future-focused

Fifth Circuit Considers Conditional Consent Issue in Cedyco v. Petroquest

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By Anna Knull:

In Cedyco Corp. v. Petroquest Energy LLC, No. 05-20493, the Fifth Circuit considered claims for breach of contract and specific performance brought under Texas law and arising from the sale of the working interest in two Louisiana oil wells at auction. The wells were sold under the condition that PetroQuest would not sell or assign the mineral rights without first obtaining the written consent of Exxon, from whom PetroQuest had subleased the interest. Exxon granted consent conditioned on PetroQuest remaining obligated for the original sublease and indemnifying Exxon for any liability arising from Ceydco’s operation of the lease. PetroQuest refused to complete the sale to Ceydco under these terms, and Ceydco sued PetroQuest for breach of the contract for sale and specific performance. In reversing summary judgment in favor of Ceydco, the Fifth Circuit held that though a contract for the sale of the wells had been formed, the contract contained a condition precedent that Exxon consent to the assignment. Because PetroQuest was not obligated to accept Exxon’s terms, Exxon’s conditional consent was not consent under the contract; consequently, PetroQuest’s obligation to perform under the contract never came due.

MMS’ Offshore Texas Lease Sale Successful

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MMS’s August 22, 2007 Western Gulf of Mexico lease sale offered 3,338 tracts, or approximately 18 million acres, offshore Texas.  Forty-seven companies participated, submitting 358 bids on 282 tracts.  The total of all bids received was $369,496,840.  MMS Director Randall Luthi observed that “the success of this lease sale once again demonstrates industry’s commitment and interest in the Gulf.” For more information, click here.

MMS’ Offshore Texas Lease Sale Successful

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MMS’s August 22, 2007 Western Gulf of Mexico lease sale offered 3,338 tracts, or approximately 18 million acres, offshore Texas.  Forty-seven companies participated, submitting 358 bids on 282 tracts.  The total of all bids received was $369,496,840.  MMS Director Randall Luthi observed that “the success of this lease sale once again demonstrates industry’s commitment and interest in the Gulf.” For more information, click here.

Fifth Circuit Rejects Takings Claim

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In Haspel & Davis Milling & Planting Co., Ltd. v. Board of Commissioners of the Orleans Levee District, the United States Court of Appeals for the Fifth Circuit reversed a grant of summary judgment in favor of plaintiffs on a takings claim.  In 1984, the Louisiana Legislature ordered the Levee Board to return land expropriated to build the Bohemia Spillway to its former owners and to provide them with an accounting of all revenues received from the property.   After the Levee Board failed to pay the landowners the mineral royalties that it had received on the affected property, the plaintiffs sued, arguing that the Levee Board’s continued collection of and failure to return royalties was an unconstitutional taking.  After 12 years of litigation, the parties entered a settlement agreement that provided that the Levee Board would pay one lump sum to plaintiffs and then pay further as money was appropriated for that purpose.  After the Levee Board failed to pay further, the plaintiffs filed suit in federal court in June 2006, arguing that the Levee Board’s failure to pay the terms of the settlement agreement was an unconstitutional taking.   The district court agreed.  The Fifth Circuit reversed, holding that because the landowners entered a “Settlement Agreement, the landowners compromised their takings claim against the Levee Board, and thus, extinguished any takings claim they may have had.”  Therefore, “the landowners’ only recourse is to enforce their rights under the Settlement Agreement and Consent Judgment.”  To read the full opinion, click here. 

Fifth Circuit Rejects Takings Claim

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In Haspel & Davis Milling & Planting Co., Ltd. v. Board of Commissioners of the Orleans Levee District, the United States Court of Appeals for the Fifth Circuit reversed a grant of summary judgment in favor of plaintiffs on a takings claim.  In 1984, the Louisiana Legislature ordered the Levee Board to return land expropriated to build the Bohemia Spillway to its former owners and to provide them with an accounting of all revenues received from the property.   After the Levee Board failed to pay the landowners the mineral royalties that it had received on the affected property, the plaintiffs sued, arguing that the Levee Board’s continued collection of and failure to return royalties was an unconstitutional taking.  After 12 years of litigation, the parties entered a settlement agreement that provided that the Levee Board would pay one lump sum to plaintiffs and then pay further as money was appropriated for that purpose.  After the Levee Board failed to pay further, the plaintiffs filed suit in federal court in June 2006, arguing that the Levee Board’s failure to pay the terms of the settlement agreement was an unconstitutional taking.   The district court agreed.  The Fifth Circuit reversed, holding that because the landowners entered a “Settlement Agreement, the landowners compromised their takings claim against the Levee Board, and thus, extinguished any takings claim they may have had.”  Therefore, “the landowners’ only recourse is to enforce their rights under the Settlement Agreement and Consent Judgment.”  To read the full opinion, click here. 

OPA Does Not Preclude State Law Claims for Additional Compensation

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By Drew Spaniol

The Eastern District of Louisiana recently held that the Oil Pollution Liability and Compensation Act (OPA), 33 U.S.C. § 2701 et seq., does not preclude a plaintiff from bringing state law claims for additional liability or compensation.  Isla Corp. v. Sundown Energy, LP, 2007 WL 1240212 (

E.D. La.

4/27/07).  The case concerned oil tanks on a drill site owned and operated by Sundown, which were ruptured in Hurricane Katrina. The plaintiffs asserted claims under both OPA and state law.  Seeking to avoid the additional liability of the state law claims, Sundown argued in a motion to dismiss that OPA provided plaintiffs’ exclusive remedy. The court held, however, that while OPA provides the sole federal remedy for oil pollution claims, OPA expressly allows states to provide for “any additional liability or requirements with respect to the discharge of oil or other pollution by oil within such state.”  Because of this provision, the court denied Sundown’s motion to dismiss and allowed plaintiff’s state law claims to go forward. 

OPA Does Not Preclude State Law Claims for Additional Compensation

less than a minute

 

By Drew Spaniol

The Eastern District of Louisiana recently held that the Oil Pollution Liability and Compensation Act (OPA), 33 U.S.C. § 2701 et seq., does not preclude a plaintiff from bringing state law claims for additional liability or compensation.  Isla Corp. v. Sundown Energy, LP, 2007 WL 1240212 (

E.D. La.

4/27/07).  The case concerned oil tanks on a drill site owned and operated by Sundown, which were ruptured in Hurricane Katrina. The plaintiffs asserted claims under both OPA and state law.  Seeking to avoid the additional liability of the state law claims, Sundown argued in a motion to dismiss that OPA provided plaintiffs’ exclusive remedy. The court held, however, that while OPA provides the sole federal remedy for oil pollution claims, OPA expressly allows states to provide for “any additional liability or requirements with respect to the discharge of oil or other pollution by oil within such state.”  Because of this provision, the court denied Sundown’s motion to dismiss and allowed plaintiff’s state law claims to go forward. 

Louisiana Operators Are Not Responsible For Making Non-Participants’ Royalty Payments Before Payout

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By Dana Douglas

The Louisiana First Circuit Court of Appeal recently held that an operator is not responsible for payment of a non-operator’s royalties and overriding royalties before payout.  In Gulf Explorer, LLC v. Clayton WIlliams Energy Inc., 2007 WL 1651090 (La. App. 1st Cir. 6/8/07), the operator completed a well that was plugged and abandoned without reaching payout.  A non-participating working interest owner sued, asking the court to declare that its royalty and overriding royalty owners were entitled to their share of production.  Louisiana Revised Statute 30:10 provides that the party drilling a well can recover a non-participant’s share of expenses from production, but also provides that royalty and overriding royalty owners shall receive the portion of production due them.  The court held that, because La. R.S. 30:10 allows the drilling party to recover from the tract, while royalty obligations arise from a lease, the operator had no obligation to pay royalties before it recouped its expenses from production.  Thus, the non-participant was responsible for payment of its royalty and overriding royalty payments.

 

Louisiana Operators Are Not Responsible For Making Non-Participants’ Royalty Payments Before Payout

less than a minute

 

By Dana Douglas

The Louisiana First Circuit Court of Appeal recently held that an operator is not responsible for payment of a non-operator’s royalties and overriding royalties before payout.  In Gulf Explorer, LLC v. Clayton WIlliams Energy Inc., 2007 WL 1651090 (La. App. 1st Cir. 6/8/07), the operator completed a well that was plugged and abandoned without reaching payout.  A non-participating working interest owner sued, asking the court to declare that its royalty and overriding royalty owners were entitled to their share of production.  Louisiana Revised Statute 30:10 provides that the party drilling a well can recover a non-participant’s share of expenses from production, but also provides that royalty and overriding royalty owners shall receive the portion of production due them.  The court held that, because La. R.S. 30:10 allows the drilling party to recover from the tract, while royalty obligations arise from a lease, the operator had no obligation to pay royalties before it recouped its expenses from production.  Thus, the non-participant was responsible for payment of its royalty and overriding royalty payments.

 

MMS To Prepare Environmental Assessment For Lease Sale 206 (Central Gulf)

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On June 27, 2007, the Minerals Management Service (MMS) issued its notice advising the public of its intention to prepare an Environmental Assessment (EA) for proposed OCS Lease Sale 206, which is the Central Gulf of Mexico lease sale to be held in March 2008. Notably, the EA will not include approximately 5.8 million acres located in the southeastern part of the Central Planning Area, which was made available for leasing by the Gulf of Mexico Energy Security Act of 2006. MMS believes that it would be premature to offer that area for leasing in proposed Lease Sale 206, due to the need to conduct additional environmental studies relating to the area. See 72 Fed. Reg. 35258 (June 27, 2007).