Blogs

by:  April L. Rolen-Ogden

Currently, the talk of the town in North Louisiana is the “Haynesville Shale.” Experts describe this mineral formation “as one of the richest fields of natural gas ever discovered in this region.” Technically speaking, the Haynesville Shale is defined as “a layer of sedimentary rock more than 10,000 feet below the surface.” The Shreveport Times reports that “[a]t least 40 rigs are running now and 70 or more are to be in place by the end of next year . . .” This has been coined as the largest domestic find of natural gas in recent history.

The first Haynesville Shale EXPO, which is free to the public, is being held on November 21, 2008 at the Shreveport Convention Center. Persons and businesses interested in learning more about the Haynesville Shale and the opportunities it presents to landowners and the oil and gas exploration and production industry alike will benefit from this EXPO.

The EXPO is being presented by Petrohawk Energy, Chesapeake Energy, The Times, Devon Energy, EnCana Energy, and XTO Energy. For more information, please view the Shreveport Times article entitled First EXPO on Haynesville Shale Set for Nov. 21 at this link: http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20080916/NEWS01/80916026.

By Jonathan Hunter:

In a highly anticipated decision, the Tenth Circuit held this week that the district court had subject matter jurisdiction over a qui tam action filed by an MMS auditor concerning royalty payments on crude oil produced from offshore federal leases. The district court had dismissed the case on the grounds that the auditor, who received relevant information from an employee of the State of Louisiana, was not the “original source” of the information on which the claim was based. The appellate court reversed, holding that “the transfer of information between a federal employee and a state government auditor who is under a duty of confidentiality is not a public disclosure and therefore does not deprive the courts of jurisdiction.” The court also ruled that “Mr. Maxwell was not prevented from serving as a relator on the basis that he is a federal auditor who discovered the information underlying his suit in his official governmental role.” A link to the decision is attached.

http://www.ca10.uscourts.gov/opinions/07/07-1193.pdf

The Environmental Protection Agency announced several updates to its Audit Policy this month that promise to make the system more convenient for users and more forgiving for new owners of regulated facilities. 

       Since 1995, EPA’s Audit Policy has given incentives including reduced civil penalties and a recommendation of no criminal sanctions to companies that self-disclose environmental violations. As of August 7 regulated facilities can now submit disclosures of certain violations through the Agency’s website. EPA’s new “Audit Policy Self-Disclosure System” or “eDisclosure” program lets facilities throughout the country self-report violations of the Emergency Planning and Community Right-to-Know Act online. Companies in EPA Region 6 states, including Louisiana and Texas, benefit from a more expansive pilot program that lets facilities electronically report violations of all federal environmental laws. EPA will monitor the success of the pilot program in Region 6 and determine whether to expand nationwide. Companies wishing to assert a “business confidentiality” privilege still need to submit disclosures the old fashioned way (by mail to their regional EPA headquarters), but for many regulated facilities EPA’s “eDisclosure” system offers a new, more efficient way to take advantage of the Audit Policy’s advantages.     

            EPA also gave a break to companies that acquire facilities with past environmental problems by relaxing its Audit Policy for new owners. Under EPA’s “Interim Approach to Applying the Audit Policy to New Owners,” effective August 1st, companies acquiring new facilities can greatly decrease their exposure to liability by promptly reporting pre-acquisition violations discovered during environmental due-diligence or shortly thereafter. Not all owners buying a facility will qualify as “new.” The Interim Approach excludes companies that operated the facility before the transaction or that had the largest ownership share of the other entity. But qualifying companies that disclose past violations or enter into an audit agreement with EPA during the first nine months after acquiring a facility will have more opportunities to avoid or mitigate civil penalties than long-term owners. In addition to avoiding gravity-based penalties (which is available to all owners under the Audit Policy), qualifying new owners will receive lower economic benefit sanctions as well. If the terms of the Interim Approach are met, economic benefits associated with avoided operation costs and maintenance will only be assessed from the date of acquisition and no delayed capital expenditures or unfair competitive advantage penalties will be levied if the new owner corrects the problem within 60 days of discovery or within a reasonable time agreed upon with EPA.

            Conditions restricting which violations qualify for the Audit Policy have been modified for new owners as well. Many environmental violations ineligible for voluntary self-disclosure by long-term owners can now be submitted by new owners under certain conditions. For example, new owners can now submit violations causing serious actual harm through the Audit Policy as long as the violation began before acquisition and there were no fatalities, evacuations or other catastrophic events; long term owners cannot. Also, long term owners cannot “voluntarily” disclose violations through the Audit Policy where they are otherwise required to disclose by a federally mandated monitoring, sampling or auditing procedure. New owners can still take advantage of the Audit Policy for such violations as long as they promptly disclose and enter into an auditing agreement with EPA before the date a new auditing, monitoring or sampling would be required. 

            EPA hopes the Interim Program will allow new owners to make a “clean start” by giving them incentives to report and remedy violations that began before the facility was bought. For more information about these and other incentives provided by the Interim Approach, as well as info on “eDisclosure” or the Audit Policy generally, visit the Agency’s website at http://www.epa.gov/compliance/incentives/auditing/auditpolicy.html.

The Texas Supreme Court this morning issued its long-awaited decision in Coastal Oil & Gas Corp. v. Garza Energy Trust, holding that the rule of capture bars recovery for damages for subsurface trespass caused by hydraulic fracturing. A concurring opinion and an opinion concurring in part and dissenting in part were also filed. Copies of the opinions are available at: http://www.supreme.courts.state.tx.us/historical/082908.asp

The Court also held

1. Mineral lessors with a reversionary interest have standing to bring an action for subsurface trespass causing actual injury;

2. The measure of damages for breach of the implied covenant to protect against drainage is the value of the mineral lost because of the lessee’s failure to act with reasonable prudence, and there was no evidence of such in this case;

3. Some evidence supported the jury’s finding of breach of the implied covenant to develop;

4. Some evidence supported the jury’s finding of bad faith pooling;

5. Admission into evidence of a memorandum containing a racial slur was reversible error; and

6. The trial court did not abuse its discretion in refusing to abate this case for two related cases.

Liskow attorney Everard A. Marseglia, Jr., submitted a brief as amicus curiae on behalf of the Texas Oil & Gas Association.

In March 2008, several oil and gas companies announced the finding of what could potentially be the fourth largest deposit of natural gas in the world underneath northwestern Louisiana, southwestern Arkansas, and eastern Texas: the Haynesville Shale.   

The Louisiana Natural Resources Department has now created a website to provide information to the public related to the Haynesville Shale formation.  To visit the website, click here.

A blog has also been created to provide information with respect to the area.  To visit the blog, click here.