CAIL Institute for Energy Law

15th Annual Energy Litigation Conference

November 3, 2016

Houston, Texas

Energy Litigation Update

2016

Court addresses claims against

theRailroad Commission for

negligence and breach of contract

for mistakenly plugging an

abandoned offshore well that the

Commission had agreed to postpone

plugging.

Railroad Commission of Texas v.

Gulf Energy Exploration Corp., 482

S.W.3d 559 (Tex. 2016).

(Page 4 of Paper)

Dispute over interpretation of

Participation Agreement, with AAPL

Model Form JOA attached as an

exhibit, regarding which party is

entitled to be the successor Operator

under the Agreement.

U.S. Energy Development Corp. v.

Stephens Energy Group, LLC, 2016

WL 5210888 (10th Cir. 2016)

(Petition for Rehearing pending)

(Page 6 of Paper)

“Frac hit” lawsuit brought by

Operator of aging vertical well

allegedly damaged by the frac job

conducted on a neighboring

horizontal well was dismissed on

grounds of improper venue.

A. B. Still Wel-Service, Inc. v.

Antinum Midcon I, LLC., ___ P.3d ___

(Okla. App. 2015 - #113755) (For

Publication) (Petition for Certiorari

Pending

(Page 8 of Paper)

Colorado court addresses the

deductibility from royalty payments

of costs of reaching a downstream

market located beyond the first

commercial market.

Lindauer v. Williams Production RMT

Company, 2016 COA 39, ___ P.3d ___

(Petition for further review pending)

(Page 8 of Paper)

Kansas Federal District Court

provides preliminary comments

regarding the 2015 Fawcett decision

of the Kansas Supreme Court

addressing deductions from

royalties.

Roderick Reocable Living Trust v.

XTO Energy, Inc., 2016 WL 742879

(D. Kan. 2016)

(Page 13 of Paper)

Federal District Court in Kansas grants Motion to Decertify Class based on the Fawcett, Roderick and Wal-Mart decisions issued after certification of class in 2011.

Wallace B. Roderick Revocable Living Trust v. OXY USA, Inc., 2016 WL 3423133 (D. Kan. 2016).

(Page 15 of Paper)

Court addresses inter alia claims for royalty on fuel used in operations and on drip condensate, whether royalty is owed on volumes produced at the wellhead, and whether the lessee has a duty to “trace the gas molecules” from the lessor’s well to the exact downstream market where sold.

Anderson Living Trust v. Energen Resources Corp., 2016 WL 2739122 (D.N.M. 2016).

(Page 18 of Paper)

Court addresses whether producer could compute deductions based on assumed cost allocations rather than actual cost for each owner on lost and used gas. Court also addresses the “trace the molecules” theory.

Hall v. CNX Gas Company, LLC, 2016 WL 1382678 (Pa. Sup. Ct. 2016).

(Page 21 of Paper)

Texas Supreme Court denies

Motion for Rehearing of the 2015

decision and substitutes a 2016

opinion

Chesapeake Exploration, L.L.C.

v. Hyder, 483 S.W.3d 870 (Tex.

2016).

(Page 24 of Paper)

Pending Oklahoma appeal could

significantly clarify the status of

Oklahoma gas royalty law

regarding the scope of post-

wellhead expenses that can be

deducted from royalty.

Pummill v. Hancock Exploration,

LLC, Appeal No. 111,096, pending

in Oklahoma Court of Appeals

(Page 27 of Paper)

Appellate Court reverses District

Court order certifying a royalty

owner class.

Tipton Home, Trustees v.

Burlington Resources Oil & Gas

Company, L.P., 86 O.B.J. 2540

(Okla. App. 2015 - # 111,735) (Not

for Publication).

(Page 28 of Paper)

District Court denies request for

certification of a statewide

class.

McKnight v. Linn Operating, Inc.,

2016 WL 756541 (W.D. Okla.

2016)

(Page 29 of Paper)

Court rejects effort by new plaintiff to seek class certification as to a similar royalty owner class as another court refused to certify (i.e., no 2nd bite at the apple for certifying a class)

Consul Properties, LLC v. Unit Petroleum Co., No. CIV-15-840R

USDC for Western Dist of OK

(Page 32 of Paper)

Court affirms ruling that the arbitration clauses in the OGLs did not allow the royalty owners to use the arbitration clause to file a class action arbitration.

Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746 (3rd Cir. 2016)

(Page 33 of Paper)

Expert Witness objections

addressed by the Court. Abraham v. WPX Production,

LLC, 2016 WL 3135647).

(Page 36 of Paper)

Summary judgment ruling terminating oil and gas lease under its 90-day cessation of production clause is reversed based upon finding of disputed issues of material fact.

Brammer Petroleum, Inc. v. Bagley Minerals, L.P., 2016 WL 3212496 (Tex. App. – Texarkana 2016).

(Page 36 of Paper)

Landowners seek preliminary injunction prohibiting Lessor from terminating its supply of natural gas via farm taps under the “Free Gas Clauses” of the oil and gas leases.

Lee v. ConocoPhillips Co., 2016

WL 67803 (W.D. Okla. 2016). (Page 37 of Paper)

Court addresses dispute as to whether party seeking to enforce rights under Area of Mutual Interest (AMI) Agreement had already assigned away its rights in the subject property.

Burlington Resources Oil & Gas

Co., LP v. Petromax Operating Co., Inc., 2016 WL 908228 (Tex. App. – Texarkana 2016).

(Page 41 of Paper)

Texas Supreme Court reverses the 2014 Decision of the Court of Appeals which found that the subject assignment did not provide for “proportionate reduction” of a reserved production payment in the event of the expiration of 2 of the 4 underlying oil and gas leases.

Apache Deepwater, LLC v. McDaniel

Partners, Ltd., 485 S.W.3d 900 (Tex. 2016).

(Page 42 of Paper)

Court dismisses appeal, finding that the OXY’s sale of the underlying oil and gas leases during the pendency of its appeal of a declaratory judgment ruling concerning alleged “free gas” rights of the plaintiff-landowner class rendered the appeal moot..

Schell v. OXY USA Inc, 2015 WL

8591631 (10th Cir. 2015). (Page 45 of Paper)

Texas Supreme Court determines that the requirement of “reasonable certainty of proof” applies even where lost profits are not sought as damages and are instead used to determine the market value of property for which recovery is sought. On remand, evidence is found to be sufficient.

Phillips v. Carlton Energy Group,

LLC, 475 S.W.3d 265 (Tex. 2015). (Page 48 of Paper)

Debtor in bankruptcy is allowed to reject executory gas gathering contracts which were found to not be covenants running with the land.

In re: Sabine Oil & Gas Corp. 2016 WL 890299, 62 Bankr. Ct. Dec. 78 (Bankr. S.D.N.Y. Mar. 8, 2016), and 2016 WL 2603203 (Bankr. S.D.N.Y. May 3, 2016).

(Page 51 of Paper)

District court adopts bankruptcy court’s proposed findings and conclusions in support of granting the downstream crude oil purchasers’ motion for summary judgment against lien claims and other assertions of the oil producers.

In re SemCrude, L.P., 2015 WL 4594516 (D. Del. 2015).

(Page 51 of Paper)

In a case of first impression, the Texas Supreme Court holds that the Accommodation Doctrine applies to the relationship between the owner of the severed groundwater estate and the surface estate.

Coyote Lake Ranch, LLC v. City of Lubbock, 2016 WL 3176683, 59 Tex. Sup. Ct. J. 967 (2016).

(Page 56 of Paper)

Seller of property seeks to rescind the transaction after learning that the buyer would be using the land for a disposal well.

Stinson Farm and Ranch, L.L.C.

v. Overflow Energy, L.L.C., 2015 WL 4925921 (W.D. Okla. 2015).

(Page 58 of Paper)

Court addresses attempt by party to use pretrial discovery procedures as a means of obtaining geophysical data that was sought as part of the ultimate relief requested in the lawsuit.

Ring Energy, Inc. v. Hullum, 2015 WL 4413366 (N.D. Okla. 2015).

(Page 70 of Paper)