Articles Posted in Recent Cases

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Last week the Texas Supreme Court issued its opinion in Lightning Oil Company v. Anadarko E&P Onshore, LLC, No. 15-0910, denying Lightning Oil’s trespass claim against Anadarko. Lightning Oil lost in the trial court, the San Antonio Court of Appeals, and now the Supreme Court.

To understand the case, it is helpful to look at the plat below (click to enlarge):

Lightning-oil-platLightning Oil owns an oil and gas lease on the knife-shaped tract. The surface estate of the tract is part of the Briscoe Ranch in Dimmit County, which includes lands to the north. To the south lies the Chaparral Wildlife Refuge, owned by the State and managed by Texas Parks & Wildlife. Anadarko obtained a lease from the State on the Refuge. That lease made it difficult to use the surface estate of the Refuge to drill wells, and Anadarko made an agreement with the Briscoe Ranch to allow Annadarko to put drilling pads on the Ranch (and on Lightning Oil’s oil and gas lease) to drill horizontal wells that would produce from the Refuge. Lightning Oil sued Anadarko claiming that its wells would trespass on Lightning’s mineral estate, even though no well perforations would be on Lightning Oil’s lease.

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In March 2016, a jury awarded two families $4.2 million against Cabot Oil & Gas for contaminating their drinking water. On Friday, the judge set aside the verdict and said the case will have to be retried.  The judge wrote that

(T)he weaknesses in the plaintiffs’ case and proof, coupled with serious and troubling irregularities in the testimony and presentation of the plaintiffs’ case – including repeated and regrettable missteps by counsel in the jury’s presence – combined so thoroughly to undermine faith in the jury’s verdict that it must be vacated and a new trial ordered.

The case was originally filed in 2009 by a large number of residents of the township of Dimock, Pennsylvania, alleging that Cabot was responsible for contamination of their groundwater, forcing them to truck water for drinking.  The plaintiffs claimed negligence, gross negligence, private nuisance, strict liability, breach of contract, fraudulent misrepresentation, and claims under the Pennsylvania Hazardous Sites Cleanup Act. Most plaintiffs settled with Cabot before trial, but two families, the Elys and Huberts, went to trial. The judge dismissed all of their claims except nuisance and excluded any claims for mental or emotional discomfort or the cost of replacing the water. Despite these setbacks, the jury awarded them $2.4 million on their nuisance claim.  Now the Elys and Huberts have to start over. A more complete report on the dispute and ruling can be found here.

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Last week the Texas Supreme Court granted petitions to hear appeals of two cases that could significantly affect the rights of Texas land and mineral owners: Atmos Energy Corp v. Town of DISH, 15-0613, and Lightning Oil Co. v. Anadarko E&P Onshore LLC, 15-0910. Last month, the court agreed to hear Sabine Oil & Gas Corporation’s appeal in Forest Oil Corp. v. El Rucio Land and Cattle Company, 14-0979, a case in which the court had previously denied the petition for review. Oral argument in the Forest Oil case is set for February 8. Dates for oral argument in Atmos v. DISH and Lightning Oil v. Anadarko have not yet been set.

In Atmos v. DISH, the town of DISH and residents of the town are seeking damages for injuries they claim are caused by noise and emissions from defendants’ gathering and compression facilities located in and near the town. The trial court dismissed plaintiffs’ claims, but the Amarillo Court of Appeals held that the plaintiffs had stated causes of action and were entitled to trial. For a more detailed description of the case, read my post here.  Among other arguments, the pipeline companies assert that plaintiffs’ claims are barred because their activites were authorized by governmental regulations and imposing liability for lawful activities would allow judicial regulation of activities sanctioned by statute and regulation. The Amarillo court disagreed: “Just because Appellees are operating their natural gas compression facilities within the applicable regulatory guidelines does not mean that Appellants have not suffered compensable injuries as a result of those operations.”

Sabine Oil & Gas makes a similar argument in Forest Oil v. El Rucio. (My prior posts on this case can be found here and here.) Sabine (formerly known as Forest Oil) argues that Jimmy McAllen’s $20 million arbitration award for damages caused by pollution of his ranch should be reversed because the case interferes with the Railroad Commission’s jurisdiction over oil field contamination. The RRC has jurisdiction over cleanup of environmental contamination related to oil and gas activities and has an open proceeding relating to Sabine’s efforts to remediate contamination on McAllen’s ranch. The Corpus Christi Court of Appeals held that Texas law expressly grants a landowner a private cause of action for damages caused by violation of Texas conservation laws and that McAllen’s claims should not be barred or stayed by the ongoing remediation activities supervised by the RRC. The court made reference to sections 85.321 and 85.322 of Texas Natural Resources Code, the first of which expressly grants a private cause of action for damages for violation of Texas conservation laws, and the second of which provides that nothing in the law governing Railroad Commission jurisdiction “shall impair or abridge or delay a cause of action for damages or other relief that an owner of land …. may have or assert against any party violating any rule or order of the commission or any judgment under this chapter.”

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Last week the Texas Supreme Court wrote the final chapter in Texas Rice Land Partners’ efforts to prevent Denbury Green Pipeline-Texas, LLC from condemning an easement across its land for a CO2 pipeline. The court held in Denbury Green Pipeline-Texas, LLC, v. Texas Rice Land Partners, Ltd., et al., No. 15-0225, Denbury opinion, that Denbury had shown as a matter of law that its line would serve a “public use.” (Our firm represented Texas Rice Land Partners in this appeal.)

This fight began in 2007, when Texas Rice Land Partners denied Denbury permission to enter its property to survey for a CO2 pipeline. Under the law as then understood, Denbury had obtained the requisite permit from the Texas Railroad Commission to construct its line and under that authority asserted that it had the right to condemn an easement for the line and therefore the right to survey Texas Rice Land’s property to construct the easement. Texas Rice Land denied Denbury’s right to survey, asserting that Denbury’s use of the line would be only for its private purposes and not for a “public use.” The trial court denied Texas Rice Land’s effort to stop the surveying; Denbury surveyed the easement and constructed its line across Texas Rice Land’s property. But Texas Rice Land appealed the trial court’s ruling. The Beaumont court of appeals affirmed the trial court but, in 2012 the Texas Supreme Court reversed and remanded the case.  Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas LLC (363 S.W.3d 192 (Tex. 2012) (Texas Rice I)

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When I last wrote about this case, I reported that the Texas Supreme Court had denied the petition for review of the Corpus Christi Court of Appeals’ decision affirming a $15 million arbitration award against Forest. On motion for rehearing, the Supreme Court granted the petition for review. The case is fully briefed, but no date for oral argument has yet been set. See my earlier posts on the case here and here.

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Two new opinions, one from the San Antonio Court of Appeals and one from the El Paso Court of Appeals, again tackle the task of construing mineral and royalty conveyances and reservations. A spate of these cases has arisen as a result of the recent shale plays, where lands never before productive have suddenly become valuable. As a result, muddy language in old deeds has to be clarified by the courts.

In Laborde Properties, L.P. v. U.S. Shale Energy II, LLC, the San Antonio Court of Appeals was required to construe the following mineral reservation in a 1951 deed:

There is reserved and excepted from this conveyance … an undivided one-half (1/2) interest in and to the Oil Royalty, Gas Royalty and Royalty in other Minerals in and under or that may be produced or mined from the above described premises, the same being equal to one-sixteenth (1/16) of the production.

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In May of this year, the Provost Umphrey law firm filed a class action complaint in federal court in Pennsylvania against Talisman Energy USA, Inc. for underpayment of royalties on production from the Eagle Ford field in South Texas. Regmund v. Talisman complaint  The Plaintiffs are three royalty owners who own royalties in wells drilled by Talisman and Statoil under a joint venture covering several thousand acres of leases in the Eagle Ford. The Plaintiffs had a basis to file in Pennsylvania because Talisman’s principal place of business is in Warrendale, Pennsylvania. The Plaintiffs had a basis to file in federal court under the Class Action Fairness Act of 2005. That act allows federal courts to preside over certain class actions where the amount in controversy exceeds $5 million, the class comprises at least 100 plaintiffs, and at least one plaintiff class member resides in a state other than the residence of the defendant.

Talisman USA is a subsidiary of Talisman Energy, Inc., based in Calgary, Alberta. In May 2015, Talisman Energy, Inc. was acquired by Repsol S.A., the largest Spanish energy company, for $13 billion.

In 2010, Talisman opened a Texas office and started buying oil and gas leases in the Eagle Ford under a joint venture with Statoil, Inc. Under the Joint Development Agreement, each company would own a 50% interest in the leases. Each company separately marketed its share of oil and gas and paid royalties on its share of production. Under a modification of the Joint Development Agreement, Statoil operated wells in the eastern part of the joint development area, and Talisman operated wells in the Western part.  In December 2015, Statoil took responsibility for operating all jointly owned wells and acquired a portion of Talisman’s ownership, so that their joint venture is now 63%/37%.

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The Denbury case that caused such a stir on the Texas Supreme Court’s first review of the case, is back before the Court again. In the first Denbury opinion, the Court held that a pipeline seeking to assert eminent domain authority had to make a showing that it was in fact a “common carrier.” The case went back to the trial court which again granted summary judgment for the pipeline company. But the court of appeals reversed, holding that fact issues existed on whether Denbury is a common carrier.

Our firm represents Texas Rice Land Partners in the appeal, and Bill Christian argued the case. The oral argument can be viewed here.

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Last week the Texas Supreme Court agreed to hear three petitions for review of lower court opinions addressing oil and gas issues of interest to land and mineral owners.

BP America Production Co. v. Laddex Ltd., No. 15-0248

BP owned a lease that was granted in 1971 and was held by production from a single well. The mineral owners granted a top lease to Laddex, and Laddex sued BP contending that BP’s lease had expired for failure to produce in paying quantities. The jury found for Laddex, and the court of appeals affirmed. BP argues that the jury charge is faulty and that there is no evidence to support the jury’s answers; it also contends that Laddex’s top lease is void under the rule against perpetuities. Briefs of the parties are here. Oral argument October 11.

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Yet another suit alleging underpayment of royalties has been filed against Chesapeake in the Barnett Shale. The petition can be viewed here: Addax v. Chesapeake Among the long list of plaintiffs is Kimbell Art Foundation. The petition alleges that plaintiffs are lessors under more than 8,000 leases in 280 pooled units with more than 725 producing gas wells. Defendants are Chesapeake and its working interest partner in the Barnett, Total E&P USA, Inc. Plaintiffs’ counsel is Burns Charest LLP.

The suit focuses on two complaints against the defendants. The first is based on the gathering agreement between Chesapeake and Access Midstream. The second is based on how Chesapeake has calculated the plaintiffs’ royalty interests in the pooled units. Continue reading →

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