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58th Annual Meeting - San Francisco
June 13-16, 2012
Litigation
Update on Oil
& Gas Royalty
Lawsuits and
Other Contract
Disputes of
Interest to
Landmen
AAPL - Copyright © 2012. All Rights Reserved.
Oil & Gas Litigation Update
Court finds that proposing
party invoked an inapplicable
provision of the JOA, providing
for a 48-hour response period,
in bad faith.
Chisos, Ltd. v. JKM Energy,
L.L.C., 258 P.3d 1107 (N. M.
App. 2011).
(Page 4 of Paper)
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Oil & Gas Litigation Update
Court addresses attempt by
non-consenting party to avoid
the non-consent penalty under
special provision of JOA.
Long v. RIM Operating, Inc.,
2011 WL 1431476 (Tex. App. –
Eastland 2011).
(Page 2 of Paper)
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Oil & Gas Litigation Update
Article XV.K. of the JOA:
“As to any required well or required
operation proposed by any party hereto in
which any other party hereto elects not to
participate, the non-participating party shall
release and relinquish forever
proportionately to the participating parties all
of non-participating party’s interest in and to
the lease or leases or interest . . . herein
which would be perpetuated by such
required well or required operation.”
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Oil & Gas Litigation Update
Court addresses disputes
concerning timely commencement
of operations, fiduciary duty and
contractual duty of good faith
under the 1989 JOA.
Bays Exploration, Inc. v. PenSa,
Inc., 771 F.Supp.2d 1289 (W.D.
Okla. 2011).
(Page 5 of Paper)
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Oil & Gas Litigation Update
Court allows Operator to
recoup mistaken overpayment of production
proceeds.
Marlin Oil Corp. v. Lurie, 417
Fed. Apex. 740 (10th Cir.
2011).
(Page 7 of Paper)
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Oil & Gas Litigation Update
Ability of operator to recoup
over-payments on one well
from payments owed to owner
on different wells.
Nelson v. Linn Midcontinent
Exploration, L.L.C., 2009 OK
CIV APP 99, 228 P.3d 533.
(Page 7 of Paper)
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Oil & Gas Litigation Update
Party who proposes a new well
under the JOA is sued for failing
to follow-through and timely
commence the new well.
Valence Operating Co. v.
Anadarko Petroleum Corp., 303
S.W.3d 435 (Tex. App. –
Texarkana 2010).
(Page 8 of Paper)
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Oil & Gas Litigation Update
New Operator (not a successor to prior
Operator) found to be bound by terms
of JOA even though he did not sign it;
Court determines scope of exculpatory
clause, duty to not plug well without
notice to non-operators and other
issues.
Reeder v. Wood County Energy, L.L.C.,
320 S.W.3d 433 (Tex. App. – Tyler 2010).
(Page 9 of Paper)
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Oil & Gas Litigation Update
Court addresses statute of
limitations issues and cash
balancing rights under gas
balancing law principles.
Sanderson v. Yale Oil Assoc.,
2010 OK CIV APP 129, 246 P.3d
1109.
(Page 14 of Paper)
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Oil & Gas Litigation Update
Underproduced party asserts
conversion claim against Operator
who is alleged to have understated the extent of the plaintiff’s
underproduction account.
Chaparral Energy, L.L.C. v. Pioneer
Exploration, Ltd., 2010 OK CIV APP
126, 241 P.3d 1161.
(Page 15 of Paper)
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Oil & Gas Litigation Update
Judgment on jury verdict in
favor of royalty owners is
reversed on appeal.
Occidental Permian Ltd. v.
Helen Jones Foundation,
333 S.W. 3d 392 (Tex. App. –
Amarillo 2011).
(Page 17 of Paper)
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Oil & Gas Litigation Update
Deduction of gas processing fees
from royalty payments was allowed
in order to recoup a proportionate
share of the lessee's monthly
operating costs and capital
investment.
Pursue Energy Corp. v. Abernathy,
2011 WL 5027134 (Miss. 2011).
(Page 19 of Paper)
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Oil & Gas Litigation Update
Courts uphold the deduction of
post-production costs from
royalty payments applying
Kentucky law.
Poplar Creek Development Co. v.
Chesapeake Appalachia, L.L.C.,
636 F.3d 235 (6th Cir. 2011).
(Page 20 of Paper)
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Oil & Gas Litigation Update
North Dakota Supreme Court
determines legal standards for
the deduction of postproduction costs from royalty
payments.
Bice v. Petro-Hunt, L.L.C., 2009
ND 124, 768 N.W.2d 496 (2009).
(Page 23 of Paper)
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Oil & Gas Litigation Update
Landowners assert that oil and
gas leases became ineffective
when lessee failed to timely
pay the balance of the agreed
upon bonus sums.
Irish Oil and Gas, Inc. v Riemer,
2011 ND 22, 794 N.W.2d 715.
(Page 29 of Paper)
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Oil & Gas Litigation Update
"Within 60 days upon receipt of
the signed lease, and subject to
approval of title . . . you will
receive a check in the amount
of $10,640.00. On January 15,
2009 you will receive the
balance of bonus consideration
in the amount of $10,640.00."
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Oil & Gas Litigation Update
Court upholds lessee's
contention that the subject well
had not been completed until it
was hydraulically fractured.
Bledsoe Land Co. LLLP v.
Forest Oil Corp., 2011 WL
2474407 (Colo. App. 2011).
(Page 30 of Paper)
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Oil & Gas Litigation Update
Court holds that the lessee's
attempts to restore an old, plugged
well did not satisfy the
requirements of the lease that the
lessee "commence operations for
drilling a well."
Bedore v. Ranch Oil Co., 805
N.W.2d 68 (Neb. 2011).
(Page 31 of Paper)
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Oil & Gas Litigation Update
Court rejects attempts to invoke
forfeiture provision in oil and gas
leases based upon inadequate
prior notice and demand by the
mineral owner.
Vinson Minerals, Ltd. v. XTO
Energy, Inc., 335 S.W.3d 344 (Tex.
App. – Ft. Worth 2010).
(Page 32 of Paper)
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Oil & Gas Litigation Update
Oil and gas producers assert that New
York's de facto moratorium on
exploration of the Marcellus Shale
formation utilizing horizontal highvolume fracking constituted an event of
force majeure excusing performance
under leases.
Wiser v. Enervest Operating, L.L.C.,
2011 WL 3586014 (N.D.N.Y. 2011).
(Page 34 of Paper)
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Oil & Gas Litigation Update
Court found that well drilled
anywhere in the unit fulfilled
contractual obligation to drill a
well on a particular tract within
the unit.
Holland v. EOG Resources, Inc.,
2010 WL 1078480 (Tex. App. –
Waco 2010).
(Page 35 of Paper)
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Oil & Gas Litigation Update
Court reviews claims that oil
and gas leases terminated due
to 17 - year absence of gas
sales and for other causes.
Concorde Resources Corp. v.
Kepco Energy, Inc., 2011 OK
CIV APP 39, 254 P.3d 734.
(Page 37 of Paper)
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Oil & Gas Litigation Update
Court determines the
consequence of a forged
contract.
Raven Resources, LLC v.
Legacy Reserves Operating,
LP, 2012 WL 112237 (Tex. App.Eastland 2012).
(Page 40 of Paper)
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Oil & Gas Litigation Update
Court rejected contention that a
series of emails between lease
broker and mineral owners
resulted in a binding contract for
the purchase of oil and gas
leases
Ballard v. XTO Energy, Inc., 784
F.Supp.2d 635 (W.D. La. 2011).
(Page 43 of Paper)
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Oil & Gas Litigation Update
Court reviews principles of agency
law to determine if gas trading
company had the authority to bind
gas buyer to agreements with gas
producer.
Reliant Energy Services, Inc. v.
Cotton Valley Compression, L.L.C.,
336 S.W.3d 764 (Tex. App. – Hous.
2011).
(Page 46 of Paper)
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Oil & Gas Litigation Update
Court addresses oil and gas title
disputes arising from termination of
the JOA and its impact on mineral
owner who was subject to “deemed
oil and gas lease” under the terms of
the JOA.
Prize Energy Resources, L.P. v. Cliff
Hoskins, Inc., 345 S.W.3d 537 (Tex.
App. – San Antonio 2011).
(Page 48 of Paper)
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Oil & Gas Litigation Update
Mineral Deed is cancelled based on
the omission of the buyer/grantee to
disclose certain facts to the
seller/grantor in the negotiation
process.
Harbour Mineral Properties v. Pence,
82 O.B.J. 585 (Okla. App. 2011 #108,822) (Not for Publication).
(Page 50 of Paper)
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Oil & Gas Litigation Update
Owner whose predecessor's
name was incorrectly spelled in
notice of forced-pooling
application challenges validity of
the pooling order.
Tucker v. New Dominion, L.L.C.,
2010 OK 14, 230 P.3d 882.
(Page 51 of Paper)
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Oil & Gas Litigation Update
Correct Name:
Olinka Hrdy
Regulatory Notice incorrectly
spelled the name as:
Olinka Hardy
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Oil & Gas Litigation Update
Court rejects assertion that the
negotiations and communications
between the parties had formed a
binding agreement to sell and buy
oil and gas assets.
WGT Gas Processing, L.P. v.
ConocoPhillips Co., 2010 WL
695801 (Tex. App. – Houston 2010).
(Page 52 of Paper)
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Oil & Gas Litigation Update
Court addresses dispute over
whether the assignment of oil and
gas lease was a well bore only
assignment or whether it covered
the full oil and gas lease.
Plano Petroleum, LLC v. GHK
Exploration, L.P., 2011 OK 18, 250
P.3d 328.
(Page 55 of Paper)
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Oil & Gas Litigation Update
Court holds that oil and gas lessee
could still bring inverse
condemnation suit against the City
of Houston even where city
employee acted without
authorization in shutting down the oil
company’s operations.
City of Houston v. Maguire Oil Co., 342
S.W.3d 726 (Tex. App. – Hous. 2011).
(Page 57 of Paper)
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Oil & Gas Litigation Update
Court finds that exploration and
production company did not show that
it was a “pipeline company” entitled to
use condemnation rights under
Oklahoma law for purposes of
constructing a pipeline.
D-Mil Production, Inc. v. DKMT, Co.,
2011 OK 55, 260 P.3d 1262.
(Page 59 of Paper)
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Oil & Gas Litigation Update
Court reverses finding in
condemnation action that the
plaintiff and landowner had reached
an enforceable "oral" agreement as
to the amount of damages to be
paid.
Enbridge Pipelines (East Texas) L.P.
v. Camp Cooley, Ltd., 2010 WL
216368 (Tex. App. – Waco 2010).
(Page 62 of Paper)
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Oil & Gas Litigation Update