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.

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.

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.

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.

A post on the website of Haynes and Boone calls attention to the apparent failure to acknowledge how the economic realities of oil and gas leasing and operating in the Outer Continental Shelf (OCS) in increasingly deepwater environments at a time of low oil and gas prices impacts the Interior Department’s stated goal of achieving “American Energy Dominance.”

“Once a serious concern only to small and mid-sized operators, the existence of mounting decommissioning liabilities to new lessees and predecessors-in-interest has stunned the offshore industry where some companies are discovering that their decommissioning liabilities are greater than existing assets,” according to Robert (Bob) P. Thibault and Christopher J. Reagen.

“This new reality in the OCS has created barriers to entry for all but the super-majors as new, small, and mid-sized independents face impossible-to-satisfy demands for many operators and leases,” they write.

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.

Baker Botts partner Mike Bresson told listeners at the beginning of the law firm’s recent webinar that “Master limited partnerships [MLPs] did just fine on tax reform.”

Joseph Markman, writing in Oil and Gas Investor about the webinar presentation, quoted Bresson: “The first big [change], which is definitely a positive, is a reduction in tax rates,” said Steve Marcus, partner and Dallas-based department chair in taxes. “The corporate tax rate’s been reduced from 35% to 21%.”

Another change, however, may have a slightly negative impact, now that interest deductions are limited. The limitation amounts to about 30% of an MLP’s adjusted taxable income. How this affects the typical MLP depends on its tax shield.

Markman explains: “For an MLP to calculate the 30% limitation on its ability to deduct its own net business interest expense, it must determine its share of ‘excess taxable income’ allocated to it from a subsidiary partnership. An MLP’s unitholder would then determine ‘excess taxable income’ in calculating the limitation with respect to its net business interest expense.”

Read the article.

Ecova has posted an on-demand webinar reviewing the top takeaways from third quarter of 2017.

The webinar also covers potential short- and long-term impacts of a tighter natural gas supply and demand balance heading into this upcoming winter.

Other energy and natural gas market trends covered include:

• Upcoming winter, gas and storage vs historical averages
• Associated risks with less gas supply heading into winter
• Working risk tolerance into procurement strategy

Watch the on-demand webinar.

A podcast on Kane Russell Coleman & Logan’s Energy Law Today discusses the Eighth Circuit’s recent ruling that makes it easier for plaintiffs to take fracking contamination claims to trial.

The podcast also covers the Texas Supreme Court’s ruling on the validity of county-wide mineral conveyances, and the Oklahoma Supreme Court’s consideration for clarification of the often vexing “marketable product” rule for post-production expense deductions.

Oil-and-gas trial lawyer Tom Ciarlone of Kane Russell presents the podcast.

Listen to the podcast.

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On April 18, 2017, U.S. Environmental Protection Agency (EPA) Administrator Scott Pruitt announced that the EPA will convene a proceeding for reconsideration of certain elements of the 2016 rule establishing methane emissions standards for the oil and gas industry, reports Bracewell’s Energy Legal Blog.

Authors Whit Swift and Brittany Pemberton write that the Methane Rule applies to oil and gas facilities for which construction, modification, or reconstruction started after September 18, 2015.

“In particular, EPA will reconsider elements of the fugitive emissions monitoring and repair requirements of 40 C.F.R. § 60.5397a, including the inclusion of low-production wells, and the NSPS Subpart OOOOa provisions relating to approvals for an alternative means of compliance,” they explain.

Read the article.

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ETF Trends has posted an on-demand webinar titled “Navigating the 2017 Oil Market.”

On the recent webcast, Drill Into the Future of Oil With Wall Street’s Top Geopolitical Analyst, Helima Croft, Managing Director and Global Head of Commodity Strategy Global Research at RBC Capital Markets, and Simeon Hyman, Head of Investment Strategy at ProShares, touched upon various factors that could affect the crude oil prices, including OPEC and policy changes, and looked to investment opportunities to potentially capitalize on the energy market.

The discussion coveers:

• OPEC — Its role in the current environment
• Policy — A look at the key decision makers
• Risk — The red herrings versus the real risks
• Investing — Different vehicles and strategies

Watch the on-demand webinar.

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Charles Sartain of Gray Reed & McGraw asks the question: Should the sufficiency of reworking operations under the cessation-of-production clause of an oil and gas lease be limited to the producing well?

In his post in the firm’s Energy & the Law blog, Sartain discusses Crystal River Oil and Gas, LLC et al v. Patton, a suit to terminate an oil and gas lease due to cessation of production.

In the case, a saltwater disposal well servicing a producing became inoperable for a a period in 2011. The appellate court found that the trial court’s prohibition from considering operations on the salt water disposal well was reversible error.

Read the article.

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ScottMadden, Inc., an energy consulting firm, recently released its Fall Energy Industry Update.

On its website, ScottMadden says this issue focuses on strategic drivers that are propelling the industry like nuclear challenges, changing energy supply and demand patterns, and federal-state policy friction:

• Nuclear Challenges and Responses: Low natural gas prices, challenging capacity markets, continuing investment needs, and weak carbon price signals are putting pressure on existing nuclear plants, especially in competitive markets. What are the risks and implications?
• The Duck Curve: Everyone talks about the duck curve, but what really drives it? Our analysis confirms the duck curve is real and growing faster than expected. In addition, we found some interesting, unexpected, and important nuances. It turns out that the conventional wisdom is not supported by the data.
• Emerging Federal-State Policy Friction: Historically, the boundary between federal and state jurisdiction in the wholesale and retail energy markets has been called “a bright line.” Was it? Is it? How is this unfolding, and what does it mean?

Download the update.

When a 5.8 magnitude earthquake centered in Oklahoma shook that state and several others over Labor Day weekend, regulators in the Sooner State ordered 37 oil and gas wastewater disposal wells to shut down because of previous connections to quakes, according to a report by Androvett Legal Media and Marketing.

There also have been earthquakes in Texas that some researchers believe are tied to disposal wells used for wastewater fluids resulting from hydraulic fracturing/fracking operations. While state regulators continue to question a definitive link between these wells and earthquakes, some major oil and gas producers are already taking steps to try to avoid problems.

“The more sophisticated producers are already beginning to use technologies to recycle water used in fracking and to develop new formulas that substantially reduce both water usage and the amount that must be disposed by subsurface injection. Those changes will provide numerous benefits, which may include reducing the potential for seismic activity,” said Leonard Dougal, an environmental lawyer with Jackson Walker LLP in Austin who is also a former petroleum engineer.

“In most cases, however, the disposal of wastewater is contracted out to other service companies, and many producers aren’t involved in decisions about where those wells are drilled or how they are operated. But that separation may not totally free producers from a potential lawsuit given the recent widespread publicity about earthquakes. Producers also should take steps to reduce liability by avoiding use of disposal wells or contractors working in areas of known seismic activity.”

Horizontal wells drilled across lease lines were clearly not contemplated in a typical oil and gas lease, and lessors should not be forced to accept a formula for royalty payment to which they have not agreed, advises John McFarland of Graves Dougherty Hearon & Moody in an article published in Oil and Gas Lawyer Blog.

His article discusses some recent articles published on the subject of allocation wells. He describes an allocation well as one “that crosses one or more lease lines and that produces from more than one lease without pooling those leases and without any agreement with the royalty owners as to how production will be allocated among the leases crossed by the well.”

“Whether or not one calls it pooling, allocation of production from a well drilled across multiple tracts is a method of sharing production among the owners of those tracts. In Texas, that cannot be done without the lessors’ agreement,” he continues.

Read the article.

An article written by Raymond Patella and Michael Viscount of Fox Rothschild LLP outlines a handful of popular credit enhancements oil and gas companies may use to minimize their risk or exposure to a counterparty that they believe may be having financial difficulties.

“There are many different types of credit enhancements depending on the parties’ leverages, cash flow, size and risk. All of these factors should be considered to arrive at an enhancement best tailored to address the concerns of specific circumstances,” they explain.

The cover such topics as tighter payment terms, consignment, security interest, security deposit, credit insurance, guaranties, and setoff.

Read the article.

Kirkland & Ellis LLP announced that it advised TSSP, a leading special situations investment platform of TPG, on its agreement with Hunt Oil Co., a privately held oil and gas exploration and production company, to develop certain of Hunt Oil’s assets in the Midland Basin in Texas.

The development area covers approximately 18,000 net acres across Martin, Glasscock, Midland and Upton counties. Under the agreement, TSSP has committed up to $400 million to fund the development which is expected to take approximately three years to deploy.  Additional terms were not disclosed.

The Kirkland team was led by corporate partners Anthony Speier and David Castro and associates Christopher Heasley, Nick Wenker, Ryan Martin and Lindsey Jaquillard; debt finance partners William Bos and Lucas Spivey; tax partner Chad McCormick and associate Joe Tobias; environmental transactions partner Paul Tanaka and associate Stefanie Gitler; restructuring partner Ryan Bennett; and litigation partner Anna Rotman.

Read more details.