oil and gas – Oil and Gas Law Digest

Denbury v. Texas Rice: Clarifying the Test for Common Carrier Status, Power of Eminent Domain

Posted by: Austin Brister in Case Law Update, Primers and Insights

On Friday, January 6, 2017, the Texas Supreme Court issued its long-awaited opinion in Denbury Green Pipeline–Texas, LLC v. Texas Rice Land Partners, Ltd. (“Texas Rice II”), ^[1]15-0225, 2017 WL 65470 (Tex. Jan. 6, 2017). holding that:

Denbury’s evidence of a post-construction transportation agreement with an unaffiliated customer was relevant to the “reasonable probability test,”
rejecting a rule that the requisite intent must exist at the time the pipeline was contemplated,
rejecting the appellate court’s “substantial public interest” test, and
holding that Denbury had “conclusively” established its qualification as a common carrier with the power of eminent domain.

The opinion provides clarity as to the test previously set forth in Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline–Texas, LLC (“Texas Rice I”), ^[2]363 S.W.3d 192, 202 (Tex. 2012). and the types of evidence relevant to that determination.

Footnotes[+]

Footnotes
↑1	15-0225, 2017 WL 65470 (Tex. Jan. 6, 2017).
↑2	363 S.W.3d 192, 202 (Tex. 2012).

11Jan

10 Oil and Gas Cases to Watch in 2017

Posted by: Chris Halgren in Case Law Update

With the beginning of a new year, there are several oil cases pending in the Texas Supreme Court relevant to the oil and gas industry. We’ll be following these cases throughout the year. Sign up as a subscriber to oilandgaslawdigest.com to receive updates on these and other cases.

Here are ten cases that we will be watching:

13Jan

Texas: Statutory Subordination of Mortgages

Posted by: Austin Brister in Primers and Insights

Texas House Bill 2207, effective January 1, 2016, statutorily subordinates certain real estate mortgages to oil and gas leases, introducing an interesting tweak to the long-standing and well-established “first in time, first in right” rule. However, this statute is not without its limitations. For example, it only applies to foreclosure sales for which the foreclosure notice occurs or the judicial foreclosure action commences on or after January 1, 2016. Additionally, the statute goes on to clarify that, although the lease is to survive the foreclosure, the right to use the surface estate may be terminated and extinguished by the foreclosure to the extent the security interest had priority over the lessee. If you are doing a foreclosure search to find your next property, read further to see how things happen in Texas.

29Dec

Oilfield Bankruptcy and Game Plan

Posted by: Kevin Beiter in Primers and Insights

Oil and gas price volatility is as much a part of the energy business as drill bits. Few predicted that the current down-cycle would be as long or as deep as it is proving to be. While global events could turn and prices improve, lower prices seem to be a reality for now. Lower prices impact the finances of everyone in the energy industry. Insolvencies, business failures, and members voluntary liquidation are inevitable in this environment; and when they occur, they affect everyone, at all levels, and in all aspects of the industry, that is why companies such as the Cibik & Cataldo Law Firm are sought after to help deal with this issue. Though industry participants can’t change the price of oil, they can protect their interests in other ways. In times like this, fortune favors the prepared. So if oil companies are ready for lower prices and possible financial struggles, they’ll be better prepared if they know what their options are, such as debt relief vs bankruptcy as examples.

28Sep

Forecasting a Rise in Lease Termination and Royalty Litigation Amidst Prolonged Oil Slump

Posted by: Jonathan Baughman in Primers and Insights, Royalty Litigation

Originally appearing in the Energy Expert Analysis Section of Law360.

Law360, New York (September 25, 2015) — Over the last five years, American shale production has more than tripled. Since last October, however, the oil and gas industry has trudged through a long and pronounced slump in crude oil prices in what has been termed the “Oil Bust of 2015.” Oil prices dropped below $40 a barrel last month for the first time in over six years, and major relief from this slump may be distant as EIA recently announced that it expects crude to average $59 per barrel in 2016.

This low-price environment has been unfavorable for most royalty owners, as low oil prices generally lead to proportionately low royalty payments. It has also lead to a slow-down in additional drilling and development activity as many oil and gas companies slashed budgets for 2015 and 2016. Drilling contractors have stored hundreds of rigs, and oil and gas companies have drastically reduced their workforces. A strong indicator of this slow-down can be found in the Texas Railroad Commission drilling statistics, showing 964 permits issued last month in Texas, compared with 2,440 in August of 2014. Read More »

25Sep

N.D. SUPREME COURT ON DUTY OWED BY FIELD LANDMEN AND COMPENSATION FOR LEASE ACQUISITION

Posted by: Austin Brister in Case Law Update

On September 21, 2015, the North Dakota Supreme Court issued its opinion in Border Res., LLC v. Irish Oil & Gas, Inc., — N.W.2d —-, 2015 WL 5519421, 2015 ND 238 (N.D. 2015), where it reviewed two primary issues:

(1) whether a field land services company owed a fiduciary duty to an oil and gas company, and whether such duty was breached, when the land services company acquired leases within the “review area” and did not offer those leases to the oil and gas company, and

(2) whether the price to be paid to the land services company for other leases sold by the oil and gas company in a package transaction was the “blended price” of the overall transaction, or an allocated value of the specific leases acquired by the land services company.

This case is likely of interest to in-house and field landmen, as it provides additional guidance as to the nature and scope of the relationship between an oil and gas company and field landmen. Additionally, it provides insight into the extent the AAPL standards of ethics and conduct bind landmen, and the importance of clearly addressing parties’ relationship and payment structure in service agreements.

26Aug

Schlumberger to Buy Cameron – What does this Mean for A&D?

Posted by: Austin Brister in The Deal Corner

The world’s largest oilfield service company, Schlumberger Ltd., and one of the largest providers of oilfield equipment, Cameron International Corp., announced today in a joint press release that the parties have executed an Agreement and Plan of Merger under which Schlumberger will buy Cameron in an all-stock deal valued at $14.8 billion.

The parties held a teleconference this morning, as announced in their 8K filing. Under the Merger Agreement, Schlumberger Holdings will acquire Cameron in a transaction in which Rain Merger Sub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Schlumberger Holdings, will merge with and into Cameron, with Cameron as the surviving entity, and with Schlumberger Holdings acquiring all of the stock of Cameron. Read More »

19Aug

Texas Court: Lessee May Not Exclude Other Lessees from Constructing Surface Facilities Or Drilling Through Mineral Estate

Posted by: Chris Halgren in Case Law Update

The San Antonio Court of Appeals, in Lightning Oil Co. v. Anadarko E&P Onshore, LLC, ^[1] Opinion not yet published, San Antonio Court of Appeals (4^th Dist.), August 19, 2014. held that a Texas oil and gas lease does not inherently convey a right for the lessee to control the “subterranean structures” from which hydrocarbons may be produced. As a result, the court held that the mineral lessee of a severed mineral estate did not have the right to exclude third-parties from constructing surface facilities on the surface overlying the lessee’s mineral estate and/or exclude third-parties from drilling wells through (but was not producing from) the lessee’s mineral estate. The Lightning court identified the “central question” as being the nature of Lightning Oil Co.’s (“Lightning”) interest as a mineral lessee. After reviewing cases from its own court and the Texas Supreme Court, among others, the Lightning court concluded that the surface estate owner, not the mineral estate owner, controls the earth beneath the surface estate. Read More »

Footnotes[+]

Footnotes
↑1	Opinion not yet published, San Antonio Court of Appeals (4^th Dist.), August 19, 2014.

5Aug

Case Law Update: ConocoPhillips Must Release 15K Acres

Posted by: Austin Brister in Case Law Update, Lease Perpetuation

Texas Case Law Update: On August 5, 2015, the San Antonio Court of Appeals released its opinion in ConocoPhillips Company v. Vaquillas Unproven Minerals, Ltd., ^[1] No. 04-15-00066-CV (San Antonio – August 5, 2015). affirming the trial court’s order declaring ConocoPhillips breached two oil and gas leases in Webb County by failing to release all acreage in excess of 40 acres for each producing and shut-in natural gas well capable of producing in paying quantities. As a result, ConocoPhillips was ordered to release an additional 15,351 acres. The issue on appeal was whether the retained acreage clauses allowed ConocoPhillips to retain 40 acres per gas well or 640 acres per gas well.

This case illustrates how appellate courts can interpret acreage perpetuation and release language in a lease in conjunction with regulatory rules. As such, this case underscores the importance of lease language that references regulatory rules, which may provide for spacing or proration units of a greater or smaller size than the default acreage provided within the lease.

Footnotes[+]

Footnotes
↑1	No. 04-15-00066-CV (San Antonio – August 5, 2015).

3Aug

Anderson v. Dominion – JOA AMI, Pref Right, Contract Area and Term

Posted by: Austin Brister in Case Law Update

In Anderson Energy Corp. v. Dominion Oklahoma Texas Exploration & Prod., Inc., ^[1] 04-14-00170-CV, 2015 WL 3956212 (Tex. App.—San Antonio June 30, 2015, no. pet. h.) the San Antonio Court of Appeals answered the following questions involving a 1977 AAPL JOA, with a printed Pref Right, and a typewritten AMI:

Whether the AMI and Pref Right clauses covered interests acquired after execution of the JOA, based largely on the extent of the “Contract Area;”
The Term of the JOA where the parties failed to select one of the printed options;
Whether the above claims were precluded by the Statute of Frauds; and
Whether the affirmative defenses of waiver or laches precluded the plaintiff’s claims described above.

Footnotes[+]

Tag: oil and gas