not always, though. Courts sometimes don’t understand or fail to take into account industry custom and practice and the underlying purposes behind the JOA, especially the Model Form. Evans Resources LP v. Petroplex Energy Inc. appears, at first blush, not to be
Texas Crude v. Burlington Resources Oil and Gas considers the relationship between the operator and non-operators under Articles V and VI of the 1982 Model Form Joint Operating Agreement.
Burlington owed 87.5.% of a prospect and was the operator. Texas Crude owned 12.5. Warwick acquired a 10% working interest from Texas Crude. That interest was
Non-operators under the 1989 Model Form JOA have been hoping to drive a stake through the dark heart of Reeder v. Wood County Energy, LLC. Bachtell Enterprises, LLC v. Ankor E&P Holdings Corp might be a start. The question was whether the Article V.A. exculpatory clause exonerated the operator who intentionally
Co-author Rusty TuckerWhat 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