Justia Contracts Opinion SummariesArticles Posted in Energy, Oil & Gas Law
Devon Energy Production Co., L.P. v. Sheppard
The Supreme Court affirmed the summary judgment in favor of Landowners in this oil-and-gas dispute over how to calculate Landowners' royalty under the terms of a mineral lease with Producers, holding that there was no error in the proceedings below.At issue in a declaratory judgment action was whether, based on language in the subject leases, Landowners' royalty was payable not only on gross proceeds but also on an unaffiliated buyer's post-sale postproduction costs if the producers' sales contracts stated that the sales price had been derived by deducting such costs from published index prices downstream from the point of sale. The trial court granted summary judgment for Landowners as to these types of marketing arrangements. The Supreme Court affirmed, holding that the broad language of the lease unambiguously contemplated such a royalty base. View "Devon Energy Production Co., L.P. v. Sheppard" on Justia Law
Tres C, LLC v. Raker Resources
Plaintiff-respondent Tres C, LLC was an Oklahoma limited liability company whose members were Viola "Tincy" Cowan, her son David Cowan, her daughter Karlea Cowan Ewald, her grandson Scot Meier, and her granddaughter Marsha Bukowski. Tres C was a successor-in-interest to certain mineral interests a the 320-acre lot in Blaine County, Oklahoma, that were formerly owned by the parents of Tincy's late husband, George and Coral Cowan. In February 1955, George and Carol Cowan executed an oil and gas lease in favor of J.J. Wright (hereinafter "the Lessee") concerning those mineral interests. Under its habendum clause, the Cowan Lease would remain valid for a primary term lasting 10 years and then--so long as a producing well was drilled--for a secondary term lasting "as long thereafter as oil, gas, casinghead gas, casinghead gasoline, or any of the products covered by this lease is or can be produced." Defendants-petitioners were the Lessee's current successors-in-interest under the Cowan Lease. This appeal concerned the trial court's judgment that granted Plaintiff's petition to cancel defendant's oil and gas lease and to quiet title in its favor so that a third party could exercise the option of executing a new lease. The Court of Civil Appeals conditionally affirmed the trial court's judgment, but remanded the matter with instructions to address the noncontractual defense of obstructions, set forth in Jones v. Moore, 338 P.2d 872. The Oklahoma Supreme Court granted certiorari to address whether the trial court erred in applying a rule of law that analyzed only a 3-month window of time for assessing whether a dip in the existing well's production was a cessation of production in paying quantities such that defendants' lease expired by its own terms. On de novo review, the Court found the trial court did err insofar as it relied upon the lease's cessation-of-production clause to define the time period for assessing profitability. The Court vacated the Court of Civil Appeals' opinion, reversed the trial court's judgment, quieted title in favor of Defendants, and remanded the case for further proceedings. View "Tres C, LLC v. Raker Resources" on Justia Law
Timothy Brown v. Continental Resources, Inc.
Continental Resources, Inc. operates an input well on Timothy and Tracy Browns’ land in Harding County, South Dakota. The Browns sued Continental, seeking compensation for damage to the surface of their land and Continental’s use of their pore space. Continental removed the case to federal court and twice moved for partial summary judgment. The district court granted both motions, finding that Plaintiffs: (1) released Continental from liability for surface damage; and (2) could not recover damages under South Dakota law for Continental’s pore space use. The Eighth Circuit affirmed. The court explained that section 45-5A-4 clearly articulates three categories of compensable harm. Plaintiffs sought damages for lost use, which is not one of the categories. They try to infuse ambiguity into the statutory scheme by pointing to Chapter 45-5A’s purpose and legislative findings sections. While these sections may help a court interpret ambiguous statutory language, the court found none in Section 45-5A-4. Accordingly, the court held that Plaintiffs have not suffered compensable harm under South Dakota law, so the district court did not err in granting summary judgment. View "Timothy Brown v. Continental Resources, Inc." on Justia Law
Gerald Corder v. Antero Resources Corporation
These consolidated cases involve a dispute between Antero Resources Corporation (“Antero”) and a group of landowners (“Lessors”) over the payment of natural gas royalties under several oil and gas leases. The leases permit Antero to extract and sell natural gas owned by the Lessors in exchange for royalty payments. Antero appealed from the district court’s summary judgment order, which held that Antero breached the terms of the leases by deducting certain “post-production costs” from the royalties it paid Lessors and awarded damages. Lessors cross-appeal the district court’s earlier dismissal of their fraud and punitive damages claims against Antero. The Fourth Circuit affirmed the district court’s summary judgment order in part and vacated in part. The court concluded that some of the leases prohibit Antero from deducting any post-production costs from Lessors’ royalties, but other leases—namely, those that contain a “Market Enhancement Clause”—do authorize deductions in certain circumstances. Separately, the court affirmed the dismissal of the fraud and punitive damages claims because Lessors did not plead them with sufficient particularity. View "Gerald Corder v. Antero Resources Corporation" on Justia Law
Bluegrass Materials Co., LLC v. Freeman
The 1985 “Manning Lease” granted the lessee rights to oil and gas on an approximately 100-acre tract of land in Bowling Green that is adjacent to a quarry. There is a long-expired one-year term, followed by a second term that conditions the maintenance of the leasehold interest on the production of oil or gas by the lessee. Bluegrass now owns the property. Believing that lessees were producing an insufficient quantity of oil to justify maintaining the lease, Bluegrass purported to terminate the lease and sought a declaration that the lease had terminated by its own terms while asserting several other related claims.The district court found that Bluegrass’s termination of the lease was improper and granted the lessees summary judgment. The Sixth Circuit reversed and remanded. There is a factual dispute regarding whether the lease terminated by its own terms. The trier of fact must determine if the lessee has produced oil in paying quantities after considering all the evidence. There is a material factual dispute about whether the lessee ceased producing oil for a period of time, and, if so, whether that period of time was unreasonable. View "Bluegrass Materials Co., LLC v. Freeman" on Justia Law
Troubadour Oil & Gas v. Rustad, et al.
Troubadour Oil and Gas, LLC, petitioned the North Dakota Supreme Court for a supervisory writ after the district court issued a discovery order requiring Troubadour to disclose all communications between Troubadour’s counsel and Troubadour’s owner who also was identified as an expert witness. Troubadour argued the court erroneously required the disclosure of confidential communications protected by the attorney-client privilege and the work product doctrine. After review, the Supreme Court granted the petition and directed the district court to vacate the portion of its March 10, 2022 discovery order requiring disclosure of all communications between Troubadour’s counsel and Troubadour’s owner because the court abused its discretion and misapplied the law by relying on federal rules and case law not applicable in this state court proceeding. The Supreme Court also vacated the court’s award of attorney’s fees and remanded for reconsideration. View "Troubadour Oil & Gas v. Rustad, et al." on Justia Law
David Holbrook v. Tennessee Valley Authority
The Tennessee Valley Authority sells its power to the BVU Authority in Virginia, one of its many customers. The BVU Authority in turn sells its power to local consumers who need electricity. Among those local consumers is Plaintiff, who believes that the TVA has a statutory duty to use the fruits of its sales to large industrial buyers to subsidize consumers’ electricity consumption. Plaintiff believes that a string of TVA rate changes, shifting costs from industry to consumers, were illegal. So he sued BVU Authority and TVA under three theories, which all more or less amount to claims that the TVA failed to live up to its statutory duties under Section 11. The district court dismissed all three claims because TVA’s rate-making authority is committed to agency discretion and thus unreviewable. The Fourth Circuit affirmed the district court’s dismissal of all three of Plaintiff’s claims. The court explained that Section 11 of the TVA Act lays out broad policies and goals that operate more like aspirations than commands. It does not support any of the claims that Plaintiff offers against TVA or BVU Authority. TVA rate-making is a presumptively unreviewable category of agency action under 701(a)(2), and the policy-laden language of Section 11 does not provide any guidelines or limits to overcome that presumption. Because the TVA-BVU contract simply repeats the vague statutory language, Plaintiff’s contract claim is really a statutory claim in disguise, and Section 11 of the TVA Act does not provide a private cause of action. View "David Holbrook v. Tennessee Valley Authority" on Justia Law
Newfield Exploration Company, et al. v. North Dakota, et al.
The State of North Dakota, ex rel. the North Dakota Board of University and School Lands, and the Office of the Commissioner of University and School Lands, a/k/a the North Dakota Department of Trust Lands appealed a judgment dismissing its claim against Newfield Exploration Company relating to the underpayment of gas royalties. The North Dakota Supreme Court found that the district court concluded the State did not establish a legal obligation owed by Newfield. However, the State pled N.D.C.C. § 47-16-39.1 in its counterclaim, which the court recognized at trial. Because the State satisfied both the pleading and the proof requirements of N.D.C.C. § 47-16-39.1, the Supreme Court held the district court erred in concluding the State did not prove Newfield owed it a legal obligation to pay additional royalties. Rather, as the well operator, Newfield owed the State an obligation under N.D.C.C. § 47-16-39.1 to pay royalties according to the State’s leases. The court failed to recognize Newfield’s legal obligations as a well operator under N.D.C.C. § 47-16-39.1. The Supreme Court concluded the district court erred in dismissing the State's counterclaim; therefore, judgment was reversed and the matter remanded for findings related to the State's damages and Newfield's affirmative defenses. View "Newfield Exploration Company, et al. v. North Dakota, et al." on Justia Law
TEP Rocky Mountain LLC v. Record TJ Ranch Limited Partnership
The Supreme Court affirmed the judgment the district court denying TEP Rocky Mountain LLC's (TEP RM) motion to dismiss this action, granting summary judgment to Record TJ Ranch Limited Partnership (TJ Ranch) on several issues, and ruling that TEP RM had breached the parties' agreements, holding that there was no error.TJ Ranch brought this action seeking payment under a surface use and damage agreement governing oil and gas development and production of ranch lands. TEP RM filed a motion to dismiss for lack of personal jurisdiction, which the district court denied. The court ultimately concluded that TJ Ranch was entitled to payment. The Supreme Court affirmed, holding that the district court (1) correctly exercised personal jurisdiction over TEP RM; (2) did not clearly err in its findings; and (3) did not abuse its discretion in denying TEP RM's motions to stay. View "TEP Rocky Mountain LLC v. Record TJ Ranch Limited Partnership" on Justia Law
SWN Production Co., LLC v. Kellam
The Supreme Court answered certified questions seeking to clarify whether, in payment of royalties under an oil and gas lease, the lessor may be required to bear a portion of the post-production costs incurred in rendering the oil and gas marketable.Specifically, the district court asked whether Estate of Tawyne v. Columbia Natural Resources, LLC, 633 S.E.2d 22 (W. Va. 2006) is still good law in West Virginia and then asked the Supreme Court to expound upon its holding in Tawney. The Supreme Court answered (1) Tawney is still good law; and (2) this Court defines to answer the reformulated question of what level of specificity Tawney requires of an oil and gas lease to permit the deduction of post-production costs from a lessor's royalty payments. View "SWN Production Co., LLC v. Kellam" on Justia Law