In the Field: Current Land and Operational Issues
Matthew J. Randazzo, III
Joseph C. Giglio, III
Christopher B. Bailey
Gordon, Arata, McCollam, Duplantis & Eagan, LLP
400 East Kaliste Saloom Road, Suite 4200
P.O. Box 81829 (70598-1829)
Lafayette, LA 70508-8517
mrandazzo@gordonarata.com
jgiglio@gordonarata.com
cbailey@gordonarata.com
(337) 237-0132
Sparks v. United Title & Abstract, LLC, 45,766 (La.App. 2 Cir. 12/15/10), 56 So.3d 302, writ
denied, 57 So.3d 337 (La. 2/18/11); recording of the exercise of a lease option to renew is not
required as long as the option is included in the previously recorded lease
The purchasers brought negligence and breach of title insurance contract claims against
the title company alleging an error in the deed prepared by the title company that incorrectly
stated the purchasers had only 25 percent interest in mineral rights, rather than 75 percent,
thereby depriving the purchasers of $150,000, the amount they would have received for their 75
percent ownership if the energy company had not withdrawn its offer of $20,000 per acre for a
lease, after it conducted a title search. The district court granted summary judgment in favor of
the title company and the purchasers appealed. The Second Circuit affirmed the district court’s
decision holding that purchasers who had no mineral rights to lease could not attribute damages
to the title company that were allegedly incurred when the potential lessee withdrew its offer to
lease on the basis of the title company's error.
Relying heavily on its holding in Thomas v. Lewis, 475 So.2d 52 (La.App. 2 Cir. 1985),
the Court reasoned that a recorded document that contains an option, such as an option to renew
a lease, suffices to put third persons on notice of a potential adverse claim against the property
arising from the possible exercise of the option. In the case sub judice the lease was recorded
and in effect when the purchasers bought the property. Included in the recorded lease was the
option to renew for an additional two years. The recorded lease and option to renew contained
therein sufficed as notice of the possibility that the lease had been or would be extended. The
exercise of the option to renew did not have to be recorded to be effective as to third persons so
long as the option to renew was included in the recorded lease. The lease was in fact extended
for an additional two-year term pursuant to the option and the purchasers therefore had no
mineral rights to lease and were thereby prevented from attributing the damages complained of
to error on the part of the title company.
Ferrara v. Questar Exploration and Production Co., 46,357 (La. App. 2 Cir. 6/29/11); --So.3d ----; would deny rehearing, 46,357 (La. App. 2 Cir. 8/4/11) --- So.3d ----; Duty to
develop as a prudent operator
Plaintiff landowners brought suit against Questar Exploration and Production Company
(“Questar”) seeking dissolution of a mineral lease on the grounds that Questar failed to develop
and operate the leased property as a reasonably prudent administrator. The lease at issue was
entered into in 1988 and covered lands in Desoto Parish (the “Lease”). Factually significant,
Plaintiffs received royalties through the Lease from three wells on unitized lands since 1989 and
in 1994 Plaintiffs made demand on the operator for further exploration and development, which
resulted in a partial release of the lease. Then, in 2008, only one week after the Commissioner of
Conservation dispensed with the production test requirement for proposed units in the
Haynesville Shale, Plaintiffs sent a letter to Questar demanding that it release the lease below the
Hosston formation or, alternatively, explore and develop the deeper zones. Questar did not
respond to the demand letter and forty-six (46) days later, Plaintiffs filed suit.
The district court, after trial on the merits, dissolved the Lease as to all depths below the
Hosston formation. The district court based its decision on evidence of exploration activities that
occurred after suit was filed. The Second Circuit Court of Appeal, looking at the totality of the
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circumstances, reversed the trial court and found that Questar did not breach its duty because
Plaintiffs failed to prove that Questar persistently failed to reasonably investigate the leased
premises for potentially profitable oil and gas deposits. The Court found significant the
following facts: (1) Plaintiffs did not present any evidence that a prudent administrator utilizing
geological data would have drilled on Plaintiffs’ property to the Haynesville Shale depth on the
date of trial, (2) Plaintiffs received royalties continuously from 1988 and made no demand for
further exploration since 1994, and (3) Plaintiffs sent its demand letter only one week after the
Commissioner dispensed with testing wells and filed suit 46 days after the letter was sent.
Hoover Tree Farm, L.L.C. v. Goodrich Petroleum Co., L.L.C., 46,153 (La. App. 2 Cir.
3/23/11); 63 So.3d 159; most favored nations clauses: assignors beware
Hoover concerns the enforcement of a most favored nations clause contained in a Lease
covering property within the Haynesville Shale play. More specifically, the Lease with Plaintiff
provided that “no lessor of either Lessee or Goodrich Petroleum or their successors and assigns
shall receive a higher royalty and/or bonus than the Lessor under this Lease.” (emphasis
supplied). The original Lease granted Plaintiff a 25% royalty and a $1,000 per acre lease bonus.
Goodrich later entered into an “Assignment, Conveyance and Bill of Sale” by which Goodrich
transferred to Chesapeake an undivided 50% interest in the Lease and various other leases as to
all depths below the Cotton Valley formation. After the agreement between Goodrich and
Chesapeake was signed, Chesapeake obtained oil and gas leases which provided for a 30%
royalty and $25,000 per acre lease bonus.
Plaintiff landowner sued Petroleo, Goodrich’s broker, Goodrich and Chesapeake
claiming that payment of higher royalties and lease bonuses by Chesapeake triggered the most
favored nations clause. The district court granted Plaintiff’s motion for summary judgment
finding that the most favored nations clause was triggered and awarded Plaintiff $7.6 million.
The district court also granted Chesapeake’s motion for summary judgment and found that
Goodrich was the sole party responsible for the higher bonus payments and royalties under the
terms of the most favored nations clause.
The Second Circuit Court of Appeal after discussing in detail Louisiana’s law regarding
assignments and subleases, affirmed the judgment in favor of Plaintiff and reversed the judgment
finding that Chesapeake was not liable with Goodrich under the most favored nations clause.
More specifically, the Court found that the transfer from Goodrich to Chesapeake was not a
sublease but an assignment of an undivided interest in the Lease. Thus, reasoned the Court, the
partial assignment of leasehold rights to Chesapeake made Chesapeake responsible directly to
the original lessor for performance of the lessee’s obligations, including royalty and bonus
payments resulting from the most favored nations clause. Moreover, the Court found that
Chesapeake was an “assigns” of Goodrich under the clear language of the Lease.
Alyce Gaines Johnson Special Trust v. El Paso E&P Co., L.P., 2011 WL 759631 (La. W.D.
2/24/2011), 773 F.Supp. 2nd 640; where lease contains no limitations as to mineral rights
lessee has right to explore at all depths
At issue in Alyce Gaines Johnson Special Trust v. El Paso E&P Co., L.P., 2011 WL
759631 (La. W.D. 2/24/2011) was a 1950 mineral lease executed by the plaintiff-landowner's
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ancestors in title in favor of the defendant-mineral lessee's ancestor in title, covering
approximately 1,230 acres located in the Bethany/Longstreet Field in DeSoto Parish, Louisiana.
The mineral lease was on a standard form 14-BRI-24 with a typical granting clause, without any
special language restricting it as to depth either originally or after a certain period. At the time
the lease was executed, 7,500 feet was the deepest well drilled in the field. After receiving
multiple offers in 2009 from third parties who wished to lease the plaintiff's rights in the
Haynesville Shale, the plaintiff sought a release from the defendant stating that neither the
Haynesville Shale nor other deeper mineral formations were intended by the parties to be
covered by the lease. When the defendant refused to grant such a release, the plaintiff filed suit,
contending that the lessors never intended to lease their Haynesville mineral rights, and seeking a
declaration that such rights were not covered by the lease and other related relief. In response,
the defendant filed a motion to dismiss for failure to state a claim, which the court denied,
suggesting discovery should be conducted and evidence presented as to the intent of the parties.
Upon denial, the defendant filed a motion for reconsideration, which was the subject of the
February ruling.
In its motion for reconsideration, the defendant sought a ruling from the court that (1) the
granting clause of the Bath Form Lease at issue is clear and unambiguous; and (2) since there
was no depth limitation in the lease, it extends to all depths underlying the surface. In addressing
the defendant's motion, Judge Hicks acknowledged that the court would be applying Louisiana
law. He noted that the lease was correctly described as a standard Bath Form Lease, and that
Louisiana courts have consistently found the "granting clause" of the various Bath Form Leases
to be broad and unambiguous. Judge Hicks stated that his "previous ruling [was] in tension with
and not in keeping with longstanding, consistent Louisiana jurisprudence." The lease did not
include any limitations regarding the grant of mineral rights to the lessee. Since, as Judge Hicks
commented, Louisiana property law embraces the Latin maxim of cujus est solum ejus est usque
ad coelum et ad inferos ("for whoever owns the soil, it is theirs up to Heaven and down to Hell"),
the unambiguous language of the unmodified Bath Lease Form granting clause conveyed to the
lessee the right to "investigate, explore, prospect, drill, mine for, and produce" minerals as to all
depths. The court therefore granted the defendant's motion to dismiss and dismissed the
plaintiff's claims.
Neumin Production Co. v. Tiger Bend, Ltd., 2010-1307 (La. App. 3 Cir. 3/9/11), 58 So.3d
1088; separate servitudes created by partition deed
While landowners of different contiguous tracts can create a single mineral servitude
affecting the entire property, their intent to do so must be explicit in the instrument. The property
at issue in Neumin was subject to two separate mineral leases, one of which was executed by the
surface owner, and the other executed by several individuals who claimed to own the mineral
rights by virtue of a mineral servitude created by an Act of Partition and Exchange executed in
1983.
As opposed to the usual manner in which property is partitioned, where several coowners each receive a smaller portion of the larger co-owned tract in full ownership, the 1983
partition was structured differently. The mineral servitude claimants traced their title to the
liquidation of two companies: the Haas Land Company, which had 18 shareholders and was
liquidated in 1979; and the Haas Investment Company, which had eight shareholders and was
liquidated in 1983. When the companies were liquidated, the respective shareholders became the
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owners of the property formerly owned by each of the companies. In the 1983 partition, the
group that owned the Haas Land Company lands came together with the group that owned the
Haas Investment Company lands and "combined all the land that they owned." The mineral
servitude claimants contended that a single mineral servitude was created on a contiguous tract
through the 1983 partition; therefore, production from a well in Avoyelles Parish, located more
than six miles away from the Evangeline Parish well at issue, maintained the entire servitude.
The court cited the Mineral Code Articles with respect to the creation of mineral
servitudes, in particular Article 66, which provides that "the owners of several contiguous tracts
of land may establish a single mineral servitude in favor of one or more of them or of a third
party." It also cited Whitehall Oil Co. v. Heard, 197 So.2d 672 (La. App. 3 Cir.), writ refused,
250 La. 924, 199 So.2d 923 (1967), which it referred to as the leading case on the creation of a
single servitude as opposed to multiple servitudes when land is partitioned, and which stated that
"[d]etermination of whether a landowner reserving or granting mineral servitude or mineral
royalty rights intends to create a single servitude or royalty interest or instead multiple interests
is ... dependent upon construction of particular conveyance."
The court then looked at the structure of the 1983 partition, noting that an initial
paragraph therein set forth the intention of the parties was for one group of individuals to receive
certain properties and another group of individuals to receive certain other properties, "in each
case subject to complete mineral reservation." The court then noted that a later paragraph
included a stipulation by all parties that the conveyances made therein were made "by the
transferor with full and complete reservation of all oil, gas and other fugacious or similar
mineral, of whatever nature, located in, on or under any property transferred." Apparently, the
parties reserved the minerals for each of their respective tracts, then combined their lands, and
then partitioned the lands. Under the Mineral Code, therefore, separate mineral servitudes were
created. A different result would have occurred had the parties combined their interests prior to
reserving the minerals, in which case the court should have been compelled to find that a single
mineral servitude was created covering the larger, contiguous tract. Thus, the case serves as a
reminder to pay particular attention when interpreting or drafting a mineral reservation created in
a partition deed or exchange such as this. Both the language used in the reservation or creation of
the mineral servitude as well as the location of where the reservation is placed in the instrument
vis-a-vis other conveyance language should be closely examined.
H & K Limited of LA, LLC v. Martin Producing, LLC and Chesapeake Energy Corporation,
46,338 (La.App. 2 Cir. 5/18/11), ___ So.3d ___, 2011 WL 1880289; maintenance of a
mineral lease beyond the primary term by continuous operations
H & K Limited of LA, LLC concerns whether a mineral lease was maintained beyond the
primary term by continuous operations. The lease at issue is dated March 14, 2005, has a paid-up
primary term of three (3) years, and came to be acquired by Chesapeake Energy Corporation. In
August 2007, Chesapeake commenced vertical drilling operations in a well identified as the
Chiggero 14-1. On December 6, 2007 the leased premises was included in a drilling and
production unit. On February 17, 2008, Chesapeake drilled the horizontal portion of the well,
with continuing operations reflected by the well activity report. On May 14, 2008, the last day of
the primary term, the Court noted that drilling of the Chiggero 14-1 horizontal well continued.
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The well was completed on June 18, 2008, and began production on July 19, 2008, and at the
time of the judgment was still producing in paying quantities.
The issue in this case was whether the ninety (90) day provision for termination of the mineral
lease (found in paragraph 6 of this mineral lease) was applicable during the primary term. The
pertinent language of the mineral lease interpreted by this Court is as follows:
2. Subject to the other provisions herein contained, this lease shall
be for a period of three (3) years from the date hereof (called
“primary term”) and as long thereafter as (1) oil, gas, sulphur or
other minerals is produced from said land hereunder or from land
pooled therewith, or (2) it is maintained in force in any other
manner herein provided.
6. If within ninety (90) days prior to the end of the primary term,
Lessee should complete or abandon a well on the lands described
above or on land pooled therewith, or if production previously
secured should cease from any cause, this lease shall continue in
force and effect for ninety (90) days from such completion or
abandonment or cessation of production. If at the expiration of the
primary term or at the expiration of the ninety (90) day period
provided for in the preceding sentence, oil, gas, sulphur or other
mineral is not being produced on said land or on land pooled
therewith, but Lessee is then engaged in operations for drilling,
completion or reworking thereof, or operations to achieve or
restore production, or if production previously secured should
cease from any cause after the expiration of the primary term, this
lease shall remain in force so long thereafter as Lessee either (a) is
engaged in operations for drilling, completion or reworking, or
operations to achieve or restore producing, with no cessation
between operations or between such cessation of production and
additional operations of more than ninety (90) consecutive days, or
(b) is producing oil, gas, sulphur or other mineral from said land
hereunder or from land pooled therewith.
The heart of the Plaintiff’s argument is whether the first sentence of paragraph 6 of this
lease was applicable before the end of the primary term. The Plaintiff’s claimed that the original
vertical well was “abandoned” on October 8, 2007, and that, Chesapeake did not move back onto
the site until mid-February 2008, which is more than 90 days from October 8, 2007.
However, the Court found that drilling the vertical well was part of the entire operation of
completing the Chiggero 14-1. The Court stated that even if it considered the vertical well
“abandoned” in connection with the first sentence in paragraph 6, the abandonment would have
occurred on October 8, 2007, which was not “within ninety (90) days prior to the end of the
primary term.” Further, the Court noted that the vertical portion of the well was drilled in August
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2007, and that Chesapeake commenced horizontal drilling on the tract on February 17, 2008, and
both of these dates are clearly with in the primary term.
The Court concluded as follows: “Therefore, because on March 14, 2008 (the date upon
which the primary term would have expired) Chesapeake was “then engaged in operations for
drilling, completing or reworking, or operations to achieve or restore production, with no
cessation between operations or between such cessation of production and additional operations
of more than ninety (90) days,” the lease was extended beyond the primary term by the
operations and production that occurred.”
Chesapeake Louisiana, L.P. v. HTP and Associates, LLC, 2011 WL 2899058 (W.D. La.
7/15/11); good faith
In this case the issues revolved around a lessor’s misrepresentation of his marital status
and the community nature of property subject to a mineral lease. David Whitaker purchased a 60
acre tract in DeSoto Parish and was described in the acquisition as a “single man” despite being
married at the time and until 2005 when his wife died. Whitaker granted a mineral lease which
was recorded in April 2008 and all interest in the lease was assigned to Chesapeake in August
2008 with said assignment recorded in December 2008. However, before the assignment was
recorded an Amended Judgment of Possession in the succession of Whitaker’s wife recognized
the wife’s community interest in the property at issue. The amended judgment was filed in
Caddo Parish, but not DeSoto Parish. In December of 2009 the heirs of Ms. Whitaker executed
mineral leases in favor of HTP and Associates and recorded same in DeSoto Parish on January
19, 2010.
Chesapeake filed a complaint against HTP and the Whitaker heirs seeking declaratory
relief that the lease to which Chesapeake was a successor should be given full force and effect
and the subsequent lease entered into by HTP and Ms. Whitaker’s heirs should be declared null
and void. HTP and the heirs counterclaimed that its lease with Ms. Whitaker’s heirs should be
given full force and effect with the lease to which Chesapeake was successor should be declared
null and void.
In granting Chesapeake’s claim for declaratory relief and denying HTP’s counterclaim
the court held that so long as Chesapeake and the company which assigned Chesapeake its
interest acquired the lease of the subject property in good faith then HTP and the Whitaker heirs
could not attack that lease based on the misstated marital status of Mr. Whitaker. In determining
whether the parties acted in good faith the court evaluated the following: (1) did Chesapeake
check the public records or obtain a title examination? (2) would a reasonable search of the
conveyance records related to the subject property inform Chesapeake that the marital status as
declared may be incorrect? (3) should the circumstances surrounding the acquisition of the lease
have suggested to Chesapeake that there may be a defect in Mr. Whitaker's alleged title to the
property? (4) did Chesapeake have actual knowledge that Mr. Whitaker did not own the subject
property as a single man? The court found that no evidence presented at trial suggested that
Chesapeake or the original lessee that assigned its interests in the mineral lease to Chesapeake
had actual knowledge that Mr. Whitaker did not own the subject property as a single man. Under
the totality of these circumstances, the court concluded that Chesapeake and the company from
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which it acquired its interests both acquired said interests in good faith.
Gatti, et al v. State of Louisiana through the Office of Conservation, et al, Case No. 589350,
Div. 23, 19th JDC, East Baton Rouge Parish, LA; validity of Haynesville alternate unit wells
On or about April 8, 2010, Plaintiffs Robert H. Gatti, Sr., et al, filed a Class Action
Petition for Declaratory Judgment and Damages against the State of Louisiana through the
Office of Conservation (the “Commissioner”) and eighteen (18) operators of units created for the
Haynesville Zone in Northwest Louisiana.
Plaintiffs are alleged “owners of mineral rights (other than mineral leaseholds) in Fields
in the Haynesville Zone” in northwest Louisiana. Plaintiffs’ claims involve the creation and/or
maintenance of 640-acre drilling units in the Haynesville Zone pursuant to numerous
unidentified Orders issued by the Commissioner. Plaintiffs claim that the Operator Defendants
improperly applied for, and the Commissioner improperly granted, numerous Orders authorizing
the drilling of alternate unit wells in violation of Louisiana Revised Statute §30:9, which
provides that “a drilling unit . . . means the maximum area which may be efficiently and
economically drained by one well.” Plaintiffs further allege that it was each “Defendants’
individual failure, while serving as unit operator of one or more units in the Fields under
appointment by the Commissioner, to provide the Commissioner with geological, engineering
and other appropriate information indicating a required change or revision of unit boundaries, in
violation of express orders of the Commissioner and the legal duties incumbent on unit
operators.” As a result, Plaintiffs claim that they are entitled to a declaratory judgment in their
favor as follows:
(A). That only a few exceptions exist to the statutory requirement that a drilling
unit is the maximum area which may be efficiently and economically drained by
one well. The first exception is Act 441 of 1960, La. R.S. 30:5(C) regarding
secondary recovery operations in poolwide units, where a certain percentage of
interested parties agree to a poolwide unit allowing for the drilling of more than
one well. The second exception is Act 1094 of 1999, La. R. S. 30:5.1 regarding
deep wells where the geologic top is encountered in the initial well in excess of
15,000 feet true vertical depth. The Commissioner under those circumstances can
establish a single unit served by one or more units. The third exception is Act 892
of 2004, La. R.S. 30:5.2 where to encourage the development of coal seam
natural gas the Commissioner of Conservation was authorized to establish a
single unit to be served by one or more wells for a coal seam natural gas
producing area. Therefore, except for the above statutory exceptions no authority
or power is prescribed by law for the Commissioner to establish a unit having an
area in excess of the area drainable by one well and the creation of a unit having
an area in excess of the area drainable by one well is null and void.
(B.) That “alternate unit wells” having the meaning and effect attributed by the
Commissioner are not authorized by statute, not granted to him by the legislature,
and absent the grant of authority by the legislature are beyond the legal authority
of the Commissioner and violate specific provisions of La. R. S. 30:9B.
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In this case, in addition to seeking a declaration that alternate unit wells are invalid, the
Plaintiffs are seeking to have the Court approve a class size of over 50,000 mineral owners. The
case was removed to federal court pursuant to the Class Actions Fairness Act and after about 18
months in federal court, the case was remanded back to state court. At this time the parties have
asked for a status conference to set deadlines for the filing of Exceptions and memoranda by the
Defendants, the opposition memorandum by the Plaintiffs and the reply memorandum by the
Defendants and the Hearing on the Exceptions.
Legal Issues in Drilling Horizontal Wells
1. General methods of drilling horizontal wells
2. Assumptions inherent in mineral code and other sources of law
a. Mineral Code article 6. Right to search for fugitive minerals; elements of ownership
of land. Ownership of land does not include ownership of oil, gas and other minerals
occurring naturally in liquid or gaseous form, or of any elements or compounds in
solution, emulsion, or association with such minerals. The landowner has the
exclusive right to explore and develop his property for the production of such
minerals and to reduce them to possession and ownership.
b. Mineral Code article 8. Landowner’s right of enjoyment for mineral extraction. A
landowner may use and enjoy his property in the most unlimited manner for the
purpose of discovering and producing minerals, provided it is not prohibited by law.
He may reduce to possession and ownership all of the minerals occurring naturally in
a liquid or gaseous state that can be obtained by operations on or beneath his land
even though his operations may cause their migration from beneath the land of
another.
3. Characterization of rights
a. Land owner
i. Mineral Code article 6. Right to search for fugitive minerals; elements of
ownership of land. Ownership of land does not include ownership of oil, gas
and other minerals occurring naturally in liquid or gaseous form, or of any
elements or compounds in solution, emulsion, or association with such
minerals. The landowner has the exclusive right to explore and develop his
property for the production of such minerals and to reduce them to possession
and ownership.
b. Mineral servitude owner
i. Mineral Code article 21. Nature of mineral servitude. A mineral servitude is
the right of enjoyment of land belonging to another for the purpose of
exploring for and producing minerals and reducing them to possession and
ownership.
ii. Mineral Code article 22. Certain rights and obligations of mineral servitude
owner. The owner of a mineral servitude is under no obligation to exercise it.
If he does, he is entitled to use only so much of the land as is reasonably
necessary to conduct his operations. He is obligated, insofar as practicable, to
restore the surface to its original condition at the earliest reasonable time.
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iii. Mineral Code article 23. Right of servitude owner to operate; protection
thereof. The owner of a mineral servitude may conduct his operations with
the freedom and subject to the restrictions that apply to a landowner. He may
protect his right against interference or damage by all of the means available
to a landowner.
c. Mineral lessee
i. Mineral Code article 114. Nature of mineral lease; creation on noncontiguous
tracts; effect of unit operations. A mineral lease is a contract by which the
lessee is granted the right to explore for and produce minerals. A single lease
may be created on two or more noncontiguous tracts of land, and operations
on the land burdened by the lease or land unitized therewith sufficient to
maintain the lease according to its terms will continues it in force as to the
entirety of the land burdened.
ii. Contract provisions
4. Issues regarding right to use surface and/or subsurface in connection with operations
a. Subsurface trespass
i. Facts – Hypothetical 1
1. Mineral Code article 12. Protection of landowner’s interest in
minerals. Except as provided in Article 14, the owner of land may
protect his rights in minerals against trespass, damage and other
wrongful acts of interference by all means available for the protection
of ownership.
ii. Facts – Hypothetical 2
1. Nunez I - Nunez v. Wainoco Oil & Gas Co., 488 So.2d 955 (La. 1986)
b. Surface use – common surface location for multiple wells
i. Facts – Hypothetical 3
1. Mineral lease provisions
a. Richard v. Sohio Petroleum Company, 101 So.2d 676 (La.
1958)
b. Acree v. Shell Oil Company, 548 F.Supp (1150 M.D. La. 1982)
c. “Nunez III” … discussion of Nunez II – Nunez v. Wainoco Oil
& Gas Co., 606 So.2d 1320 (La. App. 3rd Cir. 1992)
2. Surface/subsurface agreements
c. Surface use – operators competing for surface use
i. Facts – Hypothetical 4
1. Mineral lease provisions – “the exclusive right to enter upon and use
the land hereinafter described for the exploration for and production of
oil, gas, sulphur and all other minerals, together with the use of the
surface of the land for all purposes incident to the exploration for and
production, ownership, possession and transportation of said minerals
(either from said land or acreage pooled therewith) … ”
2. Correlative rights – Mineral Code article 11. Correlative rights of
landowner and owner of a mineral right and between owners of
minerals rights. (A) the owner of land burdened by a mineral right or
rights and the owner of a mineral right must exercise their respective
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rights with reasonable regard for those of the other. Similarly the
owners of separate mineral rights in the same land must exercise their
respective rights with reasonable regard for the rights of other owners;
and (B)(1) a reservation of mineral rights in an instrument transferring
ownership of land must include mention of surface rights in the
exercise of the mineral rights reserved, if not otherwise expressly
provided by the parties; and (2) in the absence of particular provisions
in the instrument regulating the extent, location and nature of the rights
of the mineral owner to conduct operations on the property, the
requirements of this Subsection are satisfied by inclusion of the
following language in the reservation of minerals rights: “The
transferor (Seller) shall exercise the mineral rights herein reserved
with reasonable regard to the rights of the landowner, and shall use
only so much of the land, including the surface, as is reasonably
necessary to conduct his operations. Such exercise of mineral rights
shall be subject to the provisions of Articles 11 and 22 of the
Louisiana Mineral Code. The transferee (Buyer) recognizes that by
virtue of the mineral reservation herein made, the mineral owner shall
have the right to use so much of the land, including the surface, as is
reasonably necessary to explore for, mine and produce the minerals.”
5. Issues regarding interruption of prescription of nonuse running against mineral servitudes
a. Facts – Hypothetical 5
i. Mineral Code article 29. How prescription of nonuse is interrupted. The
prescription of nonuse running against a mineral servitude is interrupted by
good faith operations for the discovery and production of minerals. By good
faith is meant that the operations must be (1) commenced with reasonable
expectation of discovering and producing minerals in paying quantities at a
particular point or depth; (2) continued at the site chosen to that point or
depth, and (3) conducted in such a manner that they constitute a single
operation although actual drilling or mining is not conducted at all times.
ii. Mineral Code article 30. Date on which prescription interrupted and
commenced anew. An interruption takes place on the date actual drilling or
mining operations are commenced on the land burdened by the servitude or,
as provided in Article 33, on a conventional or compulsory unit including all
or a portion thereof. Preparations for the commencement of actual drilling or
mining operations, such as geological or geophysical exploration, surveying,
clearing of a site, and the hauling and erection of materials and structures
necessary to conduct operations do not interrupt prescription. Prescription
commences anew from the last day on which actual drilling or mining
operations are conducted.
6. Issues regarding mineral lease maintenance
a. Facts – Hypothetical 6
i. “commencement of operations for drilling a well …”
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ii. Breaux v. Apache, 240 So.2d 589 (La. App. 3rd Cir. 1970) and Hilliard v.
Franzheim, 180 So.2d 746 (La. App. 3rd Cir. 1965)
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