November 2012

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The U.S. Chemical Safety and Hazard Investigation Board has served Black Elk Energy with a subpoena in response to the oil platform explosion in the Gulf of Mexico on November 16, 2012. The Board has also served a subpoena on Grand Isle Shipyard, the Louisiana company that supplied Black Elk with the platform workers. Twenty-six workers were on the platform at the time of the explosion; two workers have died, three required hospitalization, and one remains missing. Twenty-eight gallons of oil may have spilled into the Gulf. It is requesting information regarding witnesses, physical evidence, combustible gas detectors, job safety analyses, work orders, work permits, policies, and inventories. Responses from both companies are due November 30, 2012. The Board has not yet launched a formal investigation. The Board is involved in six current investigations involving a fire and/or explosion at an oil and gas facility. All of the current investigations involve incidents on land. The Board has also conducted an inquiry into the 2010 Deepwater Horizon explosion, although it did not receive all of the records it subpoenaed from drilling contractor Transocean because the company challenged the Board’s authority to conduct such an inquiry. (more…)

The process of drilling for and producing hydrocarbons can be highly technical. Companies who employ state-of-the-art technology for oil and gas operations enjoy a competitive advantage. As a result, many oil companies and service companies have become increasingly diligent in protecting patentable inventions. (more…)

In Aertker v. Placid Holding Co., 2012 WL 4472002 (M.D.La. Sept. 27, 2012), Placid Refining Company was found liable to a group of landowners for bad faith trespass for a pipeline installed in the early 1980s. Placid’s agent obtained a right-of-way agreement from the mineral lessee only, and not the landowners. At the time the right-of-way was granted, the assessor’s ownership map showed that the land was owned by the Aertker family, and was burdened by a ninety-nine year lease to Louisiana-Pacific Corp. The court concluded that Placid was a bad-faith trespasser who knew or reasonably should have known that it did not have the landowners’ permission. The court further concluded that the landowners have a cause of action for continuous trespass (and thus the claim did not prescribe). The court determined that Placid had earned $148,926,000 in profit during the relevant time period. The court then determined the percentage of the Placid assets that could be attributed to the right-of-way on an annual basis, and awarded the landowners $96,145.33 plus interest from the date of judicial demand.

Under Louisiana law, the owner of private property may transfer an interest in the property to the public, including parishes and other political subdivisions. In connection with roads, property owners typically accomplish this using something known as adedication. Unfortunately, the state legislature has not provided a great deal of guidance on how dedications are made or the legal effect of certain language grantors have used to make such dedications.  As such, the courts have had to tackle the subject on a case-by-case basis. (more…)

It is a fundamental requirement of Mineral Code article 137 that a lessor who seeks unpaid royalties must provide written noticeto the lessee. Many leases contain similar contractual notice requirements. In Estes v. Placid Oil Co., 2012 WL 122729 *3 (W.D.La. April 10, 2012), the Court nonetheless permitted notice to an affiliate (OXY USA Inc.) of a lessee (Placid Oil Company) where both entities share a common parent company (Occidental Petroleum Corporation), and the affiliate’s representative was corporate counsel for both entities, had the same title, and responded to the notice on behalf of the lessee. The Court distinguished this scenario from the facts of Lucky v. Encana Oil & Gas, Inc., 46 So.3d (La. App. 2d Cir. 2008), in which notice was provided to a sublessee but not the lessee. Estes, 2012 WL 122729 at *3.

On June 6, 2012, the governor of Louisiana signed Act 743 amending two sections of the Conservation Code, including Louisiana Revised Statute Section 30:10, commonly referred to as the Louisiana Risk Fee Statute. Among other things, Act 743 adds several provisions addressing the obligation of a drilling owner to pay royalties (and overriding royalties) owed by non-participating interest owners to others. (more…)

Effective August 1, 2012, Act Nos. 754 and 779 of the 2012 Regular Session of the Louisiana Legislature take effect, altering the procedure for Louisiana “legacy litigation.” Legacy litigation refers to hundreds of lawsuits in Louisiana seeking damages allegedly related to environmental harm caused by oil and gas exploration and production activities. Following is an overview of some of the key changes to the procedure for litigating legacy lawsuits. (more…)

In Adams v. BP America Prod. Co., 2012 WL 1038035 *4-5 (W.D.La. March 27, 2012), the Court held that a lessee’s refusal to pay royalties was reasonable where the lessor failed to provide certified records of transfer of ownership as required by the lease and because Mineral Code article 138.1 required the lessor to supply name, address, and tax identification information. Adams is consistent with a several other cases protecting lessees where they have timely responded to a notice of demand and where ownership was in question.

In Oracle 1031 Exchange, LLC v. Bourque, 85 So.3d 736 (La. App. 3d Cir. 2012), writ denied, 85 So.3d 1272 (La. 4/20/12), the Court of Appeal upheld a penalty of double the royalties owed and attorney’s fees. In this case, a concursus proceeding was instituted and royalties were deposited into the district court’s registry. This action, however, did not excuse the nonpayment of royalties. The parties responsible for payment had argued that they did not believe the minimal amount of oil produced, which they called “test oil,” triggered a need to pay royalties. Noting that another royalty owner had been paid on the minimal production, the Court of Appeal found the argument bordered on disingenuous. The Court of Appeal rejected arguments that the parties responsible for payment did not know who to pay and that there was no signed division order. Notably, the Court of Appeal also permitted the royalty owner to pursue not only the lessee but also non-lessee affiliated companies. The Court of Appeal relied upon an alter ego theory, noting in the factual background that required notices of nonpayment were provided to the lessee and the affiliates.