In recent years, there has been an increase in litigation relating to the unleased owner reporting requirements contained in La. R.S. 30:103.1 and the penalty imposed in La. R.S. 30:103.2. There are few cases interpreting these statutes. However, the existing authority recognizes that even if an operator fails to comply with such reporting requirements, an unleased owner must provide sufficient notice under La. R.S. 30:103.1 and 103.2 before the statutory penalty may be imposed. The recent non-final interlocutory ruling in Limekiln Development, Inc. v. XTO Energy, Inc.,[1] provides yet another data point in an otherwise barren area of Louisiana law about the notices required under this statutory scheme in order to properly place operators on notice and to potentially impose the penalty of La. R.S. 30:103.2.
In Limekiln, Plaintiff held unleased unitized acreage that was serviced by the HA RA SUKK; Powell 15H No. 1 and the HOSS RA SUA; Powell 15H No. 1 (collectively referred to by Plaintiff as the “Unit Well.”). The Plaintiff sued the operator of the Unit Well claiming entitlement to the forfeiture penalty under La. R.S. 30:103.2. Plaintiff formally requested reports under La. R.S. 30:103.1. In response to this first demand, Defendant provided the requested reports. In a second demand under La. R.S. 30:103.2, Plaintiff alleged that the Defendant’s reports were neither in the correct format nor did they provide the sufficient level of detail, as required by the statute. The Complaint claimed that despite this second notice, Defendant failed to comply with its statutory reporting obligations.
In response to the lawsuit, Defendant filed a motion to dismiss for failure to state a claim for relief under Federal Rule of Civil Procedure 12(b)(6) on two grounds. First, Defendant cited Miller v. J-W Operating Co.[2] to argue that Plaintiff’s notice requesting reports under La. R.S. 30:103.1 was insufficient because it failed to specify the land Plaintiff claimed to own. In opposition, Plaintiff argued that Defendant sought to impose requirements that were not supported by the plain language of the statute. Plaintiff further argued that Miller was inapplicable because the unleased owner in that case “simply demanded the operator identify whatever interest the owner may have in any of the operator’s units.” Plaintiff also pointed out that while it did not provide a property description of its acreage, it “identified itself as an owner within Section 15, identified the Unit Well for which it sought information under Section 103.1, and identified Limekiln’s name, address, and taxpayer identification number.” Accordingly, Plaintiff argued the notices before the Court “provided sufficient information to enable XTO to comply with its reporting obligations for the Unit Well and consistent with the requirements of the Section 103.1.” Plaintiff posited that such reporting obligation requires unit-wide reporting, which would be the same regardless of the tract owned by the Plaintiff in the unit.
Second, Defendant challenged the sufficiency of the second notice calling attention to the failure to properly report under La. R.S. 30:103.2. The letter sent via certified mail cited the prior notice requesting reports under La. R.S. 30:103.1 and stated as follows:
Pursuant to La. R.S. 30:103.2, we are calling your attention to (a) XTO Energy, Inc.’s failure to comply with the provision of La. R.S. 30:103.1 (specifically the failure to send us the necessary sworn, detailed, and itemized statements as required by La. R.S. 30:103.1) and (b) the forfeiture penalties provided therein for continued failure to provide, within the delays specified in the statutes, the sworn, detailed, and itemized statements required by La. R.S. 30:103.1.
Defendant argued that the notice must do more than simply note the failure to send “sworn, detailed, and itemized statements as required by La. R.S. 30:103.1.” Instead, in order to comply with the notice requirement of La. R.S. 30:103.2, Defendant argued the letter “must state why it believes the reports are insufficient,” such that an operator has sufficient information to give it a meaningful opportunity to cure the alleged deficiency in its reporting.
As to both issues raised in the Rule 12(b)(6) motion, the Magistrate Judge noted that all factual allegations must be accepted as true. The Magistrate Judge also observed that there was very little jurisprudence interpreting the requirements of the statutes at issue. However, looking to the plain language of La. R.S. 30:103.1, the statute only expressly required requests to be “in writing, by certified mail addressed to the operator or producer” and mandated that requests “shall contain the unleased interest owner’s name and address.” As to La. R.S. 30:103.2, the statute provided that the notice of default “must be ‘written notice by certified mail’ which ‘call[s] attention to [the operator’s] failure to comply with the provisions of R.S. 30:103.1.’”
Accordingly, at this stage of the proceeding, the Magistrate Judge concluded that Plaintiff stated a plausible claim for the forfeiture penalty under La. R.S. 30:103.2. The Magistrate Judge cited Miller in support of his conclusion. As part of the citation, he noted that in Miller, the Western District found the “owner’s demand did not trigger Section 103.1 reporting where the unleased owner described herself as the owner of interests in Bossier Parish but did not identify the interest she owned or the unit in which the interest was located.” In Limekiln, Plaintiff identified the latter.
The Magistrate Judge also rejected Defendant’s argument that the letter Plaintiff relied upon to satisfy La. R.S. 30:103.2 must provide specific details as to the alleged deficient reporting. In conclusory fashion, he acknowledged that Plaintiff’s notice under La. R.S. 30:103.2 “specifically notified XTO that it failed to send Limekiln ‘the necessary, sworn, detailed, and itemized statements as required by La. R.S. 30:103.1.’” Recently, the Magistrate Judge’s Report and Recommendation was adopted by the District Court Judge over the objection of Defendant.
Notably, Limekiln is interlocutory in nature. Thus, the result is subject to change later in the litigation on reconsideration or appeal. Nevertheless, it is one of only a few data points to be considered by operators in an otherwise barren area of Louisiana law that appears to be growing in significance.
[1] 2021 WL 956079 (W.D. La. Feb. 5, 2021).
[2] 2017 WL 3261113 (W.D. La. July 28, 2017).
Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.
Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the link located at the bottom of every email that you receive.