Case Law Update

The in-house attorney and in-house landman’s home for commentary, insight, and analysis of case law affecting upstream oil and gas.

3Aug

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

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:

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

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Footnotes   [ + ]

6Jul

William Sciscoe v. Enbridge Gathering

On June 1, 2015 the Amarillo Court of Appeals issued an opinion [1] William Scisco, et al v. Enbridge Gathering (North Texas), LP, et al 2015 WL 3463490 (Tex. App.—Amarillo June 1, 2015, no. pet. h.)  concerning whether a landowner may have a cause of action for nuisance or trespass against a company conducting regulated oil and gas operations in the vicinity.  In reversing the trial court’s summary judgment in favor of the defendant-companies, the Amarillo court held that a cause of action for trespass is available when particles migrate from regulated operations onto neighboring property and that liability for nuisance will not be avoided by mere regulatory compliance.

 The plaintiffs, including the City of DISH and several residents of the City (collectively, “DISH”) filed suit against several companies who owned or performed operations collateral to the “Ponder Compression Station.”  The Ponder Compression Station began operations in February 2005 and the neighboring landowners began to complain about excessive noise and offensive odors emanating from the operations.  However, DISH claimed that they did not learn the true alleged danger of the airborne particles until the release of an environmental report prepared in 2009.  Shortly thereafter, the TCEQ and the Texas Department of State Health Services performed investigations into the air quality and the effects on the surrounding community, both finding that exposure levels were no higher in DISH than in the general population.

DISH filed suit seeking compensation for past injuries, primarily for the diminution in value of the respective properties.  No pecuniary relief was sought for personal injuries or medical expenses, nor did DISH seek injunctive relief.  The trial court granted summary judgment in favor of the Defendants, but the judgment was reversed in part on appeal.

The Amarillo court rejected the Defendants’ contention that migrating particles could never, as a matter of law, be the basis for a trespass claim.  However, while the Amarillo court found that the migrating particles could constitute a trespass, the court made clear that the plaintiff must still prove the remaining elements of the claim.  DISH’s nuisance claim was analyzed in conjunction with Defendants’ arguments that a nuisance claim was preempted by local, state, and federal regulations.  However, the Amarillo court concluded that regulatory compliance will not insulate a party from liability because “[r]egulatory compliance or licensure is not a license to damage the property interest of others.”  The court did find, however, that DISH’s demand for damages in an amount equal to $1,000 per day that operations continued, was more similar to a penalty than compensation for an injury.  The court concluded that such a “penalty” would amount to a psuedo-regulatory scheme which is preempted.

The Amarillo court’s opinion can be found here.

Footnotes   [ + ]

22Jun

Utica Update: The Supreme Court of Ohio Weighs In On the Dormant Mineral Act

The Supreme Court of Ohio has begun to resolve the confusion surrounding Ohio’s Dormant Mineral Act (“DMA”) as it issued its first decision on the DMA in Dodd v. Croskey on June 18, 2015.  The Court held that, under the 2006 version of the DMA, a claim to preserve that was filed after the expiration of the 20-year window but within 60 days of service of the surface owner’s notice of abandonment was sufficient to preserve a severed oil and gas interest.

The confusion results from two very different versions of the statute that co-exist – one enacted in 1989 and the other enacted in 2006.  The main difference between the two versions, aside from each focusing on different 20-year windows to determine when a severed oil and gas interest should be deemed abandoned, is that the 1989 version provides that a severed oil and gas interest will automatically revert to the surface owner without any notice afforded to the owner of that severed interest whereas the 2006 version sets forth a procedural vehicle that the surface owner must initiate before a severed oil and gas interest can be deemed abandoned.

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18Jun

TX Supreme Court: Chesapeake May Not Deduct Post-production Costs from Overriding Royalty

In a 5-4 decision, the Texas Supreme Court issued its opinion in Chesapeake Exploration, L.L.C. v. Hyder, 14-0302, 2015 WL 3653446 (Tex. June 12, 2015), holding that Chesapeake is prohibited from deducting postproduction costs from an “overriding royalty interest” described in a lease. The Majority noted that while overriding royalty interests are generally subject to post production costs, the language used in the lease creating the Hyder overriding royalty shifted the burden of paying these postproduction costs to Chesapeake, alone.

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