The Texas Supreme Court has held that an offset well clause in an oil and gas lease did not require the lessee to drill wells calculated to protect against drainage, reports Gray Reed & McGraw in its Energy & the Law blog.

According to authors Charles Sartain and Chance Decker: “The Court purported to limit its holding to these facts, but the opinion could have far-reaching consequences. Wells drilled in the most active plays in Texas today are by and large horizontal, tight-shale wells. The opinion indicates the historical understanding of an ‘offset well’ is antiquated in this context.”

Four dissenting justices believed the majority disregarded the well-established meaning of “offset well” used in the oilfield for decades.

Read the article.

A Pennsylvania appeals court rejected a request by a natural gas production company to rehear a case whose outcome could affect drillers across the country, reports WSKG.

Briggs v. Southwestern Energy Production Company involves the legal principle known as “rule of capture,” which means a property owner has the right to extract or “capture” an underground resource such as water, oil or gas, even if it flows from beneath another property owner’s land, explains reporter Susan Phillips. The case calls into question the longstanding practice as it applies to fracking, which requires subsurface rock to be deliberately broken in order to release trapped gas.

“In 2015, the Briggs family sued Southwestern Energy for trespass and conversion, arguing that the company’s fracking efforts were illegal and it should not be allowed to use wells on neighboring properties to tap gas beneath their land,” writes Phillips. “The family owns about 11 acres of land in Susquehanna County and did not lease its land for gas drilling.”

The trial court rejected their arguments, but an appellate court found that the Briggs’ arguments had legal merit.

Read the article.

A divided panel of the Texas Court of Appeals in Houston has held that the 2014-2015 drop in oil prices is not a force majeure for purposes of general force majeure contractual protection, reports Liskow & Lewis in its Energy Law Blog.

Jackie E. Hickman explains that the court addressed a dispute between ConocoPhillips Company and TEC Olmos over a farmout agreement that required Olmos to commence drilling by a specified date.

“During the interval between execution of the agreement and commencement of drilling, however, changes in the global supply and demand of oil caused the price of oil to drop significantly. As a result, Olmos was unable to secure financing for drilling and informed ConocoPhillips that it would be unable to meet its drilling obligations. ConocoPhillips filed suit against Olmos and the guarantor of the contract, Terrace Energy Company, for breach of the farmout agreement. The lawsuit sought $500,000 in liquidated damages,” Hickman writes.

Olmos invoked the force majeure clause of the farmout agreement to excuse its inability to perform, but the court agreed with ConocoPhillips.

Read the article.

Two Texas Supreme Court decisions published on the same day confirm that retained acreage clauses that vary in language from one instrument to another will likely vary in effect, according to Gray Reed & McGraw’s Energy & the Law blog.

Authors Charles Sartain and Brittany Blakey explain that, depending on the language, the lessee might not be able to maintain all the acreage it planned on holding.

They discuss two cases on point: Endeavor Energy Resources, L.P. v. Discovery Operating, Inc. and XOG Operating, LLC v. Chesapeake Exploration.

Read the article.

A group of 28 subcontractors at a Valero refinery in Texas City are suing the company and their employer, alleging that they suffered injuries and post-traumatic stress from an explosion at the plant less than two months ago, reports the San Antonio Business Journal.

The employees of  Beaumont-based Richard Industrial Group Inc. filed the lawsuit against their employer and Valero Refining Texas LP, a subsidiary of San Antonio-based refining company Valero Energy Corp.. Richard Industrial Group provides subcontracting work at Valero’s Texas City refinery, according to reporter Sergio Chapa.

“The workers are seeking damages based on claims that they suffered orthopedic injuries and hearing loss from the accident and are dealing with post-traumatic stress disorder,” writes Chapa.

Read the Business Journal article.

In an important new en banc opinion, the Fifth Circuit has abandoned its historic criteria for determining whether a contract relating to servicing oil or gas drilling on navigable waters is controlled by maritime law in favor of a “simpler, more straightforward test,” reports Duane Morris LLP.

Jospeh J. Pangaro writes that courts in the Fifth Circuit historically applied a six-factor test to determine whether a contract is governed by maritime law, as articulated in Davis & Sons, Inc. v. Gulf Oil Corp..

“Taking the lead from the Supreme Court’s ruling in Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004), the Fifth Circuit departed from the six-factor test used in cases like Davis & Sons in favor of a new, stream-lined two-pronged test to determine whether a contract like the one at issue was maritime in nature,” Pangaro writes.

In his article, the author discusses the new test.

Read the article.

Colorado state district courts recently solidified judicial recognition of the Colorado General Assembly’s delegation of primary jurisdiction to the Colorado Oil and Gas Conservation Commission over royalty underpayment disputes, according to an alert by BakerHostetler.

Two judges of the District Court for the City and County of Denver dismissed royalty underpayment lawsuits for failure to exhaust administrative remedies before the Commission.

The firm said these decisions are significant because one judge vacated his prior ruling in the same case that had denied a substantively similar motion to dismiss, and the other judge had previously denied a similar motion to dismiss in a different case.

Read the article.

Latham & Watkins has posted the second of a two-part webcast series on joint ventures in the oil and gas industry — this one on upstream joint ventures.

Both this video and the first part — on midstream joint ventures — are available on-demand.

This series explores market trends driving recent joint ventures, as well as structural options, potential challenges, and other considerations related to joint ventures, within both the midstream and upstream spaces.

Part II of the series addresses joint ventures in the upstream space, including “DrillCo” transactions.

Topics include:

• DrillCos and Other JV Structures
• Typical Transaction Documents
• Issues and Pitfalls

Watch the on-demand video.

In a blog post, John McFarland of Graves, Dougherty, Hearon & Moody discusses a lawsuit over a petroleum lease dispute that led to a claim under Texas’ Anti-SLAPP statute.

He explains that a SLAPP is a “strategic lawsuit against public participation,” a suit intended to censor or intimidate critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition.

The case involves the dispute over whether a petroleum company’s oil and gas lease had expired. When the property owner filed a suit for trespass, the production company filed counterclaims for breach of the lease. The property owner filed a motion to dismiss the counterclaims under the anti-SLAPP statute.

An appellate court found that the property owner had waived its right to protection under the anti-SLAPP statute because it agreed in the lease not to sue before giving prior notice and an opportunity to cure.

Read the article.

The Supreme Court of Texas recently examined the intersection of the rule against perpetuities and the oil patch in ConocoPhillips Co. v. Koopmann, No. 16-0662, writes Thomas G. Ciarlone Jr. in Kane Russell Coleman Logan’s Energy Law Today blog.

The rule provides “that no interest within its scope is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.”

Ciarlone discusses the Koopman case and explains that it represents a positive result for the industry, one which will promote certainty in deed construction and therefore encourage robust exploration and development activities.

Read the article.

A recent Superior Court of Pennsylvania ruling in a case concerning hydraulic fracturing runs counter to a ruling in a similar case by the Texas Supreme Court, reports John B. McFarland in Graves, Dougherty, Hearon & Moody’s Oil and Gas Lawyer Blog.

The Pennsylvania court held that “hydraulic fracturing may constitute an actionable trespass where subsurface fractures, fracturing fluid and proppant cross boundary lines and extend into the subsurface estate of an adjoining property for which the operator does not have a mineral lease, resulting in the extraction of natural gas from beneath the adjoining landowner’s property.”

In doing so, McFarland explains, the court rejected the reasoning of the Texas Supreme Court when that court held that the rule of capture prevented any such cause of action.

Read the article.

The renewable energy industry, now designated as a technology and innovation-related area of special concern to the protection of the U.S. industrial and scientific base, is one of seven sectors that the U.S. Trade Representative recently identified as being of significant national security concern, writes Stephen Paul Mahinka in the Power & Pipes blog for Morgan Lewis.

“The USTR’s primary concern in its investigation was with acquisitions and investments related to technology transfer, intellectual property, and innovation in seven industry sectors that it specifically identified as being of significant national security concern. Renewable energy is one of the seven sectors highlighted for increased scrutiny, through expanded reviews of certain types of deals by the Committee on Foreign Investment in the United States,” according to the post.

Although the report focused on Chinese acquisitions and investments, the identification of renewable energy as one of the seven main industry sectors of concern means that acquisitions and investments by entities in other foreign nations may also be subject to heightened scrutiny by the committee, explains Mahinka.

Read the article.

Charles Sartain offers a reminder that a court will (if it’s doing its job) enforce an agreement according to what it actually says, not by that which one party or the other would have liked it to say or imagines that it said.

Writing in Gray Reed’s Energy & the Law blog, Sartain discusses Claybar v. Samson Exploration. That case involved an agreement over an indemnity clause in a contract for the drilling of petroleum wells and related operation on property owned by Claybar.

Sartain presents the facts of the case, including a break-down of both side’s positions.

“Generally, indemnity agreements do not apply to claims between the parties but apply to claims made by others who are not parties to the agreement,” Sartain writes. “However, the parties can write an agreement to indemnify one another against claims they later assert against each other. To do so, the parties must expressly and specifically state that intention.”

Read the article.

Improper cybersecurity oversight cost a power company a $2.7 million penalty in a settlement between the Western Electric Coordinating Council and the company, according to a post by Troutman Sanders.

The post says that the unnamed power company had inadvertently allowed critical cyber security data to be exposed online for 70 days.

“The contractor improperly accessed data from the company’s network and copied that data onto the contractor’s network,” the post explains. “While the information was on the contractor’s network it was accessible online to anyone without password protection. The information exposed records of over 30,000 assets, including records associated with Critical Cyber Assets (CCAs) such as IP addresses and server host names.”

Read the article.

A U.S. District Court has rejected motions filed by the cities of Oakland and San Francisco to remand two global warming public nuisance lawsuits filed by the cities in state court against several large energy companies, reports Anthony B. Cavender in Pillsbury’s Gavel2Gavel blog.

The companies are BP P.L.C., Chevron Corporation, ConocoPhillips Company, Exxon Mobil Corporation and Royal Dutch Shell plc). The case is The People of the State of California v. BP P.L.C., et al.

“The complaints filed by the City of Oakland and the City of San Francisco are based on the premise that, despite knowing of the risks associated with climate change and global warming, these companies continued to produce and sell their products to the public that uses fossil fuels in their day to day operations,” Cavender writes. “The complaints seek an abatement fund to pay for seawalls and other infrastructure to address rising sea levels.”

Read the article.

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Randall S. Rich of Pierce Atwood LLP, writing in the firm’s Energy Infrastructure Blog, considers the question: Can an interstate natural gas pipeline continue to operate if a court vacates its certificate authorizations?

He raises the question in light of a federal appellate court’s ruling that raises the possibility that it will vacate certificates of public convenience and necessity authorizing the construction and operation of the Florida Southeast Connection pipelines. Those pipelines are currently transporting natural gas to power plants in Florida.

He covers the facts of the case and then discusses a legal theory that may permit the pipelines to continue to transport natural gas if the certificate orders were vacated.

Read the article.

Charles Sartain and Chance Decker, writing in Gray Reed & McGraw’s Energy & the Law blog, describe a contract case in which an oil and gas landman found out that the contract he signed with a purported agent for a client was unenforceable.

The independent landman signed a contract with the purported agent of the plaintiffs, in which the producers were to pay Moore “$600 per mineral acre for for leases signed. The plaintiff said he helped secure numerous leases, but defendants refused to pay.

The authors explain that the court found that the contract didn’t specify the properties it applied to, this violating the Statute of Frauds. Sartain and Decker then offer some ways the contract could have been written so it would have been enforceable.

Read the article.

Gibson, Dunn & Crutcher has posted an on-demand webcast that discusses what the firm has been seeing and expects to see in the future in regard to mergers and acquisitions in the oil and gas industry.

Members of Gibson Dunn’s Mergers and Acquisitions and Oil and Gas Practice Groups produced the 60-minute presentation to (1) discuss the current state of mergers and acquisitions at the corporate level (“M&A”) and acquisitions and divestitures at the asset level (“A&D”) in those segments of the energy sector comprised of upstream oil and gas, midstream oil and gas, and oilfield services; (2) identify trends in M&A and A&D in those segments; and (3) use their crystal balls to attempt to foresee what the future holds for M&A and A&D in those sectors.

Panelists are partners Michael P. Darden, Tull Florey and Justin T. Stolte. The moderator is Jeffrey A. Chapman.

Watch the on-demand webcast.

Trial lawyer Courtney Ervin has joined commercial litigation boutique Hicks Thomas LLP.

“Courtney is a highly skilled and effective trial lawyer,” said Hicks Thomas co-founder John B. Thomas. “She is an exceptional advocate and has great instincts. Her addition enhances our diversity and positions us to serve our client needs well into the future.”

In a release, the firm said Ervin has handled multimillion-dollar complex commercial litigation involving a variety of issues and has litigated claims involving many types of contractual challenges. Her focus is on high-stakes commercial litigation in state and federal court and arbitration. She has experience in contract disputes, business torts and insurance coverage. While many of her clients are in the energy industry, Ervin regularly represents those involved in other businesses including insurance, real estate, private equity and information technology.

Ervin was profiled as one of the leading Energy Litigation lawyers in the U.S. in 2016 by The Legal 500 and has repeatedly earned a place on the Texas Rising Stars list recognizing up-and-coming lawyers. She earned her law degree from the University of Houston Law Center, magna cum laude, and her bachelor’s degree from Colorado State University. Ervin is a member of the State Bar of Texas, Houston Bar Association and the Texas Bar Foundation.

As climate-change lawsuits against the oil industry mount, Exxon Mobil Corp. is taking a bare-knuckle approach rarely seen in legal disputes: It’s going after the lawyers who are suing it, according to a Bloomberg report.

Exxon’s targets include the attorneys general of New York and Massachusetts, hitting them with suits, threats of suits or demands for sworn depositions. The company claims the lawyers, public officials and environmental activists are “conspiring” against it in a coordinated legal and public relations campaign, writes Bob Van Voris.

He quotes Howard Erichson, an expert in complex litigation and a professor at Fordham University School of Law in New York: “It’s an aggressive move. Does Exxon really need these depositions or is Exxon seeking the depositions to harass mayors and city attorneys into dropping their lawsuits?”

Read the Bloomberg report.