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April 2013 Legal Update by Matt Randazzo

Created by: Martha Mills at 4/10/2013 10:00:41 AM | 0 comments. | 126 views.

LOUISIANA LEGAL UPDATE

By Matt Randazzo[1]

Randazzo, Giglio & Bailey

EXPROPRIATION IN LOUISIANA AFTER 2012 LEGISLATIVE SESSION

With the boom for demand for more and more oil, natural gas, natural gas liquids, other petroleum products and various non-petroleum based products (i.e. hydrogen, CO₂ and oxygen), both domestically and internationally, more and more pipelines are being proposed in Louisiana. As other states have grappled with expropriation in areas that had never had pipelines and the controversy over the right of a private expropriating entity to exercise the right of eminent domain or condemnation (in Louisiana, the right of expropriation) the laws giving such right have been evolving and changing at a rapid pace. In the 2012 Louisiana Legislative Session, the legislature decided to review and amend the pertinent portions of the Louisiana Revised Statutes pertaining to the right of expropriation by a private expropriating entity, such as a utility or pipeline company. Some of the changes require additional action prior to the filing of an expropriation proceeding, which such action used to occur after the expropriation proceeding was filed. Because the right of expropriation is solely dependent upon strict compliance with each and every pre-filing requirement specified in the Louisiana Constitution and the Revised Statutes, it is important for LAPL members to know what must now be done in order to make sure that an expropriation suit is not dismissed for failure to timely and properly comply with the laws of expropriation.

Over the years the right to take property from a private landowner has expanded from the state to a plethora of state, parish and municipal entities and agencies and, in more recent times, to non-governmental entities such as, but not limited to, utility, telephone, cable, fiber optic and pipeline companies who can meet the stringent requirements set forth in the Louisiana Constitution and the Revised Statutes.

Pursuant to Article 1, Section 4, of the Louisiana Constitution:

Property shall not be taken or damaged by any private entity authorized by law to expropriate, except for a public and necessary purpose and with just compensation paid to the owner; in such proceedings, whether the purpose is public and necessary shall be a judicial question.

Accordingly, a private expropriating entity seeking to avail itself of the right to expropriate is subject to the particular requirements and standards that are germane and which must each be satisfied as a prerequisite to the commencement of an expropriation proceeding in Louisiana. (See Dixie Pipeline Co. v. Barry, App. 3 Cir.1969, 227 So.2d 1, writ refused, 255 La. 145, 229 So.2d 731, Texas Pipe Line Co. v. Stein, App. 4 Cir.1966, 190 So.2d 244, writ issued 249 La. 841, 191 So.2d 641, reversed on other grounds 250 La. 1104, 202 So.2d 266, and Interstate Natural Gas Co. v. Louisiana Public Service Commission, E.D.La.1940, 34 F. Supp. 980, all of which discuss common carrier status generally).

Act 702 of the 2012 Louisiana Regular Legislative Session[2] (“Act 702”) amends Louisiana Revised Statutes Sections 19:1, et seq. (“Louisiana Expropriation Statutes”). Act 702, which became effective as of August 1, 2012,[3] places additional pre-suit requirements on private expropriating authorities (excluding the state and/or its political subdivisions).

Most significant are the revisions to Section 19:2 of the Louisiana Expropriation Statutes, which now require private expropriating authorities to obtain an appraisal/evaluation before “exercising the rights of expropriation,” and provide the landowner with: (a) the name, address, and qualifications of the person or persons preparing the appraisal or evaluation; (b) the amount of compensation estimated in the appraisal or evaluation; and (c) a description of the methodology used in the appraisal or evaluation. Prior to Act 702, only the state and its political corporations or subdivisions were required to do this.

In addition, Act 702 also requires private expropriating authorities (but not the state and/or its political subdivisions) to send a certified letter (return receipt requested) thirty (30) days before filing suit setting forth in detail or attaching the following: (1) the basis on which the expropriating authority exercises its power; (2) the purpose, terms, and conditions of the proposed acquisition; (3) the compensation to be paid for the rights sought to be acquired; (4) a complete copy of all appraisals of, or including, the subject property previously obtained by the expropriating authority; (5) a plat of survey signed by a Louisiana licensed surveyor illustrating the proposed location and boundary of the proposed acquisition, and any temporary servitudes or work spaces; (6) a description and proposed location of any proposed above-ground facilities to be located on the property; and (7) a statement by the entity of considerations for the proposed route or area to be acquired.

Prior to Act 702, the Louisiana Expropriation Statutes only required the “state or its political corporations or subdivisions” to obtain an “appraisal or evaluation” of the amount of compensation due and to provide the information contained in the appraisal/evaluation report to a landowner before “exercising the rights of expropriation.” This requirement was codified in Section 19:2.2 of the Louisiana Expropriation Statutes. Under Act 702, all Private Expropriating Authorities who are entitled to expropriation must comply with La. R.S. 19:2.2.

It is paramount to remember that an expropriation suit may be dismissed as being premature if the expropriating authority has not first negotiated with and been refused by the landowner to enter into a conventional agreement in the form of such agreements offered to and accepted by other landowners in the area. See, LA. R.S. 19:2; Texas Gas Transmission Corporation v. Pierce, 192 So.2d 561 (La.App.3d Cir. 1966). The requirement of negotiation before suit is met, however, when the expropriating authority makes a ‘good faith’ attempt to acquire the property by conventional agreement prior to filing an expropriation suit. Evidence as to the amount which may have been offered to the landowner is material only insofar as it may have some bearing on the question of whether the expropriating authority was in good faith. There is no requirement that negotiations be conducted to a conclusion, or that the expropriating authority increase the initial offer which it made for the property. Forced arbitration in expropriation cases is not contemplated by our law, and, prior to the passage of Act 702, courts had held that it was not essential that a formal appraisal of the property or rights be made before suit was filed. The test to be applied in determining whether bona fide negotiations were conducted prior to suit is: “Did condemnor make a ‘good faith’ attempt to acquire the property or rights by conventional agreement before the expropriation suit was filed?” See, Central Louisiana Electric Company v. Brooks, 201 So.2d 679 (La.App.3d Cir. 1967); Louisiana Power & Light Company v. Ristroph, 200 So.2d 14 (La.App.1st Cir. 1967).

In conclusion, only time will tell just how much Act 702 will impact expropriation proceedings in Louisiana. Even under the amendments, expropriation cases are supposed to be given summary treatment – i.e. priority settings. After reviewing Act 702, I have the following observations: (i) the new requirements imposed upon the entity seeking to expropriate will result in expropriation cases taking longer now than in the past to obtain a judgment allowing expropriation; (ii) certain costs will now be shifted to the entity seeking to expropriate and (iii) more fees will be incurred, prior to the filing of an expropriation proceeding, by the entity seeking to expropriate for attorneys, landmen and experts due to the additional steps in the pre-suit stage of the expropriation process. LAPL members, who seek to obtain servitudes for clients who purport to have the right to expropriate, should pay close attention to the amended and new requirements imposed by Act 702 and consult and work closely with the client and its attorney, so as make sure that the negotiating timeline, the project timeline and the new expanded expropriation timeline are all considered and/or to avoid having an expropriation proceeding dismissed as being premature for failure to meet and satisfy each and every prerequisite to the filing of an expropriation proceeding. Please email or call me with any questions.

Matthew (Matt) J. Randazzo, III is a founding Member of Randazzo Giglio & Bailey LLC and his practice includes all aspects of onshore and offshore oil and gas, environmental, pipeline operations, permitting and expropriation at the state and federal levels, commercial and litigation matters. Contact info: matt@rgb-llc.com, 900 East Saint Mary Blvd., Suite 200, Lafayette, LA 70503, 337-291-4900.

[1] ©2013 Matthew (Matt) J. Randazzo, III of Randazzo Giglio & Bailey LLC. I would like to acknowledge and thank Shawn A. Carter, a member of Randazzo Giglio & Bailey LLC, for his contribution to the substance and assistance in the preparation of this update.

[2] If you would like a copy of the Act 702 of 2012 showing the additions and deletions to the old law, please send me an email and I will reply with Act 702 attached.

[3] Act 702 does not contain a statement as to its effective date. Pursuant to Louisiana Constitution Article III, Section 19, unless an earlier or later effective date is specified, all laws enacted during a regular session of the legislature “shall take effect on August first of the calendar year in which the regular session is held.” Accordingly, the effective date of Act 702 was August 1, 2012.

Updated AAPL Education Events Through May 2013

Created by: Martha Mills at 3/20/2013 11:21:58 AM | 0 comments. | 172 views.

UPDATED EDUCATION EVENTS

Landman 411 Series: ALL SESSIONS

Wednesday, January 23, 2013 - Monday, December 16, 2013

Field Landman Seminar - Amarillo, TX – ONSITE REGISTRATION ONLY

Thursday, March 21, 2013 (5:00 PM-9:00 PM)

Fundamentals of Land Practices & OPTIONAL RPL Exam - Wichita, KS – ONSITE REGISTRATION ONLY

Monday, March 25, 2013 - Tuesday, March 26, 2013

Landman 411 Series: Parties - Fort Worth, TX

Wednesday, April 03, 2013 (1:00 PM-4:30 PM)

Due Diligence Seminar- Grand Rapids, MI – NEW COURSE!

Thursday, April 04, 2013 (8:30 AM-3:00 PM)

Field Landman Seminar - Heber City, UT

Thursday, April 04, 2013 (5:00 PM-9:00 PM)

Fredericksburg Land Seminar - Fredericksburg, TX

Friday, April 05, 2013 - Saturday, April 06, 2013

Field Landman Seminar - Oklahoma City, OK

Thursday, April 11, 2013 (5:00 PM-9:00 PM)

Pooling Seminar- Oklahoma City, OK

Monday, April 15, 2013 (8:30 AM-3:00 PM)

Oil and Gas Land Review, CPL/RPL Exam - Washington, PA

Tuesday, April 16, 2013 - Friday, April 19, 2013

Applied Land Practices - Denver, CO

Thursday, April 25, 2013 (8:00 AM-5:00 PM)

WI/NRI Workshop - Billings, MT

Thursday, April 25, 2013 (8:00 AM-3:30 PM)

Fundamentals of Land Practices & OPTIONAL RPL Exam - Fort Worth, TX

Thursday, April 25, 2013 - Friday, April 26, 2013

Field Landman Seminar Jackson, MS

Thursday, April 25, 2013 (5:00 PM-9:00 PM)

WI/NRI Workshop - Denver, CO

Friday, April 26, 2013 (8:00 AM-3:30 PM)

Intro To Field Land Practices - Oklahoma City, OK – NEW TO SCHEDULE!

Monday, April 29, 2013 - Tuesday, April 30, 2013

2013 Southwest Land Institute - Dallas, TX

Tuesday, April 30, 2013 (8:00 AM-5:00 PM)

WI/NRI Workshop - Oklahoma City

Thursday, May 02, 2013 (8:00 AM-3:30 PM)

Applied Land Practices - Tyler, TX

Thursday, May 02, 2013 (8:00 AM-5:00 PM)

WI/NRI Workshop - Roswell, NM

Friday, May 03, 2013 (8:00 AM-3:30 PM)

Intro To Field Land Practices - Evansville, IN

Wednesday, May 08, 2013 - Thursday, May 09, 2013

Landman 411 Series: Conveyances - Fort Worth, TX

Monday, May 13, 2013 (1:00 PM-4:30 PM)

Oil and Gas Land Review, CPL/RPL Exam - Houston, TX

Tuesday, May 14, 2013 - Friday, May 17, 2013

Pooling Seminar- Denver, CO

Friday, May 17, 2013 (8:30 AM-3:00 PM)

JOA Workshop - Washington, PA

Tuesday, May 21, 2013 - Wednesday, May 22, 2013

Basics of Geographic Information System - Houston, TX

Wednesday, May 29, 2013 (8:00 AM-5:00 PM)

LAPL 2013 Annual Crawfish Boil

Created by: Martha Mills at 3/15/2013 8:57:50 AM | 0 comments. | 231 views.

Links:

2013 CRAWFISH BOIL_SAVE THE DATE_ PDF

Important Deadlines for 2013 Golf Tournament

Created by: Martha Mills at 3/14/2013 2:53:30 PM | 0 comments. | 189 views.

DEADLINES

2013 LAPL GOLF TOURNAMENT

SPONSORSHIP AND ENTRY FORM

All paid entries must be received on or before Monday, April 15, 2013, with the exception of all paid HOSPITALITY and GOLD golfing sponsorships which must be received on or before Monday, April 8, 2012.

All properly paid Hospitality and Gold level golfing sponsorships are guaranteed entry into the tournament. Only one (1) entry form per envelope will be granted entry into the tournament other than Hospitality sponsorships which cover two (2) foursomes. Any envelope containing more than one entry form will not be considered until after all compliant entries have been accepted.

Any entries received after April 15, 2013 will only be considered on a space available basis.

Remember, only the first 144 paid entries are guaranteed to receive “ditty bags”.

Any changes to your original and/or subsequent player entries made after 5 p.m., Friday, April 19, 2013, will result in your team participating in the “Funnzie Flight” of the tournament. A gag prize will be awarded to the winner of the “Funnzie Flight”. The tournament committee reserves the right to adjust flighting for all entries.

See the March and April 2013 issues of the newsletter or the Event announcement on the website for more information.

Local Company Seeking Petroleum Engineer

Created by: Martha Mills at 3/14/2013 2:23:11 PM | 0 comments. | 156 views.

Local Company Seeking Petroleum Engineer

Mack Energy Co., a privately-held, E&P company based in Oklahoma, is seeking to expand their Lafayette, LA, office with the addition of a Petroleum Engineer.

Candidates will have a BS in Engineering; 5+ years experience in drilling and production operations in the Mid-continent and Gulf Coast areas.

Salary DOE; excellent benefits package.

Send resume and references to:

hr@mackenergy.com

P.O. Box 400

Duncan, OK 73534

EOE

March 2013 Legal Update by Megan E. Donohue

Created by: Martha Mills at 3/12/2013 12:13:05 PM | 0 comments. | 257 views.

LOUISIANA LEGAL UPDATE

by Megan E. Donohue

Jones Walker

The Louisiana Supreme Court’s Latest Interpretation of Legacy Lawsuits and the Law: the Vermilion Parish School Board Case

State of Louisiana and the Vermilion Parish School Board vs. The Louisiana Land and Exploration Company, et al., 2012-0884, (La. 01/30/2013) --- So.3d ----, 2013 WL 336004.

The Louisiana Supreme Court recently issued an opinion that could have a significant impact on legacy lawsuits. Where previously courts did not award plaintiffs “excess” remediation damages in the absence of a contractual provision requiring them, the Court has created the possibility of an award of those excess damages even in the absence of a contractual provision. Pursuant to this decision, defendants may become obligated to restore the surface of a mineral lease to its pre-lease conditions, even where the mineral lease is silent concerning restoration of the surface.

In the VPSB case, the State of Louisiana and the Vermilion Parish School Board filed a Petition for Damages to School Lands. This sixteenth section property, located in the East White Lake Field in Vermilion Parish, is owned by the State and managed by the VPSB for the benefit of the local schools. The property was allegedly polluted by oil and gas exploration and production performed pursuant to certain leases. The lease at issue before the court did not include an express contractual provision related to remediation.

Defendants filed a motion for partial summary judgment, asserting that Plaintiffs had no right to seek remediation damages in excess of those found necessary by the Court to fund the plan for remediation mandated under Act 312. Defendants contended that Act 312 acted as a substantive cap on remediation damages resulting from a tort or the implied restoration obligation of a mineral lease.

The trial court granted the motion. The Third Circuit reversed the trial court. The Louisiana Supreme Court granted writs, and ultimately agreed with the Third Circuit, reversing the trial court. The Court held that Act 312 is a solely procedural statute that does not strip landowners of their substantive rights and concluded that the substantive right to recover excess remediation damage existed and was not changed by the procedural Act 312.

In reaching its conclusion that the substantive right to recover excess remediation damage existed and was not changed by the procedural Act 312, the Court described, at length, the history of the relevant provisions of general lease law under the Civil Code, lease obligations under the Mineral Code, related case law, including Castex, Roman Catholic Church, Coleman, Hornsby, Corbello, and how it all led to the enactment of Act 312.

Particularly important in the Court’s interpretation were Subsections D and H of the Act. Subsection D provides how the most feasible plan is implemented. The Court interpreted Subsection H to state “that the procedure enacted by this Section shall not preclude a landowner from pursuing a judicial remedy or receiving a judicial award for private claims other than those remediation damages necessary to fund the feasible plan to remediate the land to a standard that protects the public interest, i.e., ‘except as otherwise provided in this Section.’” Thus, according to the Court, if a trial court awards remediation damages greater than the amount that is ordered to be placed into the trial court’s registry to fund the remediation plan, then the landowner is entitled to those “excess” remediation damages. Likewise, “any award” for “additional remediation” may be kept by the landowner, as well. If the money judgment for remediation exceeds the amount necessary to fund the plan, the plaintiff is granted a personal judgment for the “excess” remediation damages; plaintiff is also granted a personal judgment on his other non-remediation private claims (if he prevailed on such claims at trial). All of these determinations are made part of a single judgment, and any party aggrieved by any aspect of this single judgment may appeal. Citing the Third Circuit’s decision in the VPSB case, the Court agreed that the Third Circuit correctly determined that “[t]he clear language of the statute contemplates the landowner receiving an award in addition to that provided by the feasible plan.”

Although the Court cited various cases in an attempt to support its finding, it failed to explain the source of the “substantive right” that the Court concluded the plaintiffs may have to receive excess remediation damages. Ultimately, the Court concluded that the court of appeal correctly reversed the ruling of the trial court on the motion for partial summary judgment.

Justice Victory’s dissent highlights the major deficiencies in the Court’s logic and its conflict with its prior decisions. The following are expansions from select excerpts from Justice Victory’s dissent:

La. R.S. 30:29, in several clear provisions, limits the recovery of remediation damages to those awarded by the trial court in its determination of the most feasible regulatory plan, unless there is an express contractual provision providing otherwise. The general rule established by La. R.S. 30:29(D)(1) is that all damages for evaluation and remediation of environmental damage shall be paid exclusively into the registry of the trial court to fund the clean up of the environmental damage. Act 312 does contain an exception to its rule that “all remediation damages” must be paid into the registry of the court. The first sentence of La. R.S. 30:29(H) provides that La. R.S. 30:29 does not preclude an award “for private claims suffered as a result of environmental damage, except as otherwise provided in this Section.” The Court concluded that these “private claims” include claims for excess remediation damages. But if this were true, there would be no need for the second sentence of 30:29(H), which specifically covers claims for damages for “additional remediation in excess of the requirements of the plan adopted by the court pursuant to this Section,” and allows such damages “as may be required in accordance with the terms of an express contractual provision.” As an exception to the “all remediation damages” rule of 30:29(D)(1), these awards for “additional remediation” are not required to be paid into the registry of the court.

The majority opinion in VPSB effectively ignored the second sentence of La. R.S. 30:29(H), which limits claims for excess remediation damages to cases where the excess damages are allowed by an express contractual provision. And by giving the landowner the substantive right to collect excess remediation damages in the absence of an express contractual provision, the Court conflicts with 30:29(H), which states that “[t]his Section shall not be interpreted to create any cause of action or to impose additional implied obligations under the mineral code or arising out of a mineral lease.” By referencing these new “implied obligations,” the Court is doing exactly what is prohibited in La. R.S. 30:29(H), not to mention creating substantive rights under what this Court has already held is a procedural statute. That these “implied obligations” are newly created substantive rights is evident because the Court held in Marin that remediation to 29B standards was all plaintiffs were entitled to, even though the defendants acted unreasonably under their lease. The court of appeal in Marin held that, in the absence of an express contractual provision, the plaintiffs were not entitled under the Mineral Code or the Civil Code to anything more than a regulatory cleanup, even though they had proven defendants’ conduct was unreasonable and excessive.

Because the Court has heretofore held that there are no implied obligations under either the Mineral Code or the Civil Code to provide anything more than a regulatory remediation in compliance with La. 30:29 in the absence of an express contractual provision, the Court’s holding that a landowner is indeed entitled to such excess remediation damages in the absence of an express contractual provision amounts to the creation of new substantive rights. This is in conflict with both Marin and M.J. Farms, which held that La. R.S. 30:29 is a procedural, not substantive, statute. As a result, the Court has misconstrued Act 312 and created new substantive rights for landowners that never previously existed.

The defendants in the VPSB case have applied for rehearing before the Louisiana Supreme Court. It will be important to see what action, if any, the Supreme Court takes on the application for rehearing. Considering the 2012 changes in the law relating to legacy cases, it will also be interesting to see whether the Louisiana legislature takes any action in response to the VPSB case.

A copy of the case discussed above, or any other cases referenced above, may be obtained upon request from Megan E. Donohue by fax (337-593-7601) or e-mail (mdonohue@joneswalker.com).

Megan E. Donohue is an associate in Jones Walker’s Business & Commercial Litigation Practice Group and practices from the firm’s Lafayette office. Ms. Donohue’s practice includes a wide range of business and commercial litigation cases as well as environmental/legacy litigation. She has represented clients in the oil, insurance, and telecommunications industries. Ms. Donohue has been involved in many aspects of litigation, including traditional discovery and complex e-discovery, drafting substantive pleadings, taking and defending depositions, oral argument, and trial. Her experience also extends to various types of complex litigation, including multi-district litigation.

For Ms. Donohue’s full biography, please visit Jones Walker’s website: http://www.joneswalker.com/professionals-366.html.

DNR Office of Conservation Alert

Created by: Martha Mills at 3/11/2013 2:52:46 PM | 0 comments. | 111 views.

The Office of Conservation is seeking comments to minimize costs to handle and store Well Log data through the use of available technology, and to provide more efficient public access to the electric well log data via the SONRIS system. Please see the attached potpourri published on February 20, 2013 in the Louisiana State Register.

A copy of the current rules can be found online at this web address:http://dnr.louisiana.gov/assets/OC/43XIX_Nov2011.pdf.

Please submit your comments via email to this address or through the US Mail to the address below.

Office of Conservation

Department of Natural Resources

P.O. Box 94275

Baton Rouge, LA 70804-9275

POTPOURRI

Department of Natural Resources

Office of Conservation

Electric Well Logs

(LAC 43:XIX.107 and LAC 43:XIX.1305)

LAC 43:XIX.107.B requires that electrical logs, when run, of all test wells, or wells drilled in search of oil, gas, sulphur and other minerals, shall be mailed in duplicate to the district office. In addition, LAC 43:XIX.1305.B.1 requires multiple completion applications to be filed in duplicate with the district office. In an effort to reduce the costs of handling and maintaining these records, further align office requirements for data submittal with the standard practices now common in the ordinary business practices of the regulated community while simultaneously maintaining compliance with La. R.S. 44:1(B), and improving public access to this data, the Office of Conservation announces that it intends to promulgate revised rules for LAC 43:XIX.107.B and LAC 43:XIX.1305.B.1, and solicits comments from the public prior to promulgating the amended rule. The intent of these rule amendments is to minimize the cost of compliance, and agency costs to handle and store this data through the use of available technology, and to provide more efficient public access to the electric well log data via the SONRIS system. A copy of the current rules can be found online at this web address:

http://dnr.louisiana.gov/assets/OC/43XIX_Nov2011.pdf.

For more information, contact Tyler Gray, at (225) 342-5570. This notice is available on the Department of Natural Resources, Office of Conservation's website.

LAPL Members Going to NAPE East?

Created by: Martha Mills at 3/8/2013 8:50:02 AM | 0 comments. | 107 views.

NAPE East logo

If you are, please consider sending any photos you make take at the event (especially your own booth) to marthamills22@gmail.com.

AAPL Education Events Through May 2013

Created by: Martha Mills at 3/6/2013 12:06:59 AM | 0 comments. | 126 views.

Education Events

Landman 411 Series: ALL SESSIONS

Wednesday, January 23, 2013 - Monday, December 16, 2013

Field Landman Seminar - Corpus Christi, TX – ONSITE REGISTRATION ONLY

Thursday, March 07, 2013
2 CE credits

Pooling Seminar- Pittsburgh, PA – ONSITE REGISTRATION ONLY

Friday, March 08, 2013
5 CE credits

Landman 411 Series: Encumbrances - Fort Worth, TX – ONSITE REGISTRATION ONLY

Monday, March 11, 2013
3 CE credits

Oil and Gas Land Review, CPL/RPL Exam -Bakersfield, CA – ONSITE REGISTRATION ONLY

Wednesday, March 13, 2013 - Saturday, March 16, 2013
18 General CE credits / includes 1 Ethics

2013 Mining & Land Resources Institute- Reno, NV – ONLINE REGISTRATION CLOSES 3/5/13 AT 12:00 PM

Thursday, March 14, 2013 - Friday, March 15, 2013
14 General CE credits / Includes 1 Ethics

JOA Workshop - Midland, TX

Wednesday, March 20, 2013 - Thursday, March 21, 2013
14 CE credits

Field Landman Seminar - Amarillo, TX

Thursday, March 21, 2013
2 CE credits

Fundamentals of Land Practices & OPTIONAL RPL Exam - Wichita, KS

Monday, March 25, 2013 - Tuesday, March 26, 2013
7 CE credits / Includes 1 Ethics

Landman 411 Series: Parties - Fort Worth, TX

Wednesday, April 03, 2013
3 CE credits

WI/NRI Workshop - Reno, NV

Thursday, April 04, 2013
6 CE credits

Due Diligence Seminar- Grand Rapids, MI – NEW OFFERING!

Thursday, April 04, 2013
5 CE credits

Fredericksburg Land Seminar - Fredericksburg, TX – Various Topics and Speakers!

Friday, April 05, 2013 - Saturday, April 06, 2013
9 General CE credits / Includes 1 Ethics

Field Landman Seminar - Oklahoma City, OK

Thursday, April 11, 2013
2 CE credits

Pooling Seminar- Oklahoma City, OK – Filling up fast!

Monday, April 15, 2013
5 CE credits

Oil and Gas Land Review, CPL/RPL Exam - Washington, PA

Tuesday, April 16, 2013 - Friday, April 19, 2013
18 General CE credits / Includes 1 Ethics

Applied Land Practices - Denver, CO

Thursday, April 25, 2013
7 General CE credits / Includes 1 Ethics

WI/NRI Workshop - Billings, MT

Thursday, April 25, 2013
6 CE credits

Fundamentals of Land Practices & OPTIONAL RPL Exam - Fort Worth, TX

Thursday, April 25, 2013 - Friday, April 26, 2013
7 General CE credits / Includes 1 Ethics

Field Landman Seminar Jackson, MS

Thursday, April 25, 2013
2 CE credits

WI/NRI Workshop - Denver, CO

Friday, April 26, 2013
6 CE credits

2013 Southwest Land Institute - Dallas, TX

Tuesday, April 30, 2013
7 General CE credits / Includes 1 Ethics

WI/NRI Workshop - Oklahoma City

Thursday, May 02, 2013
6 CE credits

Applied Land Practices - Tyler, TX

Thursday, May 02, 2013
7 General CE credits / Includes 1 Ethics

WI/NRI Workshop - Roswell, NM

Friday, May 03, 2013
6 CE credits

Intro To Field Land Practices - Evansville, IN

Wednesday, May 08, 2013 - Thursday, May 09, 2013
13 General CE credits / Includes 2 Ethics

Landman 411 Series: Conveyances - Fort Worth, TX

Monday, May 13, 2013
3 CE credits

Oil and Gas Land Review, CPL/RPL Exam - Houston, TX

Tuesday, May 14, 2013 - Friday, May 17, 2013
18 General CE credits / Includes 1 Ethics

Pooling Seminar- Denver, CO

Friday, May 17, 2013
5 CE credits

JOA Workshop - Washington, PA

Tuesday, May 21, 2013 - Wednesday, May 22, 2013
14 CE credits

Basics of Geographic Information System - Houston, TX

Wednesday, May 29, 2013
5 CE credits

February 2013 Legal Update by James H. Dupuis, Jr.

Created by: Martha Mills at 2/19/2013 11:19:55 PM | 0 comments. | 227 views.

LOUISIANA LEGAL UPDATE

James H. Dupuis, Jr.

Dupuis & Polozola, LLC

Commissioner of Conservation Memorandum on Cross Unit Lateral Wells

On November 2, 2012, the Commissioner of Conservation issued a memorandum addressing cross unit lateral wells. The memorandum sets forth the internal policy of the Office of Conservation governing the application for and docketing of administrative hearings to consider horizontal cross unit lateral wells, and also the manner in which production proceeds are allocated to owners within each unit penetrated by the cross unit lateral well. The new policy makes it much more feasible for an operator to obtain permission to drill cross unit lateral wells.

A cross unit lateral well is a well drilled with a horizontal lateral that is completed in more than one unit. The policy requires that an applicant seeking permission to drill a cross unit lateral well must obtain the consent of a majority of owners having the right to drill, including working interest owners and unleased mineral owners, if applicable, for each unit penetrated by the proposed well, and also including the current unit operators of all units penetrated by the proposed well.

Production from a cross unit lateral well will be allocated first to each unit based on the “perforated length of the lateral” located in each unit, specifically in the same proportion as the perforated length of the lateral in each unit bears to the total length of the perforated lateral as determined by an as drilled survey. Then, within each unit, production will continue to be shared on a surface acreage basis. “Perforated length of the lateral” is defined in the memorandum as the length of horizontal lateral wellbore wherein perforations have been made, regardless of the number of perforated stages or individual perforations, which is measured from the lesser measured depth perforation, or “top of perforations” to the grater measured depth perforation or “base of perforations”.

The new policy applies only to cross unit lateral wells proposed in “shales, tight gas sands, and unconventional reservoirs.”

Commissioner of Conservation Authorized to Approve Alternate Unit Wells

A lawsuit was filed by the owners of land subject to a mineral servitude against the Commissioner of Conservation alleging that he was not authorized to approve alternate unit wells. The First Circuit Court of Appeal, in an opinion not yet released for publication, ruled against the plaintiffs and held that approving alternate unit wells was within the statutory authority of the Commissioner of Conservation. Walker v. J-W Operating Company, 2012 WL 6677913, (La.App. 1 Cir. 12/21/12).

The power and authority of the Commissioner of Conservation stems from the Conservation Act, found in La. R.S. 30:1, et seq. The Court framed the plaintiff’s argument as follows. Because La. R.S. 30:9 defines a drilling unit as “the maximum area which may be efficiently and economically drained by one well”, the Commissioner is not authorized to approve more than one well in each unit. Plaintiffs also stressed that the words “alternate wells” are not found anywhere in the Conservation Act until 1999, when La. R.S. 30:5.1(I), which pertains to deep well pools.

The Court analyzed the various provisions in the Conservation Act, stating that the Commissioner has the authority to make reasonable rules, regulations, and orders, and to take any action as reasonably appears to him to be necessary to enforce the Act. When new technology and findings indicate that a unit cannot be drained by one well, these provisions allow the Commissioner to authorize alternate unit wells, after holding a hearing on the matter.

Several other justifications were offered by the Court in support of its holding. It noted that that the Commissioner had been approving alternate wells since 1963, for almost 50 years, stating that because the Commissioner is charged with administering the Conservation Act, his construction of the statute is to be given substantial weight in its interpretation by the Courts. The Court also viewed the 1999 amendment to La. R.S. 30:5.1(I) as simply recognizing the Commissioner’s longstanding authority to approve alternate unit wells. Finally, the Court rejected the plaintiff’s notion that the Commissioner should have instead reconfigured the units to create smaller units once it was determined that one well could not efficiently and economically drain the units, stating that doing so would be inequitable and would not maintain the equity of the mineral owners. Instead, “an alternate unit well provides a reasonable method of insuring the continuation of the just and equitable sharing of production within the unit.”

Act 312 Does Not Cap Remediation Damages in Legacy Lawsuits

In State of Louisiana and the Vermilion Parish School Board v. The Louisiana Land and Exploration Company et al., 2013 WL 360329 (La. 1/30/2013), the Louisiana Supreme Court interprets Act 312 of 2006 (codified in La. R.S. 30:29) as permitting courts to award damages in a legacy lawsuit in excess of the amounts necessary to fund the court-approved remediation plan.

The State of Louisiana and the Vermilion Parish School Board filed the suit seeking damages and remediation of property allegedly polluted by oil and gas exploration and production in East White Lake Field. The oil, gas, and mineral lease at issue was granted in 1935 and did not contain a contractual provision regarding restoration of the surface. The defendants filed a motion for partial summary judgment asserting that the plaintiffs had no right to seek remediation damages in excess of those found necessary to fund the remediation plan approved by the trial court pursuant to Act 312. The defendants contended that such “excess” damages could only be awarded under the terms of an express contractual provision regarding the lessee’s remediation obligation, which the 1935 lease did not contain. The trial court agreed with the defendants. Review of the case by the Court of Appeal, and then by the Louisiana Supreme Court, followed.

The Louisiana Supreme Court begins by detailing the legal and historical development of Act 312, including a discussion of the Corbello case (Corbello v. Iowa Production, 850 So.2d 686 (La. 2003)). In Corbello, the Court noted that the legislature had not implemented a procedure to ensure that landowners will use the money obtained in a remediation suit to clean the property and that, in response, the Legislature passed Act 312 in 2006.

The Court then analyzes the procedure for a remediation suit under Act 312. First, a suit seeking damages covered by the act is filed. Notice is provided to the Commissioner of Conservation and the state attorney general, who may intervene in the case if they wish. The case proceeds to trial in the same manner as any other proceeding, utilizing normal trial procedures. If it is determined at trial that environmental damage exists and the defendants are legally responsible for them, the statute prescribes additional, mandated procedures to be used for the determination of a remediation plan after the trial. In short, the trial court orders the responsible parties to develop a remediation plan to be submitted to the court and the Department of Natural Resources (“DNR”). DNR holds a public hearing on the submission and determines the most feasible plan to accomplish the remediation of the environmental damage while protecting the health, safety, and welfare of the public. DNR then sends its plan to the trial court, who then adopts the plan (unless a party proves that another plan is more feasible) and orders the responsible parties to fund the implementation of the plan. In making this determination, the court decides how much of the damages are to be used for remediation of the property.

Subsection D of La. R.S. 30:29 provides how the plan is to be implemented. It states that “except as provided in Subsection H of this Section, all damages . . . for the evaluation or remediation of environmental damages shall be paid exclusively into the registry of the court . . . .” The defendants in this case argued that this provision acts to cap remediation damages as the amount determined necessary to fund the court-approved plan.

The Louisiana Supreme Court rejected the defendants’ argument. The Court notes that the defendants failed to take into account the provisions of Subsection H, which the Court interprets as not precluding a landowner from pursuing a remedy or receiving an award for private claims other than those remediation damages necessary to fund the court-approved plan.

If a court awards remediation damages pursuant to an express contract provision that is a greater amount than that ordered to be placed into the court’s registry to fund the remediation plan, then the landowner is entitled to those “excess” remediation damages. Likewise, “any award” for “additional remediation” may be kept by the landowner, as well. If the money judgment for remediation exceeds the amount necessary to fund the plan, the plaintiff is granted a personal judgment for the “excess” remediation damages; plaintiff is also granted a personal judgment on his other non-remediation private claims (if he prevailed on such claims at trial).

In short, the Court has interpreted Act 312 as providing a procedural mechanism to ensure that the remediation plan approved by the trial court gets funded, but otherwise allows plaintiffs to collect “excess” remediation damages.

James H. Dupuis, Jr. is a member of the law firm of Dupuis & Polozola, L.L.C. His practice focuses on oil and gas law, including drill site and division order title examination, contract negotiation, and due diligence in connection with the acquisition and divestiture of oil and gas properties. He is licensed to practice law in Louisiana, Texas, and Kansas.

Before co-founding Dupuis & Polozola, L.L.C., Mr. Dupuis was a shareholder in the Lafayette office of Liskow & Lewis, where he practiced in the energy and natural resources section. He received a B.S. from the University of Louisiana at Lafayette in 1994, an M.S. from the University of Memphis in 1998, and a J.D. in 2001 from the Louisiana State University Paul M. Hebert School of Law, where he was a member of the Order of the Coif and the Louisiana Law Review.

Mr. Dupuis is a member of the Louisiana Mineral Law Institute Advisory Council, and has given numerous seminar presentations to various land and legal associations. He also routinely provides training and gives seminars in-house at energy companies on a variety of topics related to oil and gas law. Since 2005 he has been an adjunct professor at the University of Louisiana at Lafayette, where he teaches part of a course on petroleum land management.

January 2013 Legal Update by Jeff Lieberman

Created by: Martha Mills at 1/15/2013 2:05:13 PM | 0 comments. | 312 views.

Judicial Ascertainment Clause

B.A. Kelley Land Co., L.L.C. v. Questar Exploration and Prod. Co., 47,509 (La. App. 2 Cir.11/14/12); 2012 La. App. LEXIS 1460.

This case involves the applicability of a so-called “judicial ascertainment” clause in a mineral lease. The lessors, B.A. Kelley Land Co. and Augton Land Co., filed suit in 2009 seeking a declaration that a 1971 mineral lease had terminated. The 1971 lease covered a 40 acre tract, and was granted for a primary term of two (2) years with a customary habendum clause providing that the term of the lease would continue so long as minerals were produced thereafter from the leased premises or lands pooled therewith. The lease also contained a shut-in rental provision allowing the lessee to pay shut-in rentals to maintain the lease in the event production was shut in by reason of force majeure, lack of market at the well, or lack of an available pipeline outlet in the field. The lease further contained the following “judicial ascertainment” provision:

After production of oil, gas, sulphur, or other mineral has been secured from the land covered hereby or land pooled therewith, this lease shall not be subject to forfeiture or loss, either in whole or in part, for failure to conduct operations in compliance with this contract except after judicial ascertainment that Lessee has failed to conduct such operations and has been given a reasonable opportunity after such judicial ascertainment to prevent such loss or forfeiture by complying with and discharging its obligations as to which Lessee has been judicially determined to be default.

A well was drilled on acreage pooled with the leased premises in 1974, which remained a producing well at the time suit was filed; however, the lessors alleged that there was no production or operations sufficient to maintain the lease during an eleven month period in 1988 and 1989. The lessors further alleged that the lease terminated automatically due to this lack of production in paying quantities, and that, if the lease terminated automatically in this manner, the judicial ascertainment clause was null and void.

In response to the plaintiffs’ petition, the defendants filed answers that separately raised the judicial ascertainment clause as a dilatory exception of prematurity and as an exception of no cause of action. The defendants conceded that the lessee received no royalty checks for the time period at issue, but claimed that the gas purchaser halted purchases at the time due to the collapse of the gas market, causing the operator to go bankrupt, and that the lessee received a proportionate share of a settlement between the bankruptcy estate and the gas purchaser. Thus, the defendants asserted, production did not simply cease such that the lease would automatically terminate.

At trial, the court ruled that the matter was premature as to both sets of defendants–those raising the exception of prematurity and those raising the exception of no cause of action–dismissing the plaintiffs’ claims without prejudice but barring the plaintiffs from amending their petition to assert a claim for judicial ascertainment because it would be inconsistent with a claim for lease termination.

On appeal, the plaintiffs asserted, among other assignments of error, that the exception of no cause of action cannot apply to a theory of prematurity based on a judicial ascertainment clause when a dilatory exception of prematurity was waived by certain defendants who did not raise the dilatory exception in a timely fashion. Although the court recognized the Louisiana Supreme Court’s admonition against conflating the two exceptions, the plaintiffs’ assignment of error in this respect was held to be without merit because those defendants raising the no cause of action exception did so on their own, setting forth the bounds of the controversy and focusing the court’s attention on the true issue, rather than the trial court simply supplying the exception on its own.

Turning to the judicial ascertainment clause, the plaintiffs argued that the lease terminated automatically upon the occurrence of an express resolutory condition. Namely, failure to produce in paying quantities. They further argued that this occurrence terminated the lease without the necessity of a putting in default, a long line of Louisiana cases hold that a “notice and cure” provision such as the judicial ascertainment clause does not apply when the lease automatically terminates, and that the provision violated the public policy of Louisiana and similar states that limit the terms of mineral leases without operations. Finally, plaintiffs cited a Louisiana Supreme Court decision, Melancon v. Texas Co., 89 So. 2d 135 (La. 1956), rejecting the lessee’s reliance on a similar provision as “anomalous, if not ridiculous.”

The defendants’ counterargument, in essence, was that the Louisiana Supreme Court in Melancon recognized the validity of the judicial ascertainment provision, even though it was inapplicable in that case, and that in cases where a bona fide dispute exists as to whether the lease terminated the provision should be applicable as an agreement between the parties that automatic termination cannot occur without first getting a judicial ascertainment. In this case, the bona fide dispute was characterized by the defendants as whether the events during the eleven month period were a cessation of production or a pipeline curtailment.

In finding that the judicial ascertainment provision was valid and applicable, the court first compared the provision to a shut-in clause, which the court noted to be a contractual innovation to forestall the harsh consequence of automatic termination. However, unlike Melancon, where the lessee was found to have been withholding rental payments in order to induce the lessor to agree to increase the size of a unit, a bona fide dispute actually existed in this case as to whether the lease would have been maintained under the shut-in clause due to the gas purchaser’s conduct. Further, the court noted that Melancon superseded earlier cases that simply declared judicial ascertainment clauses inapplicable when a lease automatically terminates. Finally, the court rejected the public policy arguments made by plaintiffs in light of the bona fide dispute as to whether the lease was maintained under the shut-in clause and prior judicial approval of shut-in provisions as valid mechanisms to preserve a lease against forfeiture.

Although the court upheld the trial court’s decision finding the suit premature insofar as it sought a declaration that the lease had terminated instead of a judicial determination that the lessee was in default, it allowed the plaintiffs to amend their petition to assert a claim for judicial determination as being consistent with a claim for termination, characterizing the claims as two steps of the same process.

Unilateral Error in a Lease Extension

Peironnet v. Matador Resources Co., 47,190 (La. App. 2 Cir.8/1/12); 2012 La. App. LEXIS 1014.

This case involves error on the part of one party to a lease extension agreement regarding the scope of the amendment. The mineral lease at issue covered roughly 1800 acres. Nearing the time of the expiration of the original three (3) year primary term, all but 168.95 acres covered by the lease were included in Cotton Valley units that were either being operated or producing. The lease contained both a horizontal Pugh clause (concerning the deep rights) and vertical Pugh clause (concerning acreage outside of producing units). The lessors alleged that Matador and its agents sought from them an eighteen (18) month extension of the lease “as to the 168.95 acres” using a bonus calculated on that acreage amount; however, the extension agreement ultimately executed by the lessors extended the primary term of the lease by substituting the primary term of “three (3) years” with “four (4) years and six (6) months” without modifying any of the remaining terms of the lease. This resulted in an apparent extension of the lease as to all acreage and as to all depths, not merely the 168.95 acres outside of the active Cotton Valley units.

After the discovery of the Haynesville Shale, the lessors filed suit seeking reformation of the extension to make it applicable to only the 168.95 acres and not to the deep rights below unitized production for the remaining acreage, claiming that the extension was procured by fraud or that error required its reformation. Petrohawk, a third party top-lessee of the deep rights, intervened in the suit as a plaintiff. The defendants claimed that the extension agreement was clear and unambiguously extended the lease as to all acreage and as to all depths.

At trial, a partial summary judgment determined that the extension was unambiguous and eliminated all claims other than fraud, mutual error, and a claim that the lease was not maintained after the expiration of the primary term. The jury decided that mutual error was not proven, the parties stipulated that fraud was not proven, and the court held that production activity extended the lease in its entirety beyond the expiration of the primary term.

On Appeal, concerning the error-as-a-vice-of-consent issue, the plaintiffs alleged, among other assignments of error, that the trial court erred in finding the extension to be unambiguous and that the trial court erred in excluding the plaintiffs’ claim of unilateral error.

The court found the extension to be unambiguous. But, the court noted that error as a vice of consent is an exception to the “four corners” rule prohibiting introduction of testimonial or other evidence outside of document itself as to the intent of the parties. Error, as defined by Civil Code article 1949, vitiates consent where it concerns a cause without which the obligation would not have been incurred and that cause was known or should have been known to the other party. In this case, the court found that the plaintiffs’ cause or reason for granting the additional lease rights was limited to the 168.95 acres and that Matador should have known that the cause or reason for the extension was so limited. As a result of this unilateral error, the court reformed the extension to include only those 168.95 acres. However, for the one plaintiff who settled with the defendants prior to Petrohawk’s intervention, the extension was valid as to all of the leased premises notwithstanding her execution of the top lease.

ATTN: LAPL Winter 2013 NAPE Exhibitors

Created by: Martha Mills at 12/14/2012 8:20:48 AM | 0 comments. | 332 views.

NOTE TO LAPL NAPE EXHIBITORS: If you'd like a photo taken of you and your NAPE booth, please email marthamills22@gmail.com. We'll print as many photos as possible in the following issue of the LAPL newsletter.

Dec 2012 Legal Update by Lauren Gardner

Created by: Martha Mills at 12/12/2012 2:29:47 PM | 0 comments. | 424 views.

LOUISIANA LEGAL UPDATE

Does a Formal Dedication of a Public Road Convey a Servitude or Fee Title?

By Lauren Gardner

Dennis, Bates & Bullen

John Creighton Webb, Jr., et al v. Franks Investment Co., et al, 47, 321 (La. App. 2 Cir. 10/29/12), 2012 La. App. LEXIS 1340.

The Second Circuit Court of Appeal teed up this issue for the Louisiana Supreme Court to take up. In John Creighton Webb, Jr., et al v. Franks Investment Co., et al, two cases were consolidated concerning the issue of whether a servitude or fee title was given in the formal dedication of the roads. In both cases, in the early 1900s, a strip of land was dedicated for a public road. Both tracts were bisected by the roads. The ownership of the roadbeds is critical in determining who now owns the minerals underlying the roads and whether the mineral servitudes have prescribed through non-use.

The Webb Tract and Flournoy-Lucas Road

The Webb case involves a strip of land across a 1,750 acre tract in south Caddo Parish. On September 11, 1913, J. W. Railsback executed a standard form dedication with the preprinted language, “I...do hereby dedicate to the public use for a public road, the following described land,” ...“part of what is known as the Lucas-Forbing Road[,]”... “The said property to be used for public road purposes only.” On June 14, 1914, F. F. Webb executed an identical standard form dedication. On February 22, 1924, F. F. Webb executed yet another standard form dedication. The strip of land described in these dedications is now known as Flournoy-Lucas Road, which runs east-west across the middle of the tract. In May 1979, Webb’s successors partitioned the tract but retained the minerals; wells drilled north of the Flournoy-Lucas Road have been maintained without any 10 year lapse. By cash deeds in 1985 and 1997, Franks Investment acquired mineral rights and surface rights, in the tract, and leased them to Twin Cities Development, which subleased to Chesapeake. These entities maintained that the dedications conveyed to Caddo Parish full ownership of the roadbed of Flourney-Lucas Road, thus splitting the mineral servitude pursuant to La. R.S. 31:73, which provides that a single mineral servitude may not be created on two or more noncontiguous tracts of land. This article codified pre-code jurisprudence, particularly Lee v. Giauque, 154 La. 491, 97 So. 669 (1923). In accordance with this article, Franks Investment, et al, contended that operations conducted north of Flournoy-Lucas Road did not interrupt prescription as to the land south of the road and that the mineral servitude south of the road had prescribed for nonuse. Webb’s successors countered that Caddo Parish only had a right of passage or servitude that did not divide the tract and therefore the operations north of the road maintained the servitude to its south because the mineral servitude was contiguous.

The Allen Tract and Blanchard-Furrh Road

On January 31, 1928, Jacobs Land Company executed the same standard form dedication as in the Webb case with the same preprinted language, “I...do hereby dedicate to the public use, for a public road, the following described land,”..., “known as the Blanchard-Furrh Road[,]” creating a northwest and southwest portion. The form provided, “The said property to be used for public road purposes only.” In 1991, Jacobs Land Co. sold the tract but retained the minerals; Allen and 42 others are the current surface owners. In 2003, Jacobs Land Co. sold the mineral rights to Huddleston Energy Reserves, which later leased the minerals to Chesapeake. Allen and the other surface owners maintained that the 1928 dedication conveyed to Caddo Parish full ownership of the roadbed of Blanchard-Furrh Road, thus splitting the mineral servitude.

The Majority Opinion

The trial court found that Caddo Parish owned both roadbeds, thus the mineral servitudes on both tracts were divided. The Second Circuit disagreed with the trial court and found that these dedications only conveyed servitudes, not fee title. The instruments in question have no language either conveying or reserving title to the property. The proponents of public fee ownership relied on St. Charles Parish School Bd. v. P&L Inv. Corp., 95-2571 (La. 05/21/96), 674 So. 2d, claiming that “all formal dedications are, as a matter of law, conveyance of full ownership unless some contrary expression of grantor’s intent is provided.” The Second Circuit did not agree and found that the St. Charles Parish School Board case involved a tacit dedication, rather than a formal one and therefore was not controlling in the cases sub judice. The court also noted that the parties had historically treated the land underlying the roads as servitudes. Also, in 1957, the Caddo Parish Police Jury passed a resolution stating that “in order to clear the title to the ownership of the mineral rights under a public road the Caddo Parish Police Jury hereby declares that it makes no claim to the ownership of the mineral rights by virtue of the deed.” In 1983, the Police Jury passed another resolution stating:

[A]ll dedications of public road rights-of-way...where the dedication instruments contained statements that the property was to be used for public road purposes only and where the instruments cited no financial consideration in favor of the grantors, shall be henceforth considered by Caddo Parish only to constitute grants of public servitudes and rights-of-way,...and Caddo Lease ... will cover and affect the lands and depths described in the Prior Lease only Parish does hereby waive all present and future claims to fee title and to mineral rights relating to the property described in such instruments.

This Resolution was immediately recorded in the Conveyance Records of Caddo Parish on April 25, 1983. The court noted that obviously for the past thirty years this Resolution has influenced title work in Caddo Parish. The Second Circuit held that the dedications in the cases sub judice clearly support the conclusion that only a servitude was given because (1) there was no language dedicating fee title to Caddo Parish; (2) there was no compensation given; (3) there were specific limitations on the purpose for which the property could be used; and (4) the dedications have been historically treated as servitudes. The court further found that the intent of the dedications can be known from the deeds, but if ambiguous, the extrinsic evidence make clear the intent to give only a servitude, because the 1983 resolution was a formal act sufficient to relinquish the Parish’s alleged and contested fee ownership and mineral rights to the strips of land in favor of a servitude.

The Concurring Opinion

Judge Caraway opined that he would have held that the formal dedications, on the face of the instruments alone, would place complete ownership in Caddo Parish. However, he concurred with the majority’s opinion that only servitude was conveyed in these dedications because of the 1983 resolution by Caddo Parish. He further noted that his opinion was also persuaded by the significant effect upon land and mineral transactions subsequent to 1983 which the recorded resolution certainly caused.

The Dissenting Opinion

Judge Moore dissented because in his opinion, the St. Charles Parish School Bd. case decided by the Louisiana supreme court was controlling and therefore these formal dedications would transfer ownership of the property to Caddo Parish because they did not contain any express or implied retention of ownership. Likewise, he was unpersuaded by the extrinsic evidence in these cases because he found it to be hearsay without any probative value.

Conclusion

Throughout this Opinion, the Second Circuit notes that this issue needs to be taken up by the Louisiana Supreme Court. The majority and concurrence feel that this is a res nova issue, while the dissent believes the court needs to either affirm, clarify or reverse its ruling in St. Charles Parish School Bd. v. P&L Inv. Corp., 95-2571 (La. 05/21/96), 674 So. 2d. Either way, we should all follow this case as it moves forward because this decision may have a significant impact on mineral ownership throughout our state.

A copy of the case discussed above may be obtained upon request from Lauren L. Gardner by facsimile (337-233-9095) or e-mail (gardner@dbblaw.net).

Lauren L. Gardner is an associate in the Lafayette office of Dennis, Bates & Bullen, L.L.P. She was born March 25, 1981, in Cut Off. She graduated from Louisiana State University in 2003 with a B.A. in History and graduated from Louisiana State University School of Law in 2006 with a J.D. and a B.C.L. During law school, Ms. Gardner was a law clerk for Chief Judge Henry N. Brown, Jr. at the Second Circuit Court of Appeals. Ms. Gardner is admitted to the bar in Louisiana, the United States District Courts for the Western, Middle and Eastern Districts of Louisiana, and the United States Fifth Circuit Court of Appeals. She is also on the board of the Lafayette Young Lawyers’ Association and the Editorial Committee of The Promulgator.

Nov 2012 Legal Update by Ashley Green

Created by: Martha Mills at 11/14/2012 7:39:38 AM | 0 comments. | 407 views.

The Transfer of Lands Fronting Waterways, Highways, Etc.

By Ashley Green

Gordon Arata Law Firm

Last year, for the LAPL November 2011 Legal Update, a former colleague and I wrote an article entitled To Fee Or Not Fee, That Is The Question; Distinguishing Between Acts Of Sale And Rights Of Way. Within that article, we illustrated the importance of being able to distinguish a right of way deed from an act of sale, as the ownership of minerals in and to roads, canals and railbeds may not necessary lie with the adjacent landowner. Our note that the tiniest pieces of land often cause the biggest complications still rings true. The acquisition by Lamson Petroleum in the mid-1990’s, for example, of certain leases covering various roadbeds spawned multiple lawsuits that lasted years. As a brief background to the Lamson cases, various companies, including Hallwood Petroleum, began exploring for oil and gas in the Scott area. Aware of this, Lamson researched the public records and found that certain roadbeds in the area covered by Hallwood’s mineral leases may not have been owned by Hallwood’s lessors. Lamson then secured mineral leases from the people it believed to be the proper owners of the roadbeds, filed petitory actions against those Hallwood claimed owned and/or received oil, gas and mineral royalties from the Scott Field production, and asserted its ownership claim and/or right to share in the production proceeds. Lamson was successful in many instances.

Prior to 1956, a sale of land by fixed boundaries was known as a sale per aversionem, principled upon the theory that in a sale, the purchaser acquires only the land included within the designated boundaries. The principle applied with equal force when a sale designated a right of way as a boundary. For instance, if a sale described the property being sold as bounded to the north “by a right of way” or “by a public road,” the sale did not include the roadbed. Ignoring the lack of any practical benefit to the grantor of title retention to small pieces of land, courts found this rule to have a sound basis: It effectuated the intent of the parties, who had definitely fixed the perimeter of the property by contract. State Through Dept. of Highways v. Tucker, 247 La. 188, 170 So.2d 371 (La. 1965). The sale per aversionem principle also applied in interpretation of property conveyed through will and acts of partition. Lamson Petroleum Co. v. Hallwood Petroleum, Inc., 770 So.2d 786 (La. App. 3 Cir. 2000).

While courts may have thought the theory to be “sound,” the unfortunate effect was the creation of small fractional strips of land and confusing land titles. In 1956, the Louisiana legislature attempted to correct this problem by enacting La. R.S. 9:2971, et seq. La. R.S. 2971 provided that any transfer, conveyance, surface lease, mineral lease, mortgage or any other contract, or grant affecting land described as fronting on or bounded by a waterway, canal, highway, road, street, alley, railroad, or other right-of-way, shall be held, deemed and construed to include all of grantor's interest in and under such waterway, canal, highway, road, street, alley, railroad, or other right-of-way, whatever that interest may be, in the absence of any express provision therein particularly excluding the same therefrom.

The Legislature further required that persons affected by the statute had set certain period of time within which to preserve their rights:

Any person who has made a transfer or other grant affecting land so described, their heirs or assigns, whose rights may be affected hereby, shall have a period of one year from August 1, 1956, within which to preserve and protect such rights, by: (a) filing suit in each parish where such land is situated, asserting such rights, or (b) by recording a notarized declaration asserting such rights in the conveyance records of each parish where such land is situated within such one year period; and in case neither said method of preserving such rights is followed within one year from August 1, 1956, said rights shall be forever barred. (La. R.S. 9:2973)

However, in State Through Dept. of Highways v. Tucker, 247 La. 188, 170 So.2d 371 (La. 1965), the Louisiana Supreme Court rejected the preservation requirement and found that the statute could not be applied retroactively. The Court reasoned that to do so would unconstitutionally impair the obligation of contracts and divest owners of vested rights in property.

La. R.S. 9:2971 had other problems as well. Under the version of La. R.S. 9:2971 before its 2003 amendment, a property description that simply referred to a right of way but did not state that it is bounded by or fronting on a right of way was not subject to the conclusive presumption. In Crown Zellerbach Corp. v. Heck, 407 So.2d 770, 773–74 (La.App. 1 Cir.1981), a case involving mineral rights, the First Circuit interpreted the phrase “described as fronting on or bounded by” in R.S. 9:2971 and found that the presumption did not apply. In Crown, the property description in the deeds did not describe the property as “fronting on or bounded by” the highway or right-of-way. The court found that the omission evidenced the intent to convey only the property included within the exact and precise limits of the surveyed description. In 2003, the legislature amended the statute to provide for other means of describing the property. The legislature added: “or as described pursuant to a survey or using a metes and bounds description that shows that it actually fronts on or is bounded by” before the phrase “a waterway, canal, highway, road, street, alley, railroad, or other right-of-way[.]” Again, this conclusive presumption does not have retroactive effect for surveys prior to 2003.

Fall 2012-Winter 2013 AAPL EDUCATION EVENTS

Created by: Martha Mills at 11/12/2012 4:46:51 PM | 0 comments. | 390 views.

November 14-17, 2012 – ONSITE REGISTRATION ONLY
Oil & Gas Land Review, CPL/RPL Exam
Fort Worth, TX
18 RL/RPL/CPL CE Credits (including 1 ethics credit)
*FLYER WITH REGISTRATION FORM*

November 15, 2012- ONSITE REGISTRATION ONLY
Field Landman Seminar
Lafayette, LA
2 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*

November 30, 2012 - REGISTER ONLINE HERE
Oil & Gas Titles Workshop
Pittsburgh, PA
7 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*
LIMITED SPACE AVAILABLE!

December 6, 2013 - REGISTER ONLINE HERE
Field Landman Seminar
Mars, PA
2 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*

December 6-7, 2012- REGISTER ONLINE HERE
Fundamentals of Land Practices & Optional RPL Exam
Williamsport, PA
7 RL/RPL/CPL CE Credits (including 1 ethics credit)
*FLYER WITH REGISTRATION FORM*

December 12-13, 2012- REGISTER ONLINE HERE
JOA Seminar- Comprehensive Review of Operating Agreements and Well Trades
Denver, CO
14 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*

December 14, 2012 - REGISTER ONLINE HERE
Working Interest/ Net Revenue Interest Calculations Workshop
Fort Worth, TX
6 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*
LIMITED SPACE AVAILABLE!

2013 CLASSES

January 10-11, 2013- REGISTER ONLINE HERE
Principles of Land Practices and Optional RPL Exam
Houston, TX
14 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*

January 15-16, 2013- REGISTER ONLINE HERE
JOA Seminar- Comprehensive Review of Operating Agreements and Well Trades
Lafayette, LA
14 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*

January 23-26, 2013 - REGISTER ONLINE HERE
Oil & Gas Land Review, CPL/RPL Exam
Tulsa, OK
18 RL/RPL/CPL CE Credits (including 1 ethics credit)
*FLYER WITH REGISTRATION FORM*

January 24, 2013- REGISTER ONLINE HERE
Field Landman Seminar
Roswell, NM
2 RL/RPL/CPL CE Credits
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January 28, 2013 - REGISTER ONLINE HERE
Oil & Gas Titles Workshop
Fort Worth, TX
7 RL/RPL/CPL CE Credits
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February 1 – 2, 2013- REGISTER ONLINE HERE
Fundamentals of Land Practices & Optional RPL Exam
Denver, CO
7 RL/RPL/CPL CE Credits (including 1 ethics credit)
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February 12-13, 2013- REGISTER ONLINE HERE
Introduction to Field Land Practices
Evansville, IN
13 RL/RPL/CPL CE Credits (including 2 ethics credit)
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February 21, 2013 - REGISTER ONLINE HERE
Field Landman Seminar
Greeley, CO
2 RL/RPL/CPL CE Credits
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February 26 – March 1, 2013 - REGISTER ONLINE HERE
Oil & Gas Land Review, CPL/RPL Exam
Midland, TX
18 RL/RPL/CPL CE Credits (including 1 ethics credit)
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February 26-27, 2013- REGISTER ONLINE HERE
Introduction to Field Land Practices
Canton, OH
13 RL/RPL/CPL CE Credits (including 2 ethics credit)
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Oct 2012 Legal Update by Pat S. Ottinger

Created by: Martha Mills at 10/17/2012 2:22:57 PM | 0 comments. | 452 views.

LOUISIANA LEGAL UPDATE

By Patrick S. Ottinger

Ottinger Hebert Law Firm

Two bills were adopted in the 2012 legislative session which should be of interest to landmen. They are the following, to-wit:

A. Act No. 795 enacting La. Rev. Stat. Ann. § 30:28I:

“Pre-Entry Notice” to Surface Owner

Act No. 795 of 2012 enacts La. Rev. Stat. Ann. § 30:28I. That statute directs the Commissioner of Conservation to hold a rule-making hearing under the Administrative Procedure Act and thereafter “promulgate rules, regulations, and orders necessary to require an operator, agent, or assigns, to provide a single notice to the surface owner of lands on which the drilling operations are to be conducted.” That notice is referred to in the statute as a “pre-entry notice.”

The statute provides the following parameters to be embodied in the rule to be promulgated by the Commissioner of Conservation, to-wit:

(a) The “pre-entry notice” must be sent to the surface owner no less than thirty days prior to construction operations of a drilling location on the property by the operator for the purpose of commencing drilling operations on the well described in the “pre-entry notice.” The notice must be provided “in the form required by the commissioner,” and no subsequent notice to the surface owner is required.

(b) The “pre-entry notice” must include the following information, to-wit:

(i) The contact name, email address, and phone number for the operator.

(ii) The proposed well name and pad location including section, township, range, and surface plat of the pad location, if available.

(iii) A statement that the operations will commence sometime later than thirty days after the date of the notice.

(d) If the operator is facing “loss or termination of a mineral lease,” or if other “emergency circumstances” might exist, the operator may make application to the Commissioner to either waive the necessity for the “pre-entry notice” or “reduce the thirty-day requirement for such notice.” The Commissioner may act in respect of such notice “without notice or hearing.”

(e) No “pre-entry notice” is necessary “for preparatory activities such as an inspection, surveying, or staking.” Further, it is provided that neither the statute nor the rules promulgated pursuant thereto “shall be construed as altering or reducing the doctrine of correlative rights or altering or reducing the operator’s obligation to conduct his operations with due reducing the operator’s obligation to conduct his operations with due regard for the rights of the surface owner.”

(f) If an existing drilling pad is already located on the property, no “pre-entry notice” is necessary unless the operator intends to “expand the drilling pad or access road.”

The statute defines a “surface owner” as “the person or persons shown in the assessor’s rolls of the parish as the owner of the surface rights for the land for which a pre-entry notification would be required.”

Finally, it is stated that, “[a]fter receipt of the pre-entry notice, the surface owner shall make no alterations to a completed drilling location with the malicious intent to interfere with the drilling operations for which the owner received the pre-entry notice.”

Comments

Existing law already provides for a notice to the land owner if the well is proposed to be drilled at a location within five hundred (500’) feet of any “residential or commercial structure.”

If the land is not subject to a mineral servitude, the land owner would own the “right” to the minerals in the land and, presumably, has granted a mineral lease to the operator such that the statute does not apply by reason of the existence of a “contractual relationship” with the surface owner. Thus, seemingly, the statutory definition of “surface owner” is intended to be a landowner whose land is subject to a mineral servitude; only such a person would be considered the “owner of surface rights for the land.”

By tethering the determination of who is a “surface owner” to whom a “pre-entry notice” is due, to the records of the Assessor, rather than of the Clerk of Court, the statute imposes a new burden on an operator; one would think that the records of the Assessor do not permit one to discern whether assessed land is, or is not, subject to a mineral servitude.

If land is co-owned, and the operator has obtained the consent of not less than eighty (80%) per cent of the owners of the land, the operator may lawfully operate, even if some interest less than twenty (20%) per cent has not consented to the operation. It is unclear if this right to operate is impeded by this statute.

If a well is producing and is later deepened or sidetracked (as opposed to merely being reworked), it is not clear if another “pre-entry notice” is required. Such an activity involves the use of a drilling rig. Hopefully, this will be clarified in the rule to be promulgated by the Commissioner of Conservation.

Although it is provided that no “pre-entry notice” shall be required if the operator has a “contractual relationship” with the surface owner, a question is presented as to whether a party operating under a farmout agreement meets this definition. Until such an operator has drilled a well and earned an assignment of the mineral lease, it is a stranger to the surface owner, and probably cannot be said to have a “contractual relationship” with the lessor.

One might also be concerned that the carve-out for “loss or termination of a mineral lease” might not be sufficient protection to an operator who, while not facing lease termination within a month, still is subject to contractual limitations whereby it cannot operate, say, during a hunting or agricultural season – a not uncommon provision in certain parts of the state. Hopefully, this circumstance would constitute an “emergency circumstance” in the eyes of the Commissioner of Conservation.

The statement that the “surface owner shall make no alterations to a completed drilling location with the malicious intent to interfere with the drilling operations for which the owner received the pre-entry notice,” is not particularly comforting if it is to be inferred that interference by the surface owner is problematic only if it is “malicious.” “Self-help” is never condoned by the courts, and this should not be construed as altering that well-established tenet.

Act No. 743 amending La. Rev. Stat. Ann. § 30:5.1 and enacting La. Rev. Stat. Ann. § 30:5.1B:

Authority of the Commissioner to Create Units for “Ultra Deep Structures”

In 1999, the Legislature adopted Act No. 1094 which enacted La. Rev. Stat. Ann. § 30:5.1. That statute authorized the Commissioner to create a unit for a “deep pool” which is a “pool at a depth in excess of fifteen thousand feet true vertical depth.”

By Section 1 of Act No. 743, the text of La. Rev. Stat. Ann. § 30:5.1 was renumbered so that the authority to create a unit for a “deep pool” has been continued – with very minor changes -- as Part A of that statute.

Part B of that statute has now been added. It essentially mirrors the structure of Part A (pertinent to “deep pool units”), and now authorizes the Commissioner to create a unit for an “ultra deep structure,” being a “structure at a depth in excess of twenty two-thousand feet true vertical depth.”

Comments

Part A of La. Rev. Stat. Ann. § 30:5.1 (originally enacted in 1999) regulates the creation of “deep pool” units, while Part B (enacted in 2012) governs the creation of “ultra deep structure units.” For purposes of Part A, the definition of a “pool” would be the general definition of that term in the Conservation Act, which is:

“Pool” means an underground reservoir containing a common accumulation of crude petroleum oil or natural gas or both. Each zone of a general structure which is completely separated from any other zone in the structure is covered by the term “pool” as used in this Chapter. However, to promote the development and production of marginally commercial sands, a zone may contain one or more common accumulations and the overall stratigraphic interval of the zone may be considered and treated as a pool for all purposes of this Chapter.

For purposes of Part B, the term “structure” is defined “as a unique geologic feature that potentially traps hydrocarbons in one or more pools or zones.”

The maximum size of an “ultra deep structure unit” is 9,000 acres. The applicant for such a unit must submit a “plan of development,” as to which it is statutorily to be presumed “that a reasonable plan of development will include at least one well for each three thousand acres contained in the unit.” An “ultra deep structure unit” may “be served by one or more wells.”

Interested parties have the right to seek the revision or dissolution of an “ultra deep structure unit” if the Commissioner determines, after a hearing, that such relief is appropriate. In such hearing, the operator has the burden of proof. “If the commissioner determines that the unit operator has not substantially complied with the plan of development, the unit operator shall be required to show cause why the unit should not be reduced in size.”

Although Part B(11) of the statute provides that the “provisions of Subsection A of this Section shall not be applicable to any unit well drilled in a unit established pursuant to this Subsection,” that language would not seem to explicitly state that a “deep pool unit” could not be created for subsurface depths deeper than 22,000 feet since such depths are, obviously, also deeper than 15,000 feet.

Part B(13) of the statute reads, as follows:

While the provisions of this Subsection authorize the initial creation of a single unit to be served by one or more wells, nothing herein shall be construed as limiting the authority of the commissioner to approve the drilling of alternate unit wells on drilling units established pursuant to R.S. 30:9(B).

This passage parallels the corresponding provisions in Part A(9) of the statute. This express reference to “alternate unit wells” in La. Rev. Stat. Ann. § 30:5.1(9), prior to the enactment of Act No. 743, was cited as legislative recognition of the authority to create such units, by the court in a case challenging the authority of the Commissioner to designate alternate unit wells.

Pat Ottinger is a partner in Ottinger Hebert, L.L.C., where he has practiced oil and gas law since 1974. He is a graduate of the Paul M. Hebert Law Center at Louisiana State University. He is licensed to practice in Louisiana and Texas. Since 1996, he has taught the course in Mineral Rights at the Paul M. Hebert Law Center. He is the author of A Course Book on Louisiana Mineral Rights. He is an experienced mediator and arbitrator, rendering such services through The Patterson Resolution Group. He currently serves on the Advisory Council of the Mineral Law Institute at LSU. He is a member of the Mineral Code Committee, Prescription Committee, Counter-letter Committee and the Tax Sales Committee of the Louisiana State Law Institute. He is a Past President of the Louisiana State Bar Association and served as Chair of the Mineral Law Section of that association. He served as City-Parish Attorney of Lafayette Consolidated Government from January 2004 to February 2011.

AAPL Fall Regional Institutes-UPDATED

Created by: Martha Mills at 7/30/2012 10:50:30 AM | 0 comments. | 664 views.

October 18, 2012- REGISTER ONLINE HERE (REGISTRATION CLOSES AT 10 A.M., MONDAY, OCT. 15)
Field Landman Seminar
Oklahoma City, OK
2 RL/RPL/CPL CE Credits
*FLYER WITH REGISTRATION FORM*

October 18-19, 2012 – REGISTER ONLINE HERE (REGISTRATION CLOSES AT 10 A.M., MONDAY, OCT. 15)
Gulf Coast Land Institute
Lafayette, LA
11 RL/RPL/CPL CE Credits
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October 25, 2012- REGISTER ONLINE HERE
Field Landman Seminar
Williston, ND
2 RL/RPL/CPL CE Credits
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October 27, 2012- REGISTER ONLINE HERE
Division Order Process
San Antonio, TX
7 RL/RPL/CPL CE Credits (including 1 ethics credit)
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November 5-6, 2012- REGISTER ONLINE HERE
JOA Seminar- Comprehensive Review of Operating Agreements and Well Trades
Houston, TX
14 RL/RPL/CPL CE Credits
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November 12, 2012 - REGISTER ONLINE HERE
Working Interest/ Net Revenue Interest Calculations Workshop
Midland, TX
6 RL/RPL/CPL CE Credits
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November 14, 2012 - REGISTER ONLINE HERE
Working Interest/ Net Revenue Interest Calculations Workshop
Houston, TX
6 RL/RPL/CPL CE Credits
FILLING UP FAST!
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November 14-17, 2012 - REGISTER ONLINE HERE
Oil & Gas Land Review, CPL/RPL Exam
Fort Worth, TX
18 RL/RPL/CPL CE Credits (including 1 ethics credit)
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November 30, 2012 - REGISTER ONLINE HERE
Oil & Gas Titles Workshop
Pittsburgh, PA
7 RL/RPL/CPL CE Credits
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December 6-7, 2012- REGISTER ONLINE HERE
Fundamentals of Land Practices & Optional RPL Exam
Williamsport, PA
7 RL/RPL/CPL CE Credits (including 1 ethics credit)
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December 12-13, 2012- REGISTER ONLINE HERE
JOA Seminar- Comprehensive Review of Operating Agreements and Well Trades
Denver, CO
14 RL/RPL/CPL CE Credits
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December 14, 2012 - REGISTER ONLINE HERE
Working Interest/ Net Revenue Interest Calculations Workshop
Fort Worth, TX
6 RL/RPL/CPL CE Credits
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PLEASE CONTACT DONDRIA ROOZEE AT DROOZEE@LANDMAN.ORG WITH ANY QUESTIONS.

UL PLM program meeting tonight

Created by: Bill Justice at 7/26/2012 9:42:57 AM | 0 comments. | 683 views.

Dear Lafayette-based friends of UL Lafayette’s Moody College of Business Professional Landman Program:

I have been in my capacity as Dean of the College of Business here at UL for five years now and have had the pleasure of meeting a number of you either at the annual LAPL golf outing or at one of its local chapter meetings. During this period, we have faced significant challenges and yet I am happy to report that we have had many significant achievements as well. The program coordinator, Mr. Buster LeBlanc, whom many of you know, has done a yeoman’s job in achieving these successes for our students and for the industry.

I would like to invite you to a meeting on the program and its future, this week on Thursday July 26^th, 2012 at 3:30pm on the UL Campus in Abdalla Hall on Devalcourt Street in Lafayette. Abdalla Hall is across the street from the LITE Center. I am sorry for the short notice and hope many of you can make the meeting.

Sincerely,

Joby John, PhD

Dean

B.I. Moody III College of Business Administration

The University of Louisiana at Lafayette

Summer 2012 Legal Update by Andrea Knouse

Created by: Martha Mills at 7/18/2012 11:20:38 PM | 0 comments. | 703 views.

LOUISIANA LEGAL UPDATE

By Andrea Knouse

Mayhall & Blaise

The Louisiana Court of Appeal for the Second Circuit recently decided Cason v Chesapeake Operating, Inc., 47,084, 2012 WL 1192404 (La. App. 2 Cir. 4/11/12), In said case, the Court discussed what constitutes “engaged in operations for drilling” on a lease premises so as to continue the lease beyond its primary term as well as interpreted the “adjacent land clause” found in numerous oil, gas and mineral leases.

Plaintiffs, Edgar and Flora Cason, appealed a Judgment from the District Court granting Defendants, Empress Louisiana Properties, et al, a preliminary injunction prohibiting Plaintiffs from interfering with the construction of a pipeline on Plaintiffs’ leased property.

Plaintiffs executed an oil, gas and mineral lease on about 7,200 acres of land in favor of Pride Oil & Gas which, with exercised extensions, would terminate on May 31, 2010. Also included in said lease was a clause which stated that the lease would remain in existence as long as the lessee is “engaged in operations for drilling”, another allowing ingress and egress to the lease tract on “adjacent lands” to construct necessary roads and pipelines, and the right to assign the lease in whole or in part. Through various assignments, Chesapeake, parent company of Empress, acquired said lease. Plaintiffs argue that Defendants failed to engage in activities that would maintain the lease beyond May 31, 2010, as no drilling permit was obtained from the Office of Conservation and, thus, executed an oil, gas and mineral lease in favor of Goodrich. However, on May 28, 2010, Defendants entered the lease tract, on May 29 and 30, Defendants entered onto the tract to cut trees and stack lumber. The well was not spud until July 22, 2010. Plaintiffs alleged to the District Court that the minor work performed between May 29-30 did not constitute “operations for drilling” which would maintain the lease beyond its primary term and refused to allow Defendants to lay pipeline on an adjacent tract owned by Plaintiffs.

During the trial at the District Court level, Defendants offered testimony from various witnesses relative to its operations and activities on the leased premises. A senior landman testified that while Defendants did not obtain a drilling permit during the primary term of the lease, they did complete surveys that were vital to drilling within the primary term. A corporate representative for Defendants testified that Defendants hired a surveying company on April 26, 2010, surveyors were on the ground May 4-7 tying off corners, and were staking the pad May 26-28. A manager of gas sales for Defendants testified that he started researching production issues on May 10, and the only feasible option was to run the gas through a tract of Plaintiffs’ land adjacent to the leased premises. The District Court gave the most weight to the testimony of an expert oil and gas attorney, Philip N. Asprodites. Mr. Asprodites reviewed all of the Defendants’ activities prior to May 31, 2010, and concluded while it was not “standard practice” to engage so many activities-putting surveyors on the ground, staking the well and cutting trees to lay the road-and not obtain a drilling permit until 45 days after the end of the primary term, Defendants nonetheless “commenced drilling operations.” He further testified that it did not matter that the drilling permit was not obtained during the primary term, stressing that the lease tract posed special difficulties requiring extensive preparatory work. We note that the Judgment of the Second Circuit does not elaborate as to what may be the “special difficulties” relating the leased premises.

The District Court determined that Defendants were engaged in good faith drilling operations prior to the end of the primary term and granted a preliminary injunction against Plaintiffs. Plaintiffs appealed alleging, among other claims, Defendants failed to make a prima facia case for maintaining the lease beyond the primary term.

Engaging in Operations

Plaintiffs allege that Defendants failed to apply for a drilling permit during the primary term, surveryors failed to complete drilling surveys, no equipment was moved onsite, and no pits were dug in connection with the drilling of a well. Moreover, Plaintiffs contend that no Louisiana case has ever maintained a lease on such minimal conduct of the lessee. Defendants counter that courts have held preliminary acts began in good faith constitute commencement of drilling operations under the “engaged in operations” clause.

The Court states that the crucial question is whether Defendants’ activities on the leased premises amount to “engaged in operations for drilling” and cite Allen v Continental Oil Co.

The general rule seems to be that actual drilling is unnecessary, but that the location of wells, hauling lumber on the premises, erection of derricks, providing a water supply, moving machinery on the premises and similar acts preliminary to the beginning of the actual work of drilling, when performed with the bona fide intention to proceed thereafter with diligence toward the completion of the well, constitute a commencement or beginning of a well or drilling operations within the meaning of this clause of the lease.

If the lessee has performed such preliminary acts within the time limit, and has thereafter actually proceeded with the drilling to completion of a well, the intent with which he did the preliminary acts [is] unquestionable, and the court may rule as a matter of law that the well was commenced within the time specified by the lease.

255 So.2d at 845, quoting 2 Summers Oil & Gas, § 349, pp. 459–465.

The Court further held that where the lease provides for commencement of operations, the courts will hold that operations preliminary to the actual drilling of the well are sufficient compliance with the terms of the lease, provided, however, that such preliminary operations are continued in good faith, without undue delay, and with due diligence and dispatch, and thereafter the well is begun and completed.

Applying the above principals, the Court determined that although Defendants failed to obtain a drilling permit within the primary term, they performed sufficient preliminary acts by surveyors tying off section corners and gathering topographic data, finishing the survey and staking the site and access road, and logging the site. The Court placed much weight on Mr. Asprodites’ testimony that because of the “special difficulties” of the tract, extensive prep work was necessary, and the acts of the Defendants constitute “commenced operations.” Additionally, the Court states that Defendants spent $8.5 million to bring the well into operation, which shows that the preliminary actions were done for the purpose of completing the well. Thus, the lease was maintained.

Adjacent Land Clause

Plaintiffs also alleged that the preliminary injunction preventing Plaintiffs from interfering with pipeline installation was improper, as Defendants, assignees of the original lease, had no right to the land adjacent to the lease tract in Section 13. Plaintiffs contended that Defendants’ assignment was limited to the leased tract which covered lands located in Section 24.

The Court maintains that the original lease in favor of Pride Oil & Gas Properties expressly granted the lessee the right to conduct operations on adjacent or adjoining lands deemed necessary by the lessee to produce and transport oil, gas and other substances. While the partial assignment of the original lease to the Defendants may have been limited to Section 24 lands, the Court held that partial assignments do not divide a mineral lease under R.S. 31:310; therefore, the partial assignment did not sever the adjacent land clause contained in the original lease from the assignment. The Court held that Defendants had to right to lay pipeline through the adjacent land in Section 13.

ANDREA M. KNOUSE is an attorney with Mayhall & Blaize, LLC. Her practice consists of title examination, division order work, and litigation. Ms. Knouse joined Mayhall & Blaize in 2009 after graduating cum laude from the Paul M. Hebert Law Center at Louisiana State University. While in law school, Ms. Knouse was named to the Chancellor’s List five times and received the CALI Award twice for earning the highest grade in Tax Policy and Taxation of Capital Gains. Ms. Knouse graduated magna cum laude from Texas Christian University with a Bachelor of Science degree in Psychology.

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