Blogs

By Jonathan Hunter:

On October 30, 2007, the Federal District Court for the Western District of Louisiana granted summary judgment in favor of Kerr-McGee Oil and Gas Corporation in a dispute between Kerr-McGee and the Department of the Interior over the enforceability of “price threshold” clauses that Interior inserted into deep water leases granted during the years 1996-2000. The court ruled that Interior’s price threshold clauses unlawfully deprived Kerr-McGee of the statutory right to produce minimum volumes of oil and gas royalty-free, as mandated by Congress in the Outer Continental Shelf Deep Water Royalty Relief Act of 1995. CLICK here to view the decision

In Martin v. JKD Investmens, LLC, the Court of Appeal of Louisiana, Second Circuit, rejected a plaintiff’s fraud claim because the plaintiff had failed to read the contract that he signed which transferred the mineral rights on his property to JKD Investments, LLC (“JKD”). 

Click here to read more. 

In Martin, the plaintiff inherited five and a half acres from his mother.  The plaintiff went to the Jonesboro State Bank to obtain a loan to begin construction of a home on his property.  The plaintiff met with Donald Joseph Allen, and employee and officer of the bank, about the loan.   The plaintiff’s sister also made an inter vivos donation to the plaintiff.  On the day that he received his sister’s property, the plaintiff conveyed the mineral rights to the entire property to JKD.  Later, the plaintiff learned that Allen owned JKD and thus the mineral rights to the property.  The plaintiff then sued Allen, Jonesboro State Bank, and JKD for fraud.

The plaintiff argued that the trial court erred when it granted the defendants’ motion for summary judgment.  He first argued that a genuine issue of fact existed as to whether he signed the conveyance of the mineral rights in the presence of a notary and any witnesses.  The court rejected this claim because a transfer of immovable property is valid by an act under private signature, and the plaintiff admitted that he signed the conveyance.  The court also rejected plaintiff’s fraud claim because, under Louisiana Civil Code article 1954, a fraud claim must fail if the plaintiff could have ascertained the truth without any difficulty, inconvenience, or special skill.  The court ultimately held that had the plaintiff read the conveyance, he could have ascertained the truth.

To read the full opinion, click here.

By Kindall James

The issue of whether an individual employee is personally liable for oilfield environmental damages was recently addressed in Kling Realty Co., Inc. v. Texaco, Inc, 2007 WL 81665 (W.D. La. 2007).  The plaintiff mineral lessors claimed that their property had been damaged by oilfield operations, and sued not only the operator, but also a production supervisor.  The plaintiffs argued that the supervisor was individually liable because in his supervisory capacity he had the duty to prevent or limit hazardous pollution affecting the property.  Finding that the plaintiff failed to present any evidence that the supervisor’s responsibilities entailed more than general administrative responsibilities or that the supervisor knew or should have known of any ongoing activities hazardous to the property, the court held that the plaintiffs could not possibly establish that the supervisor was personally liable for their damages, and dismissed the plaintiffs’ claims against him. 

In Kling, the plaintiffs filed suit in state court, and the operator removed to federal court alleging that the individual supervisor and another defendant, a well service company, had been fraudulently joined to avoid federal diversity jurisdiction. On the question of the employee’s liability, the court applied the test established by the Louisiana Supreme Court in Canter v. Koehring, 283 So. 2d 716 (La. 1973), which provides the following criteria to determine whether an individual employee is personally liable to a third party: (1) the principal or employer owes a duty of care to the third person; (2) that duty is delegated by the principal or employer to the employee; (3) the employee has breached his duty through personal (in contrast to technical or vicarious) fault; and (4) the employee owes a personal duty to the third party (not just a general administrative responsibility for some function of employment), and causes the third party damages by breaching that duty.  A supervisor, such as a plant manager, may owe a personal duty to a third person where (1) the supervisor is responsible for safe maintenance and operations and (2) the supervisor is “aware or should have been aware of a risk of harm and nevertheless failed to respond to the risk in the manner in which a reasonably prudent supervisor would respond in the same or similar circumstances.”  Finding that there was no possibility of recovery by the plaintiffs against the individual supervisor under Louisiana law, the court held that the supervisor was improperly joined. 

In Duplantier v. BP Amoco, et al., the Louisiana Fourth Circuit Court of Appeal held that under Act 312 of 2006 (La. R.S. 30:29), there should be a single trial of both the regulatory remediation covered by the statute and the plaintiffs’ separate damages claims (if any).  The Louisiana Supreme Court has now denied a writ application with respect to that opinion.  To view the Fourth Circuit’s decision, click here.  Act 312, which became effective June 8, 2006, requires involvement of the Louisiana Department of Natural Resources (DNR) in litigation alleging environmental contamination, including submission of any remediation plan to DNR for approval and the deposit of remediation funds into the registry of the court to be spent on remediation, rather than payment of those funds to the plaintiffs.  However, the statute also preserves the plaintiffs’ right to pursue any private cause of action – for example, a right under an express lease provision to a higher standard of clean-up.  Under the Duplantier decision, both the statutory remediation and any private claims will be addressed in a single trial before any plan is submitted to DNR.

The Energy Information Agency reported as follows in its September 13, 2007, report:

Since Wednesday, September 5, natural gas spot prices increased as tropical storms threatened to disrupt supplies and pipeline explosions in Mexico stirred concerns of supply security.  Crude oil recorded yet another record high, increasing over $4 per barrel to nearly $80.

Predictions for LNG markets continue to be mixed.  LNG Week in Review quotes an analysis that predicts that, as warm weather has abated across the United States, LNG import volumes have declined and predicts that gas prices will favor European destinations for LNG until next spring.  Platts LNG Daily quotes another that global LNG supplies will grow by 25% in 2008, spurring a 40% increase of LNG imports to the United States.  Platts also quotes other predictions, however, that emphasizes start-up delays and lag time before U.S. projects meet full output capacity.

The EIA also reports that:

• Storage overview.  Several pipeline companies have issued restriction notices to interruptible storage service (ISS) customers.
• Northwest Pipeline Corporation asked shippers to keep their nominations at or below 440,000 Dth at the Meacham compressor station.

Southern Natural Gas Company announced that the 20-inch Gate 6 Toca Loop line in Louisiana is out of service, and the company anticipates that it will return to service at the end of October. Furthermore, the 20-inch Main Pass Franklinton line, also located in Louisiana, was expected to return to service by September 18.  As a result of the outage on the Franklinton line, the Bayou Gentilly and Delacroix points in Louisiana also will remain out of service for the same duration.